PumpSwap DEX Reaches $10 Billion in Volume in Just 10 Days, Sparking Competition with Raydium

In just 10 days from launch, PumpSwap—a decentralized exchange (DEX) on the Solana blockchain—reached $10 billion in transaction volume, thanks to impressive growth and market demand.

This unfathomable rise has seized the attention of the DeFi community and raised questions about what it means for Solana-based DEXs to compete with already established platforms like Raydium.

PumpSwap’s fast success has come from its internal drive to create a native DEX for PumpFun, which is a major player in the Solana ecosystem. Before PumpSwap went live, many of the tokens that graduated from the PumpFun platform were being sent directly to Raydium, one of Solana’s leading DEXs. This allowed Raydium to grow quite nicely, as it was benefiting from the liquidity that these tokens provided, rather than PumpFun itself, which many saw as a missed opportunity for internal growth. By launching PumpSwap, PumpFun can now reclaim that market share and redirect the trading volume back over to it, all while solidifying its position within the broader Solana ecosystem.

Raydium Responds with Its Own Version of PumpFun

PumpSwap’s appearance hasn’t gone unnoticed by Raydium, the leading DEX on Solana. Raydium, so the rumor mill has it, is developing a “PumpFunToken” offering to compete with the one just introduced by PumpFun. The implication here is that competition is intensifying, and Raydium is feeling the need to defend its turf within the Solana ecosystem.

As of last Saturday, PumpSwap captured 14.5% of the Solana DEX market share. That is a significant share for a platform that had only recently launched. PumpSwap’s effort also suggests that competition in the Solana DeFi world is intensifying. Currently, Raydium still holds the largest portion of the market, with a commanding 47.5% share; however, compared to the relatively recent KuCoin-launched 1.0% DEX in this same October month, the very competitive PumpSwap seems to be moving in the right direction to better serve Solana DEX users.

PumpFun’s decision to launch its own DEX might be part of a broader trend in the decentralized finance space.

There, protocols are focusing more and more on vertical integration. And by that, we mean: rather than relying on third-party platforms to handle transactions or liquidity, many projects are taking matters into their own hands and, in the process, trying to keep as much of the profits—which they don’t like calling profits anymore, so let’s call them revenues—and data as they can within their own ecosystems.

The Shift Towards Vertical Integration in DeFi

The success of PumpSwap emphasizes a really important trend we see in the DeFi space and one that’s likely coming to a protocol near you in the future: the vertical integration of decentralized protocols. With the rise of DeFi, many projects have started to realize the value of controlling all aspects of their operations, from token issuance to trading. By building their own DEXs, protocols like PumpFun are aiming to keep trading volume, liquidity, and user experience in-house and not on continuum with platforms like Raydium. They want to retain as much control as possible over trading and the brokering of trades.

This trend isn’t exclusive to PumpFun. A number of DeFi projects are starting to take a page from PumpFun’s reinvention of the wheel and are now governing themselves in a way that they can make economically rational decisions in the left half of the map and in the right half of the map. Valuing our native tokens is tantamount to that. What happens in the following ecosystem diagram is vertical integration to the nth degree.

In this rather dystopian vision, we’re capturing way more value, we’re valuing our native tokens in a way that’s much more meaningful and much more aligned with these ecosystems of which we’re part.

Market Share and the Future of Solana DEXs

Although Raydium presently boasts a market share that is almost half of all Solana-based DEXs, the fast growth of PumpSwap could indicate a transition in the Solana DeFi ecosystem. As more tokens are born on the PumpFun platform and then transition to the using PumpSwap, the growth of both that platform and its market seemingly will continue.apparent.

However, it is not clear at this point if PumpSwap will be a real threat to Raydium’s DEX dominance. Development of Raydium’s own version of tokens produced by the PumpFun platform suggests that the DEX is taking the necessary steps to maintain its market leadership and avoid losing too much volume to the DEX with the super-fun name.

The contest between PumpSwap and Raydium will be pivotal in ascertaining the fate of decentralized exchanges on Solana, and this contest is already well underway. To what extent this will ultimately change Solana’s decentralized exchange landscape remains to be seen. But early indicators suggest that, at best, this change will be positive for Solana users. PumpSwap achieved some dubious victories in this contest, blowing past Raydium in trading volume in late October. However, it is also clear that Raydium’s response was strategic and, potentially, just as effective.

Conclusion: A New Era for Solana DEXs?

The establishment of PumpSwap and its astonishing ascent to $10 billion in volume within a mere 10 days is a tribute to the mounting strength of the Solana DeFi ecosystem. The importance of internal decentralized exchanges (DEXs) seems to be on the rise as well, something that appears to be coinciding with the Solana DeFi ecosystem’s recent advances.

Although Raydium commands the DeFi space on Solana, the new decentralized exchange PumpSwap is making notable inroads. In the next several months, it will be interesting to see if PumpSwap continues to gain in popularity and market share or if Raydium finds new ways to maintain its lead.

Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.

Follow us on Twitter @themerklehash to stay updated with the latest Crypto, NFT, AI, Cybersecurity, and Metaverse news!