Product > Points : 3 Reasons why Polymarket and Pump.fun

Product > Points : 3 Reasons Why Polymarket and Pump.fun Are Successful in This Cycle🕯️.

Background:

Unless you’ve been living under a rock, any crypto guru is likely to have heard of the platforms Pump.fun and Polymarket during the “boring moment”.

In the past few months, memecoins have dominated the mindshare of every landscape in crypto, from $PEPE to $DOGWIFHAT, and from $BODEN to $MOTHER. The memecoin frenzy has generated millions in profits for early participants and DEXs such as Raydium.

The wealth effect brought by memecoins has also boosted Solana’s DAU by 18.7x since the beginning of the year (Source: Tokenterminal).

Pump.fun, in particular, has ridden on the hype and created an easy-to-launch, no-code memecoin platform, which has generated nearly $100M in revenue from its 1% trading fee and 2 SOL listing fee (the $2 launching cost was recently removed to boost usage), a very profitable business considering the low technical moat + development effort it requires.

Meanwhile, another viral platform, Polymarket (On polygon) has gained significant traction and volume as US election approaches, with over $100M in active bet (open interest) and 7–8K daily active wallet on the platform right now.

Beside election events, the increased mindshare of the platform also boosted the volume of non-election events, such as pop culture, science topics like “monkeypox” and more. For example, over $7.8M was bet on the topic “Most gold medals in the Paris Olympics.”

Unfortunately, polymarket do not take any fees , therefore there is no data that reflects the revenues they have earned.

Without incentive programs, both products have shown remarkable organic growth in terms of traction and volume, a rare case in the current state of crypto.

This success is not only because they fit the current narrative but also because they have excelled in 3 key aspects of their product as a web3 consumer application:

The Financial element
The Social element
The Seasonal driver

Today, we’ll look into the success stories of Polymarket & Pump.fun, and the lessons web3 consumer apps can learn from them to achieve organic growth without relying on points programs.

Reason 1: The Right Storm.

Polymarket:

It is no stranger that the election has been the major driver of Polymarket’s growth. However, even before the election, Polymarket had already proven its worth in the market.

In May 2023, Polymarket gained viral attention due to hosting over 60 markets on the outcome of the Titan submersible incident, reflecting an initial demand for speculating on real life events. This event also rooted Polymarket’s mindshare in people’s minds, setting the stage for its future growth.

Fast forward to June 2024, the volume of politically-related events on Polymarket has tripled from ~ $110M to $330M. Topics are mostly related to Biden stepping down, Trump debates, and other election-related issues.

And according to @richardchen39 from 1confirmation, over 94% of the volume on Polymarket is now election-related, while less than 6% of the topics are related to sports and macro market forecasting topics, such as “Fed interest rates Aug version” or “Which country will win the most Olympic medals?”.

It is fair to say that US election has been the primary catalyst behind Polymarket’s “mass adoption” story, creating the storm polymarket needed for the growth.

Pump.fun:

SOL has been the hub of memecoins since Nov 2023.

The memecoin frenzy originated from tokens like $wif and $bonk, has inspired the creation of Pump.fun, a memecoin launcher that allows thousands of users to easily create tokens in just a few seconds at almost no cost.

It went viral as Pump.fun giving birth to multiple viral memecoins, including celebrity coins like $DADDY and $MOTHER, or crypto animal coins such as $MICHI and $BILLY. This created a “gold rush” trend where users are trying to mint the next 100x token.

PUmp.fun is reaping massive profits from this gold rush, generating nearly $100M in revenue by charging a 1% fee on each trade

On the other hand, the influence of Pump.fun can be observed by the dominance of its related tokens on DEXs, which currently account for ~ 60% of the trading volume.

While easy token launching is beneficial for users, it also attracts bad actors. According to Protos.com, only 41 out of the 1.7M memecoins have achieved meaningful market value, meaning the chances of “making it” is near 0.00002%.

Reason 2: Crypto is an attention economy

Polymarket and Pump.fun are vastly different platforms serving different purposes.

Polymarket is a platform that allows users to speculate on the outcomes of real-life events by placing wagers.

Conversely, Pump.fun is a token launcher that allows any user to “tokenize” anything for various purposes, including gambling on real-life events, cultural events or even attention etc.
One thing they have in common is that they are both highly sensitive to real-life events.

“The best example would be the positive correlation between the volume of the election-based prediction market and the number of election-based tokens minted on Pump.fun”

This is an incredibly strong advantage for both platforms, as significant real world events (such as Donald Trump being shot) can capture the limited attention and engagement resources that both web2 and web3 audiences have.

Attention economy

These headline news on Google or any media can garner millions and trillions of impressions about a topic. Polymarket and Pump.fun have successfully translated this attention into a market where people can stake their capital to express their opinions and make money from it.

This is a new paradigm of the attention economy market, driven by web3 technology in the form of “tokenization” and a p2p platform that can be bet on anonymously and transparently.

The demand is reflected to be super strong that neither platform needs a point programs to bootstrap activity.

On the other hand, real-time odds is one of the reasons why Polymarket has provided huge statistical value to the web2 space. According to SimilarWeb.com, Polymarket’s website has a total of 9M visits, which is close to the total visits of platforms like Telegram and Notion.

These statistics imply that users are not only using Polymarket for gambling but also to observe a more accurate direction and odds of significant events, this statement is also supported by dune analytics research, as seen below:

“When money is at stake, decisions tend to be more radical and immediate to limit losses or seize opportunities than decisions made based on ideological beliefs.

So far, 85% of the initialised questions on Polymarket have been resolved, with 15% still awaiting outcomes. Polymarket resolves time-limited events by utilizing the UMA optimistic oracle, a system in which proposers can suggest an answer and stake a bond to resolve the market.

In contrast, Pump.fun does not have a straightforward resolution mechanism, and the outcome of a prediction can only be indirectly reflected from the corresponding token price.

For example, the value of $boden -95% following the news of Boden stepping down.

Therefore, Pump.fun provides limited statistical value compared to Polymarket, serving primarily as a rough gauge of an event’s popularity.

With that being said, Pump.fun is still serving as an excellent platform for creators to monetize their attention and influence. Anyone, including celebrities, crypto users, and gamblers can bootstrap a greater community based on token price speculation and personal branding.

Reason 3: The 3 candles 🕯️🕯️🕯️

Financial element — the First candle 🕯️

Blockchain is a heavily finance-driven industry and technology, where crypto has been commonly used as a tool for encrypted and secured day-to-day transactions.

Each viral project has a very strong financial element, and the “product” that comes out from these financial components must have value. Value can come in the form of yield, security, transparency, data, or decentralisation, values that users cannot find anywhere else except within your product.

Unlike traditional gambling applications that must follow regulations and compliance requirements (betting on elections is illegal, for instance), platforms like Polymarket and Pump.fun enable users to remain anonymous while speculating on real-world events.

Powered by the financial engine, CLOB (central limit order book) ,Negwisk and benefiting from the transparency of using CTF from Gnosis, Polymarket offers one of the most unique and engaging financial tools for wagering on any significant topic in real life or in the crypto space. Users can deposit USDC and bet on anything they believe they can win, adding a “financial” layer to all the real-life events.

At the time of writing, Polymarket has generated more than $432M in volume with its CLOB over the past 28 days organically, which is comparable to SushiSwap’s volume of $535M.

On the other hand, the financial element of Pump.fun includes a pre-built bonding curve for “fair launch” and auto-deploying LPs upon filling the curve. The platform not only provides the tools that non-technical creators need to “tokenize” their influence or attention but also offers seamless trading that improves the efficiency of launching a token.

Moreover, the tokens launched on the platform also represent a form of “financial element,” as they embody cultural value, opinion, or any topic that garners attention.

The token trading activity that comes out of Pump.fun also benefits relevant parties, such as network traffic, DEX volume, Telegram bots, and MEV. One such example is Jito stakers, who have earned as much as $624K per day in MEV rewards thanks to the increase in network activity.

Social element — the second candle 🕯️

Now, with the financial component in place, polymarket and pump.fun have begun embedding social features into their products in an attempt to retain users while creating the network effect they needed to scale a project.

As Polymarket has evolved, it has become clear that the social element within the app has grown significantly stronger.

Navigating their product, under each individual market, there are community-related features such as comment sections where users can express their opinions about the bet.

Taking the most popular topic, “Presidential Election Winner 2024,” as an example, there are more than 33,700 comments under the topic. This is important because it not only improves community engagement on Polymarket but also attracts new users to join the conversation.

In the past seven days, the stickiness has appeared extremely strong, with an average 60–70% return rate.

In addition to the comment section, the percentage of the topic has often been used as a headline on different media outlets regarding election-related news, which in turn attracts even more users to join the platform.

Last month alone, Polymarket attracted 65K new users, and growth is expected to continue as the attention on the election grows thanks to the headline funnelling.

On the other hand, Pump.fun has been incorporating a mix of media elements, aiming to improve product engagement by building the platform as a place where users can connect and communicate, rather than just a token launcher.

However, since Pump.fun announced the livestream feature on May 29, their DAU has not seen significant improvement, stabilizing around 50K-60K DAU with 20K new accounts, and no substantial growth has been observed over the months.

On August 23, Pump.fun announced a shared screen feature on the apps and multiple cameras in a room.

Despite the slow-growing trend in new user acquisition, the intention of building more in-app social features on the platform has been clear, as the team understands that these features are needed to build excitement around their product.

Besides live streaming, the frequency of tokens that are listed on Raydium also acts as a funnel to attract new users to Pump.fun, as more users recognize this wealth effect pump.fun has generated for the creators.

In short, social elements are one of the major factors that drive the attention economy of Polymarket and Pump.fun, which is supported by a functional financial engine of the product, and the growth can be maintained by the established network effect of an engaging community.

Seasonal driver — the last and third candle 🕯️

Lastly, the seasonal driver plays an important role in boosting popularity and helping the product reach PMF for these products.

As I mentioned above, both products have been highly sensitive to real-life events, especially in celebrity, election, and cultural events that are “speculatable.”

For instance, thanks to the upcoming US election, Polymarket has successfully captured massive mindshare from different channels. Meanwhile, the popularity and volume of non-election betting also saw a surge in volume despite a limited market share at the moment.

Besides, it is also observed that the market has been actively created and bet on along with the hotly discussed topics on Google search.

For example, a 120% surge in Mpox disease Google searches has created a $950k worth of betting on Mpox-related events. This reflects that seasonal drivers have helped Polymarket to “fuse” into the culture of betting while pushing the product to the masses.

(Topics appear on google trend also appears on polymarket)

Similarly, Pump.fun has also benefited tremendously from a mix of IRL events. For example, Elon Musk and Donald Trump’s Twitter Space led to more than 10,000 coins created in 3 hours and generated more than $500K in revenues during that day.

Despite the positive correlation between real life events and pump.fun activities, We cannot neglect the fact that the success of Pump.fun is also highly articulated to the rise of the memecoin culture in the landscape, such as celebrity coins $daddy and $mother.

Such a trend is supported and fueled by industry well-known figures, including @weremeow and Ansem, etc., which propel Pump.fun into a greater level of popularity. This can be observed by the rising trend of deployed tokens from April to August, a 5x increase in the number of tokens from 300K to 1.6M.

Along with the financial components and social elements within the product, seasonal drivers light up the last candle and propel the product into unprecedented growth.

Closing Thoughts

For every protocol to stay competitive in the landscape, they have to fulfill the 3 basic elements (🕯️):

• Financial elements provide the “value” a protocol needs to power up an engagement economy and the purpose for users sticking to the system.
• Social elements improve user stickiness based on the existent financial element, creating a community that attracts newcomers.
• Seasonal drivers propel the growth of the protocol that has already excelled in social and financial elements.

Learning from Pump Fun and Polymarket, any consumer application in Web3 should start by building a strong financial element that allows users to monetize or provides inherent value.

Afterward, incorporate a built-in network effect that encourages active participation and attracts new users through additional channels. Tokens are an effective way to bootstrap this network effect in the early stages.

Finally, establish a seasonal driver that captures mindshare and boosts adoption and usage from the Web2 community.

With that being said, the current state of crypto has become more PvP than ever, where most activities are driven by incentive or speculation given the lack of new excitement at the application level.

Users now are left with excessive similar options across different chains, with protocols attempting to replicate the success of the existing cases without bringing novel ideas to the table.

To break out of the cycle of repeating PvP, the next unicorn has to emerge from innovation at the product level that can solve real user problems, and user adoption will come as the seasonal drivers arrive.

Product > Points : 3 Reasons why Polymarket and Pump.fun was originally published in IOSG Ventures on Medium, where people are continuing the conversation by highlighting and responding to this story.