In this article we will see how simple it is to create a token on Solana. Solana is a super scalable (fast and cheap) blockchain, based on Proof Of History (essentially a Proof Of Stake). This chain and the consensus algorithm in general is still in beta, which is why the chain has often had "blocking" problems: the faster and cheaper a chain is, the easier it is to spam transactions, saturating it (once the maximum TPS has been reached, the chain congested). However, the reason for this article is not to explain how the Solana chain works but only to report how simple it is to create a token (memecoin). This can be done in 3 minutes for less than $4.
MEMECOIN
Together with BTC, RWA and AI tokens, memecoins dominated the crypto market between the end of 2023 and this first half of 2024. If in 2020 in the midst of DeFi Summer, memecoins were raging on the Binance Smart Chain, today we find them mainly on Ethereum, Base and indeed Solana.
PUMP FUN
To create your own memecoin on Solana, simply connect with your Phantom Wallet on pump.fun, create your own profile (nick and bio) and then press "start a new coin".
Once this is done you will need to enter:
1) Name
2) Ticker
3) Description
4) Image
The deployment costs 0.02 Sol (around $3-4). On the next screen you will be asked if you want to buy some of your tokens to protect yourself from snipers (users and bots who could "pump & dump" your token). Once created you will have an order book where this token can be bought or sold. Once the market cap exceeds 68k, the liquidity of the bonding curve will be deposited on Raydium and burned. The bonding curve determines the price of assets in the liquidity pool through a mathematical function x⋅y=k (where x and y are the quantities of two tokens in the pool and k is a constant). When a new token is created, its initial price is determined by its position on the bonding curve. The more tokens are issued, the more the price increases along the curve.
During a trade, the AMM uses the bonding curve to calculate the trade price based on the current quantities of tokens in the liquidity pool. For example, if a user wants to exchange Token A for Token B, the AMM uses the bonding curve to determine how many Token B they will receive for a given amount of Token A, keeping the reserve constant.
If someone buys a token then, they increase the quantity of one in the pool and decrease the other, changing the price according to the curve. This is how an AMM works. From a Pump Fun perspective, it is important to understand that basically buying a token can expose you to risks if someone holds a large part of the supply ready to sell it.
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