Few platforms illustrate both the speed and fragility of crypto-native market design as clearly as Pump.fun. Built on Solana, the memecoin launchpad turned token creation into a near-frictionless act and, in doing so, became one of the most important liquidity funnels in Solana’s ecosystem. Now, as memecoin volumes cool and incentives are scrutinized more closely, Pump.fun is confronting a problem that goes beyond fees: how to align creators, traders, and liquidity in a market driven more by attention than fundamentals.
Comments this week from co-founder Alon Cohen signal a meaningful shift. After months of experimentation, the team has concluded that its Dynamic Fees V1 system, while effective at jumpstarting activity, distorted incentives in ways that undermined long-term market health. The result is an overhaul aimed at redistributing rewards, clarifying ownership, and re-centering traders as the backbone of the platform.
The move reflects a broader transition underway across crypto. As speculative cycles shorten and marginal users become more selective, platforms built for virality are being forced to confront the difference between activity and sustainability.
The Original Bet: Creator Fees as Growth Engine
Pump.fun’s rise was rooted in a simple insight: reduce friction as much as possible and standardize the path from token minting to liquidity. Anyone could deploy a memecoin in minutes, plug into a bonding curve, and immediately tap into Solana’s retail trading base. The model stripped away many of the technical and social barriers that previously limited memecoin creation to insiders.
Dynamic Fees V1 was introduced to extend that logic. By rewarding token creators with a share of fees, Pump.fun aimed to attract more “serious” launches—projects with teams, branding, and at least the pretense of coordination. The early data looked convincing. According to charts shared by Cohen, bonding curve volumes more than doubled in the weeks following the rollout, coinciding with a surge in livestreamed launches and creator-led promotion.
From a platform metrics perspective, the experiment worked. New tokens were minted at scale, onchain activity spiked, and Pump.fun reinforced its status as the default memecoin venue on Solana.
But the longer the system ran, the clearer its limitations became.
When Incentives Drift From Liquidity
The core issue Cohen highlights is not that creator fees failed entirely, but that they optimized the wrong behavior. For a subset of teams actively managing communities and liquidity, the fees provided a modest but meaningful revenue stream. For the average memecoin deployer, however, the incentive function was much simpler: mint more tokens, capture initial fees, and move on.
That dynamic matters because memecoin markets do not survive on creation alone. Liquidity, not supply, is the scarce resource. Traders—often derided as “trenchers”—are the ones who take directional risk, provide volume, and ultimately determine whether a token finds a market beyond its first few hours.
By making low-risk token minting relatively more attractive than high-risk trading, the fee system skewed the ecosystem away from its most important participants. In Cohen’s words, this was “dangerous,” not in a moral sense, but in a structural one. A platform where creators are insulated from downside while traders absorb it will eventually hollow out its liquidity base.
This is a familiar pattern in crypto. Protocols that over-reward issuance at the expense of usage tend to experience short-lived growth followed by abrupt declines once marginal incentives fade.
The CTO Problem and Trust Friction
Another symptom of misaligned incentives was the rise of Community Takeover (CTO) coins. In theory, CTOs allow abandoned or creatorless tokens to survive through collective effort. In practice, they often introduce additional trust assumptions: informal promises, unverifiable commitments, and governance by social consensus rather than code.
Cohen’s critique here is notable. Pump.fun’s design ethos has always emphasized simplicity and permissionlessness. CTO dynamics reintroduce exactly the kind of coordination friction the platform originally set out to eliminate. Users are asked to trust that others will act in good faith, manage liquidity responsibly, or deliver on vague roadmaps—assumptions that rarely hold in fast-moving memecoin markets.
From a user-experience perspective, this represents a failure of product design rather than user behavior. If participants are routinely forced into ad hoc governance just to keep markets functional, the underlying incentive structure is misfiring.
The First Phase of Reform: Fee Sharing and Ownership Clarity
Pump.fun’s response is not a wholesale abandonment of creator incentives, but a reconfiguration. The first phase of changes introduces creator fee sharing, allowing creators and CTO administrators to allocate fees across up to 10 wallets after launch. This seemingly technical adjustment has broader implications.
By enabling explicit allocation, the platform allows teams to formalize relationships that previously operated off-chain or informally. Marketing contributors, liquidity managers, and community operators can be compensated transparently rather than through side deals or trust-based arrangements. In theory, this should reduce the incentive to spin up disposable tokens simply to harvest fees.
Equally important is the introduction of ownership transfer and the ability to revoke update authority. These tools address a longstanding tension in memecoin markets: the ambiguity around who controls a token and for how long. By making ownership status explicit and mutable, Pump.fun is acknowledging that control itself is a variable that should be managed, not obscured.
Cohen’s insistence that no one from the Pump.fun team will ever accept creator fees is also significant. It draws a clear line between platform and participant, reinforcing the idea that these mechanisms are designed for ecosystem actors rather than rent extraction by the venue.
Traders as the Missing Stakeholder
Underlying the entire overhaul is a reassertion of traders’ centrality. Memecoin platforms often frame creators as the primary customers, but liquidity providers and traders are the ones who determine whether markets persist beyond the initial hype window.
Traders assume asymmetric risk. They are exposed to volatility, slippage, and sudden narrative shifts. When incentive structures implicitly tax that risk to subsidize creators, traders respond predictably: they leave, reduce position sizes, or concentrate activity elsewhere.
The decline in bonding curve volumes after the initial post-launch surge is consistent with this behavior. Once the novelty wore off and fee extraction became more visible, the marginal trader’s expected value deteriorated. Activity followed.
Pump.fun’s acknowledgment of this dynamic suggests a more mature understanding of its own market microstructure. Sustainable volume does not come from perpetual onboarding of new creators; it comes from retaining traders who are willing to recycle capital through successive launches.
Dominance, Competition, and the LetsBonk Interlude
Pump.fun’s position as the dominant Solana memecoin launchpad has not gone unchallenged. The brief period in July when rival LetsBonk overtook it in volume and revenue served as a reminder that low switching costs cut both ways.
That episode appears to have sharpened Pump.fun’s focus. Aggressive PUMP token buybacks and the rollout of Project Ascend’s revamped creator payouts helped restore momentum, with trackers later showing the platform reclaiming roughly 75%–80% of Solana memecoin launches.
But market share alone does not resolve structural issues. If the leading platform struggles with incentive alignment, smaller competitors can exploit those weaknesses even without superior technology. The memecoin economy is particularly sensitive to shifts in sentiment and perceived fairness.
Memecoins in a Cooling Market
The timing of Pump.fun’s overhaul matters. Memecoin hype across Solana has cooled from its 2025 peaks, as reflected in declining revenues and more selective trader behavior. In such an environment, marginal incentives have outsized effects. What might be tolerated during euphoric phases becomes unacceptable when capital is scarce.
This cooling also clarifies which platforms are built for cycles and which are built for persistence. During expansionary phases, almost any launchpad can thrive. During contraction, only those that manage risk distribution carefully tend to retain relevance.
Pump.fun’s willingness to publicly acknowledge design flaws and iterate suggests an attempt to position itself in the latter category.
A Broader Lesson in Crypto Incentive Design
Beyond Solana memecoins, this episode highlights a recurring challenge in crypto: aligning incentives among participants with radically different risk profiles. Creators, traders, liquidity providers, and platforms do not experience markets in the same way. Systems that flatten those differences often end up privileging the least exposed actors.
The initial success of Dynamic Fees V1 illustrates how easy it is to confuse activity with health. Token minting, livestreams, and volume spikes are visible and quantifiable. Trader attrition is slower, quieter, and harder to measure—until liquidity evaporates.
By reframing the problem in terms of trader risk and platform sustainability, Cohen is implicitly arguing for a shift away from extractive growth models. That shift is not guaranteed to succeed, but it signals a recognition that memecoin infrastructure cannot rely indefinitely on novelty.
What Comes Next
Pump.fun has described the current changes as only the first phase. How subsequent iterations treat trader incentives—whether through fee rebates, improved liquidity mechanics, or clearer downside protection—will determine whether the platform can stabilize volumes without sacrificing openness.
The larger question is whether memecoin launchpads can evolve into durable financial primitives or whether they are destined to remain cycle-dependent entertainment layers. Pump.fun’s scale gives it an opportunity to test that boundary.
For now, the creator fee overhaul marks a rare moment of introspection in a sector more accustomed to doubling down than recalibrating. Whether it leads to a healthier equilibrium between creation and liquidity will become clear not in the next volume spike, but in what remains when the next one fades.
Michael Lebowitz is a financial markets analyst and digital finance writer specializing in cryptocurrencies, blockchain ecosystems, prediction markets, and emerging fintech platforms. He began his career as a forex and equities trader, developing a deep understanding of market dynamics, risk cycles, and capital flows across traditional financial markets.
In 2013, Michael transitioned his focus to cryptocurrencies, recognizing early the structural similarities—and critical differences—between legacy markets and blockchain-based financial systems. Since then, his work has concentrated on crypto-native market behavior, including memecoin cycles, on-chain activity, liquidity mechanics, and the role of prediction markets in pricing political, economic, and technological outcomes.
Alongside digital assets, Michael continues to follow developments in online trading and financial technology, particularly where traditional market infrastructure intersects with decentralized systems. His analysis emphasizes incentive design, trader psychology, and market structure rather than short-term price action, helping readers better understand how speculative narratives form, evolve, and unwind in fast-moving crypto markets.