Original ｜Odaily Planet Daily（@OdailyChina）

Author｜Golem（@web3_golem）

Last week, a new Meme issuance platform called alt.fun in the Hyperliquid ecosystem attracted significant attention from Meme players. Within just a week of its launch, its leading token ALT reached a market capitalization of up to 8.8 million USD, with the current price retracting, and the market cap maintaining around 6.7 million USD.

The novelty of alt.fun can be understood as a combination of Pump.fun and hyperliquid, where users on the platform can simultaneously experience the dual stimulation of playing with Memes and opening contracts.

Introduction to the Mechanism of alt.fun

Specifically, each Meme token issued on alt.fun has corresponding contract positions matched on Hyperliquid.

Similar to Pump.fun, any user can issue Meme coins on the HyperEVM through the alt.fun platform with one click. The token price is still influenced by the bonding curve, and the total supply of the created Meme coin is 1 billion USD. After 75% of the tokens are sold, the token successfully "graduates" and is migrated to the HyperSwap V2 liquidity pool.

The difference from Pump.fun is that when creating tokens on alt.fun, users also need to choose an underlying asset and make long/short positions with limited leverage multipliers (2/3/5 times). At the same time the token is created, the platform will mint corresponding amounts of leveraged tokens (LT) on BounceTech (Note: a permissionless leveraged token platform on Hyperliquid) and send them to users. These leveraged tokens correspond to establishing perpetual contract positions on Hyperliquid. For example, if a user chooses to create a token based on a 3x long position on HYPE, then what they receive is essentially leveraged tokens that track 3x long gains on HYPE.

As shown in the figure below, currently on alt.fun, when creating tokens, users can choose from 14 underlying assets. Similarly, when players purchase Meme coins on this platform, the platform will also mint corresponding leveraged tokens on BounceTech. If a player sells, this process will reverse, with leveraged tokens being redeemed and the user receiving corresponding USDC.

This mode of repackaging leveraged tokens as underlying assets before selling is similar to the securitization of specific risk exposure securities like futures and options in traditional finance, such as 3x shorting Nasdaq ETF, 5x shorting oil products, etc. The alt.fun platform plays a role similar to an asset management company in this process, managing the long positions behind leveraged tokens for users.

The core price of these financial products follows the net asset value; however, because the token price issued by the alt.fun platform is also influenced by the bonding curve mechanism of Meme coins, the graduation model and price driving methods of Meme coins on the platform are not singular.

Dual Graduation Model and Price Driving Methods

This also means that the prices of tokens on the alt.fun platform are influenced by two factors: one is the market sentiment from buying and selling, and the other is the performance of the underlying asset. Therefore, you might now understand what alt.fun's slogan "Your token pumps even when nobody's buying" means.

If a user creates a token based on 3x long on HYPE and invests 20 USD (the platform specifies a minimum purchase scale), and then HYPE rises by 10%, then even if no one buys that token, the user's holding value still grows by 30% to 26 USD.

Based on the dual price driving method, the token graduation model on the alt.fun platform is not limited to just one type. Specifically, the graduation condition for its tokens is to reach a market cap of 9000 USD, which essentially calculates the value of leveraged tokens. In addition to purchasing tokens allowing them to graduate, if the token itself reaches a market cap of 9000 USD due to the appreciation of the underlying asset, it can also graduate successfully. Therefore, whether a token can meet the graduation threshold is often the result of a combination of two pricing mechanisms.

Of course, ideally, the appreciation of the underlying asset drives the rise of leveraged tokens, combined with the emotional catalysts of the Meme market, that token might see a skyrocketing rise. However, once the underlying asset decreases in value, and the leveraged token's value continues to shrink, the market may panic sell, potentially causing that token's price to crash suddenly.

Therefore, although the mechanism of alt.fun can effectively leverage the amplification effect, it only works in a unidirectional market and requires users to accurately hit the trend. If the underlying asset faces volatility, users will also have to bear the costs of leveraged decay. Because when the underlying asset price is in a fluctuating state, the platform needs to perform "rebalancing" to manage positions to avoid liquidation, which means that even if the underlying asset drops and then rises again, leveraged tokens will incur losses due to forced position reduction during the drop, slowly depreciating.

Even in cases of flash crashes, the platform may fail to respond quickly enough, resulting in leveraged tokens becoming worthless.

Meme or not Meme

Currently, there are a total of 41 graduate tokens on the alt.fun platform, with only two tokens having a market cap of over a million USD, namely ALT based on 5x long HYPE and STONKS based on 5x long S&P 500, with around over 1000 total users. Although alt.fun is still in its early stages, we can also see its current development bottleneck.

One is the limited number of underlying assets on the platform; according to the current 14 types of underlying assets, the maximum number of leveraged token combinations can only be 84. Alt.fun has already seen leveraged tokens being created with the same multiples for shorting/going long on underlying assets, such as the highest ALT token which is based on 5x long HYPE, and another token at ATH is also based on 5x long HYPE. Both, apart from their token name and creation time, have no differences. If that is the case, why wouldn’t investors purchase the lower market cap ATH?

Although alt.fun may support more underlying assets in the future, its core pain point is the inability to unify the Meme coin community consensus.

The reason investors choose to buy leveraged tokens on the alt.fun platform instead of opening leverage directly on Hyperliquid is essentially to gain greater price leverage and because the platform manages the users’ positions through rebalancing, allowing individual users to act as "hands-off managers" without worrying about individual liquidation risks.

However, this is also where the problem lies; investors purchasing an alt.fun token are fundamentally based on their expectations for the future price of its underlying asset, rather than on narratives, market games, or attention. These “meaningless things” are precisely what supports the core value of Memes. A Meme's ability to rise or gain market recognition often does not come from actual value support or financial design, but more importantly, from community propagation.

As a Meme player, I find it hard to develop a love for a leveraged token akin to a particular Meme community culture. If one truly believes in the underlying asset of a leveraged token, it would be better to issue a leveraged token oneself rather than purchase an existing one and bear unnecessary premiums.

Therefore, while the mechanism of the alt.fun platform may seem innovative, in my view, it is merely a mechanical innovation. If alt.fun focuses on developing towards a DeFi platform, there may still be opportunities; if it chooses to force its way into the Meme issuance platform arena, it is destined to be short-lived.

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