Pump.fun grows riskier with a novel rug pull exploit

Pump.fun is the most accessible tool for token creation, with a known risk due to its low liquidity. For tokens that go viral, Pump.fun now has a new type of rug pull attack.

Pump.fun is one of the fastest ways to generate and distribute Solana-based meme tokens. The protocol advertises itself as a coin launcher tool, making new assets instantly tradeable with no initial liquidity. The fees for generating a new token are as low as $2, making Pump.fun a highly active protocol. 

The recent interest in meme assets drove Pump.fun fees as high as $268M annually. On certain days, Pump.fun has even surpassed the Ethereum main net in terms of fees. Highly active months see Pump.fun host more than 1.3M traders and token creators.

Also Read: Solana (SOL) goes bullish – Is $200 on the horizon?

But interacting with the protocol has led to significant SOL losses. The scam focuses on creating coins that look like solid projects, but with faked trading activity. 

The coins, their images and memes will look legitimate, but the trading orders are often not organic. The biggest tell-tale sign of this rug pull scheme is the profile of the token creator, which lists no previous experience. The replies under the coin listing are also a giveaway, as they are lazily generated to resemble organic conversation.

The team behind those scam tokens also uses other DEX services to remove any traceable connections between wallets. Thus, the newly minted assets look normal when analyzed with Bubblemaps. There are no suspicious clusters of wallets trading between each other.

The scam ends up with the team dumping the new tokens, crashing their price to zero and draining the SOL pool. Users are advised to re-check the token through Raydium and look for an ongoing trading pattern. Most of the rug pulls are finished before token trading can be established. 

Meme tokens on Solana show no sign of abating

Meme tokens activity on Solana continues to expand, with new assets appearing every few minutes. Some of the tools available monitor the tokens for initial stability, to weed out the fastest rug pulls. 

As a sign of DEX growth, Raydium now carries more than $1B in value, after another uptick in activity in July. Raydium is within the top 5 of Solana apps, growing its activity by more than 15% in a single week. 

To avoid rug pulls and scam tokens, traders are turning to copying whale wallets. Other strategies include pre-screened tokens through AI services .

Despite this, meme tokens remain highly volatile, even when not created with a rug pull in mind.

Raydium logged 626K daily active users , with a 24% growth of new users in the past day. The current trades reached $3.2B in the past day, as the crypto market entered another bullish period. Raydium makes up more than 60% of Solana trading, and now looks prepared for another episode of meme token hype, especially in the PolitiFi sector. 

Jupiter DEX aims to make meme token buying safer

Jupiter DEX aims to become the go-to, everything market on Solana. Recently, the lead developer of the project, @weremeow, showed a new toolset to research and buy meme tokens. 

Jupiter aggregates as much token data as possible, making token selection easier. Jupiter will not copy or compete with Pump.fun,  but instead aggregate trading data. However, analysis may be too slow for the speed of rug pulls. 

Also Read: Floki and Pepe Pump Over 20% As Meme Coins Surge – 5 Tokens That Could Explode Next

So far, Pump.fun has deployed more than 1.4M tokens, double the amount of tokens traded on Uniswap. For now, only a dozen meme tokens have made the grade to trade for the long term. 

One of the strategies to avoid scams is to track big token creators, tied to previously successful meme tokens. Pump.fun shows a renewed uptick in token creation, with more than 10K assets logged daily. For now, this is still slower than the market peak in May , when more than 19K new tokens were generated. 

The meme token hype may continue as SOL is on an expansion track again. As SOL value grows, so will rug pulls, aiming to gain more of the valuable assets.

Cryptopolitan reporting by Hristina Vasileva