Is This Brand New and Wildly Successful Cryptocurrency on Robinhood a Screaming Buy?

Despite existing for less than a full quarter, the crypto launchpad Pons (CRYPTO: PONS) pulled in $11.4 million of fees on Sept. 5 alone. That made it the biggest launchpad by daily fees in all of crypto, a position it has held every day since Aug. 29. One big driver of its rapid success is that it operates on the new blockchain by Robinhood Markets, which also launched recently, in early July. Given that Pons is now the largest and busiest launchpad in Robinhood Chain's ecosystem, it now has a tremendous tailwind from the future growth of the network it runs on.

So does that make this coin a screaming buy, or is there a catch?

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This coin has already burned nearly a third of its supply

A launchpad is a platform that lets anyone create a new coin and open a market for it in minutes, with no coding required. As far as the business model, Pons enables anyone to deploy a new token on Robinhood Chain for a fee of about $1.

For the most part, users have been launching meme coins with that capability, with more than 255,000 new coins launched in its short lifetime so far. The platform also keeps a slice of the fees from every trade of those assets afterward, so it can potentially benefit from successful tokens for months or years after the launch -- an important innovation over the launchpad projects that came before it.

Around 80% of the protocol's 30% cut of those trading fees is used to purchase Pons on the open market and then destroy it, which by Sept. 3 had resulted in 288 million of the original 1 billion tokens being taken out of circulation. That makes the prospect of holding it as an investment quite appealing. Instead of holding a coin that inflates its supply over time, diluting value, the opposite is happening, meaning that scarcity will be supporting its value.

Should you buy Pons?

Much of Pons' growth is happening because Robinhood Chain is subsidizing demand in order to attract more users and their capital as part of its launching process.

Robinhood has so far covered its wallet users' network transaction fees, but the subsidy will end on Sept. 29. Pons' own charges won't change, but once the underlying transactions stop being free, the cheapest speculation in crypto gets costlier. This will almost certainly mean less launch volume and fewer fees for Pons. Furthermore, in the crypto launchpad segment, there's always a new player entering the scene anyway. Even when operating on different chains, the fact that launchpads tend to be mostly used to launch meme coins means that they compete for the same pool of highly speculative and highly mobile capital.

Since the platform is also brand new, it doesn't have enough of a use history for investors to confidently buy it in advance of the subsidy's expiry, never mind in the face of as-yet unlaunched competitors. So it isn't a screaming buy right now, and it won't be until it's proven to be resilient in ways it hasn't had time to prove yet.

Alex Carchidi has positions in Pons. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.