Why FTO Model Is More Advanced Than pump.fun’s Bonding Curve On Berachain

The rise of decentralized finance (DeFi) has sparked a surge in new projects driven by token-based economies. As DeFi continues to grow, an increasing number of projects are launching their tokens to capitalize on the expanding market.

Among the hottest trends right now are meme token launches, particularly due to the innovative bonding curve model introduced by pump.fun. The meme token market currently boasts a cap of $500 million. Following the initial success of pump.fun, numerous forks have emerged on other chains, such as pump.best from base and Kodiak Finance from berachain 

For those unfamiliar with Berachain, it’s a high-performance, EVM-identical blockchain built on a Proof-of-Liquidity consensus, supported by the BeaconKit framework. This novel consensus mechanism is designed to align network incentives, fostering a robust synergy between Berachain validators, ecosystem projects, and everyday users. Unlike Solana, Berachain’s culture and consensus mechanism make it less suitable for forking pump.fun. However, innovation continues to thrive, as demonstrated by Honeypot Finance, a Berachain ecosystem project, which introduced a new launch model—FTO—better aligned with Berachain’s Proof-of-Liquidity framework.

How Does Bonding Curve Work on Pump.fun?

The bonding curve is a launch mechanism brought by pump.fun and recently went really hot in Solana ecosystem. Since it launched,Over 2 million tokens being launched and generated over 105 million revenue. Why it goes so hot.

Let’s put a graph to present how the value of a token increases with the increase in supply. It is noteworthy that the maths only plays out in case of a limited/fixed token supply.

In this model, early investors benefit the most from such a launch mechanism. 

Below is more break down of pump.fun model

Once a token is launched on Pump.fun, the primary objective is to sell the tokens. Here’s how the process works post sale:

• Once the target of selling all 800 million tokens is met, the bonding curve reaches full capacity and automatically transitions to Radium.
• The transition to Radium requires approximately 86 SOLs, with the number fluctuating between 84 and 86
• The term “King of the Hill” is used to refer to the sale of 400 million tokens, i.e. half of the target. Approximately 45 SOLs are required for the “King of the Hill” status.
• There’s also a threshold in terms of market cap. It is $69,000 for Solana and $420,000 for Blast.

When a token’s market capitalization reaches designated thresholds ($69,000 for Solana and $420,000 for Blast), Pump.fun injects liquidity ($12,000 for Solana and $30,000 for Blast) into decentralized exchanges like Raydium and Thruster DEX.

In nutshell, Pump.fun bonding curve model takes good trade-off for fair launch and fomo emotions.  Many degens earns 10x or 100x while a lot of normal users lost money in it

FTO: The more incentivized and safe launch mechanism within Berachain

FTO (fair token offering) is a mechanism designed by Honeypot Finance to help new projects to issue their tokens. With the recent update from the Honeypot Finance team, with a bit tweak of the model, it works perfect to launch the meme token on berachain as well. Here’s the initial model that we saw from the team

• FTO involves the creation of a 100% deep liquidity pool for instant trading. While this enables trading from day 1, there are no pre-minted tokens in the market. It rules out pump or dump by early investors since there’s nothing like early access to the token.
• While the team behind the project can sell the LP tokens for further development, this does not lead to a shark slump in the token’s price. The maximum loss from users is only 50% compared to a lot of launch model (even bonding curve) could lead to over 90% loss
• Both users and project will become the Liquidity providers after launch and are eligible for a share of transaction fees in accordance with their contribution. Besides, they also earn $BGT emissions from berachain’s Proof of liquidity, unlocking access to further monetization opportunities through the Flywheel Model.

Honeypot Finance’s FTO vs Pump.fun’s Bonding Curve

The primary difference between the FTO (Fair Token Offering) and Bonding Curve models lies in liquidity sourcing. While both methods aim to foster long-term engagement and efficient pricing, the Bonding Curve model fails to mitigate risks such as potential loss of funds and a lack of sustained user interest. FTO, on the other hand, excels in prioritizing liquidity by enabling community members to become liquidity providers. In contrast, the Bonding Curve model relies solely on the token deployer for liquidity, which creates an imbalance, potentially leading to manipulative practices like pump-and-dump schemes or rug pulls.

The FTO model aligns more effectively with Berachain’s Proof of Liquidity (POL) mechanism, as it allows users to act as liquidity providers post-launch while earning $BGT rewards for their contributions to the pool. This makes FTO a more robust and more user-friendly solution on berachain

In the Pump.fun model, the lack of rewards for the token deployer who crafts a successful meme token name is another notable shortcoming. Although Honeypot Finance has yet to release the full details of its meme launchpad, the potential of this model to fairly reward token deployers is clear. It’s exciting to anticipate how the final version will enhance Berachain’s Proof of Liquidity and accelerate innovation in this space.