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Blockchain/Level VIII · The memecoin age/8.3 Memecoins/Lesson 3

Launchpads and reward tokens

The tax on every trade, and rewards paid in the pairing asset

MaterialsA Solana block explorer (Solscan or Solana Explorer)A token scanner like RugCheckThe Token-2022 standard documentationAccess to the token’s contract interface or launchpad documentation

Wonder

  1. Where does the money paid to holders of a reward token come from?
  2. How can a smart contract technically enforce a fee on every single transfer?
  3. What distinguishes a ‘reflection’ mechanism from a simple trading tax?

Explore

    Part ILaunchpads and reward tokens

  1. Following pump.fun, competing launchpads like Moonshot and Raydium LaunchLab appeared in 2024-2025, along with others such as letsbonk.fun. These platforms differ primarily in their fee structures, the specific bonding curve formulas they employ, and the destination of liquidity upon graduation. Some migrate graduated tokens to established AMMs, others to their own pools, and activity shifts between them quickly.
  2. Reward tokens, often called ‘reflection’ coins, charge a fee on every trade and pass it to holders, sometimes paid in another asset. On Solana the Token-2022 transfer-fee extension makes such a tax native: it withholds a percentage of each transfer for a designated authority to collect, and the project then decides how to distribute it. The promise is yield from the token’s own volume. However, this yield is finite and dependent on continuous new capital entering the system.
  3. SafeMoon, launched in 2021 on BNB Smart Chain, popularised the model: a 10% tax on each trade, half redistributed to holders in SAFEMOON and half added to liquidity. In November 2023 US prosecutors and the SEC charged its executives with fraud, alleging they had taken millions from liquidity they described as locked; the CEO was convicted in May 2025 and sentenced to 100 months in prison in February 2026. The rewards themselves depended on continued trading by newcomers.
  4. The Token-2022 standard allows for sophisticated fee logic but also introduces centralization risks. If the contract retains authority to change the fee rate or freeze accounts, holders are exposed to manipulation. A ‘honeypot’ scenario occurs when a token can be bought but not sold, through sell-blocking logic: on EVM chains often a 100% sell tax, on Solana a freeze authority or a transfer hook. Scanners like RugCheck analyze these authorities to flag tokens where the developer retains control over the economic rules of the asset.
  5. When evaluating any reward token, four questions determine its structural integrity: Where does the fee go? Who controls the contract’s parameters? Can the tax rate be changed unilaterally by an admin key? And do rewards depend on new buyers entering at higher prices? If the answer to the last question is yes, the model is mathematically unsustainable without constant inflow. When volume fades after the launch excitement, the rewards shrink with it.
  6. To inspect a token’s anatomy, open a Solana explorer like Solscan and look up the token’s mint address. Check for ‘Mint Authority’ (if active, supply can be inflated) and ‘Freeze Authority’ (if active, wallets can be locked). Examine the top 10 holder distribution; if a small number of wallets hold a majority of the supply, the market is vulnerable to sudden dumps. Those fields show who still holds power over the token.

    7. Part IIRewards paid in the pairing asset

  7. Solana’s Token-2022 standard introduced native support for transfer fees, letting a creator set a percentage withheld from every transfer. That fee is withheld in the token itself; to pay holders in SOL, USDC, wrapped bitcoin or a tokenized equity, a contract or a platform wallet must convert it, or the launchpad’s pool must charge its fee in the quote asset directly.
  8. Launchpads now permit creators to designate this collected fee for holder distribution. This creates a yield mechanism where holders receive assets other than their own memecoin. On some launchpads, StonkFun among them, the payout currency is the pool’s quote asset: a coin paired with SOL pays in SOL, while one paired with a tokenized stock pays in that equity token. This structure links memecoin economics directly to the volatility and liquidity of external asset classes.
  9. Two primary mechanisms handle this distribution. The first is an on-chain contract that accrues rewards automatically, allowing holders to claim them via a specific function call. The second is an off-chain process where a platform-controlled wallet collects fees, swaps them into the desired quote asset, and airdrops proceeds to holder addresses. The latter introduces significant trust assumptions, as the platform wallet must be trusted not to embezzle funds or manipulate timing.
  10. The off-chain model carries specific risks visible on the blockchain. When a platform wallet sells accumulated fees to fund airdrops, those sales register as large sell orders in the memecoin’s liquidity pool. This activity can suppress the token’s price before rewards are even distributed. Holders may experience a net loss if the tax collected is offset by the market impact of the platform’s own selling activities within the same pool.
  11. Reward yield represents a share of trading fees paid by other traders, not income generated from an underlying productive asset. The sustainability of this yield depends entirely on continued trading volume. If liquidity dries up or interest wanes, fee collection drops to zero, and holder rewards cease. This creates a circular dependency where the reward mechanism itself requires constant external inflow of capital to remain viable.
  12. To evaluate any token with transfer tax features, inspect the contract code or platform documentation for the fee distribution logic. Check whether fees sit in a contract, a multi-signature wallet or a single team key. Check if the tax rate is mutable post-launch. Finally, monitor the platform’s associated wallets on a block explorer to observe how frequently and at what size they trade against the pool.

Key facts

  • SafeMoon’s executives were charged with fraud by US authorities in November 2023.
  • Solana’s Token-2022 standard includes a native transfer-fee extension that allows for trade taxes.
  • Competing launchpads like Moonshot and Raydium LaunchLab differentiate through fee structures and liquidity migration paths.
  • A ‘honeypot’ token is one where the contract prevents selling, often via 100% fees or frozen accounts.
  • Reflection tokens distribute trading fees to holders, creating a yield that depends on continuous new volume.
  • If mint authority is still active, whoever holds it can create new tokens at will.
  • Solana’s Token-2022 supports native transfer fees, withheld in the token itself.
  • Holder rewards are paid in the quote asset, not necessarily the memecoin itself.
  • Off-chain fee distribution requires trust in a platform wallet to manage funds.
  • Platform selling of accumulated fees can suppress the memecoin’s price on the chart.
  • Reward yield is derived from trading volume, not underlying asset income.
  • SafeMoon’s executives were charged with fraud in 2023 over funds from a reward-tax token.

Exercise nine, six, three, one

9CollectList 9 distinct features found in launchpad documentation or token contracts (e.g., fee rate, migration target, mint status).
6ClusterGroup the 9 features into 6 by the kind of risk each creates for holders.
3DistillReduce these 6 groups to 3 core mechanisms that determine whether a token is structurally sustainable or prone to collapse.
1CrystallizeWrite one sentence on where a reward token’s yield comes from.

Fact check

Dates, figures and claims checked against the published sources listed below.

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