Dumpy.fun: Solend’s Rebranded Product for Shorting Meme Coins

cdLast Updated: July 25, 2024

4 minutes read

Rebranding is common in the crypto world, usually involving adjustments in branding and communication. However, rebranding accompanied by a new product launch is rare.

Yesterday, the well-known lending protocol on Solana, Solend, rebranded to Save, suggesting a safer connotation. However, the new product it introduced exudes a sense of danger and excitement.

In addition to new assets like SUSD and SaveSOL, Solend has created a platform that allows shorting meme coins—dumpy.fun (X: @dumpydotfun).

The name speaks for itself. Previously, there was Pump.fun, a platform for long positions on meme coins. Now, dumpy.fun aims to create a contrast, enabling short positions on meme coins and sparking a frenzy of shorting.

Solend (now Save) introduced dumpy.fun in a blog post, stating:

Memecoins have reached a fever pitch, but rug pulls and arbitrage activities are hurting the community. dumpy.fun is a platform for shorting memecoins, allowing users to profit from corrections. It leverages the deepest on-chain liquidity and is a better alternative to perpetual contracts. dumpy.fun is powered by Save.

Since the product is not yet officially launched, we reviewed the product design white paper to understand how shorting meme coins works.

Designing Shorts with On-Chain Contract DEX Model

What goes up must come down
Isaac Newton

The white paper for dumpy.fun starts with this classic gravity theory to suggest that meme coins will eventually hit zero, thus creating a platform for shorting them.

Platform Nature

Dumpy.fun is not a traditional DEX (Decentralized Exchange). It is more like a financial tool platform specifically designed for shorting operations, combining lending and trading functions.

Operating Principle

dumpy.fun uses other platforms for lending operations (lending being Save’s primary business). It then swaps tokens via Jupiter.

This combined design allows users to short assets without directly holding them. But since it’s all on-chain, where does the funding for shorting come from?

dumpy.fun answers this by utilizing depositors’ funds from Save and attracting deposits on its new platform by offering higher deposit rates.

The interest rates to convince users to deposit come from:

Interest paid by borrowers: Shorters need to pay interest to borrow assets.
Transaction fees: The platform may take a cut from transactions.
Liquidation fees: When shorters are liquidated, part of the liquidation fees may go to depositors.

Example to Illustrate dumpy.fun’s Design

Suppose we want to short WIF.

Step 1: Deposit Collateral

You deposit 100 USDC as collateral.

Step 2: Borrow WIF

The platform helps you borrow WIF tokens worth 100 USDC (from Save or dumpy.fun’s own pool). Suppose WIF’s current price is 1 USDC, you get 100 WIF.

Step 3: Sell Borrowed WIF

The platform immediately sells these 100 WIF in the market, getting 100 USDC.

Now:

You owe the platform 100 WIF.
The platform holds your 100 USDC collateral and the 100 USDC from selling WIF.

Step 4: Wait for Price Change

Suppose WIF’s price drops 50%, now 1 WIF is worth 0.5 USDC.

Step 5: Close Position

You decide to close the position. The platform uses 50 USDC from the 100 USDC it holds to buy 100 WIF (as 1 WIF is now 0.5 USDC).

Step 6: Repay and Settle

The platform uses the 100 WIF bought to repay your loan of 100 WIF.
The remaining 50 USDC is your profit.
The platform returns your initial 100 USDC collateral.

Final Result:

You made a profit of 50 USDC.
Your original 100 USDC collateral is safely returned.

dumpy.fun automates this process, combining multiple platforms (like Save lending and Jupiter trading) to enable this functionality.

PvP Intensity: High-Stakes Shorting

If most meme coins are destined to hit zero, wouldn’t shorting always yield profits?

dumpy.fun doesn’t support this idea; it aims for more intense PvP battles.

To this end, the platform offers a “Squeeze Explorer” interface, showing the liquidation thresholds for short positions.

For those unfamiliar, a short squeeze occurs when a heavily shorted asset’s price rises suddenly, forcing shorters to buy assets quickly to close positions, pushing prices higher.

This design essentially reveals the current short positions and the funds needed to trigger a short squeeze to everyone.

So, if you are a long trader or a strong bull who is optimistic about a certain meme coin but notice a significant amount of funds shorting it, you can calculate and strategically buy in, driving up the meme coin’s price to force a short squeeze.

In dumpy.fun’s context:

If many users short a meme coin (like WIF).
Other users (possibly by viewing the “Squeeze Explorer”) decide to buy this coin collectively.
It could lead to a short squeeze, causing the token’s price to rise rapidly.
Shorters could face significant losses, while buyers initiating the squeeze might see substantial gains.

Thus, simply shorting without strategy won’t work. The “Squeeze Explorer” is designed to encourage intense battles between longs and shorts.

Place a bet and smile, for the outcome is uncertain.

With the shorting mechanism in place, the PVP in meme coins will become even more intense and ruthless.

Dumpy’s own tweet confirms this:

If someone says your coin is bad, tell them to vote with their money.

This clearly has a provocative tone — if you don’t like the meme, stop talking and short it. The underlying message is, let’s create a scenario and see whether the shorts or the longs prevail.

But there’s one thing we both know:

The outcome of the fight is unpredictable, but the one setting up the stage always wins.

Token DUMP

With the platform’s launch, it will also have its own token, DUMP.

Key Functions:

Governance: Holders can participate in platform decisions.
Fee Sharing: A portion of transaction and liquidation fees will be distributed to DUMP holders, creating a passive income stream and incentivizing long-term holding.
Collateral: DUMP can be used as collateral for trading or lending on the platform, increasing its utility and demand.
Liquidity Mining: Additional DUMP tokens can be earned by providing liquidity, helping to increase the platform’s liquidity and stability.

The platform may implement a token buyback and burn mechanism. A portion of transaction fees might be used to buy back and burn DUMP, creating deflationary pressure.

However, the product is still not live, and DUMP has not yet had its TGE (Token Generation Event).

Currently, the dumpy.fun website only allows users to join a waitlist by submitting their email. Interested players can visit the project’s Telegram for more information.

In the official Telegram community, the platform has initiated a meme coin vote to let users decide which coins to list and allow for shorting.