Author: Nancy, PANews

On November 11, the leading DEX Uniswap proposed a buyback and burn mechanism, sparking heated discussions and making the method of token value capture a focal point of market controversy, with executives from Curve and Solana publicly expressing their positions.

In traditional stock markets, buybacks, cancellations, and dividends are common capital operation methods. Especially during periods of market downturns and pressured profit expectations, such measures are often seen as a "pressure relief valve." Currently, these market capitalization management tools are also becoming increasingly popular in the crypto market, with more and more projects using them to enhance token value, boost holder confidence, and establish a positive incentive loop.

Buybacks Become a Popular Strategy, Effectiveness Depends on Transparent Execution and Market Environment

A buyback refers to a company using its available funds to purchase its own outstanding shares in the open market, thereby reducing the total share capital and conveying confidence to the market.

Apple is one of the typical representatives of stock buybacks in the U.S. stock market in recent years. Over the past decade, Apple has accumulated a buyback amount of up to $704 billion, a figure that not only exceeds the market capitalization of most companies in the S&P 500 index but also makes such a massive buyback scale a core means of maintaining shareholder returns. However, this financial engineering strategy is considered insufficient to support future growth.

The buyback craze in the crypto market is also accelerating, especially in the DeFi sector, providing project teams with tools to flexibly manage token economic models and optimize ecological incentives. According to data from CoinGecko released in October regarding token buybacks in 2025, this year, 28 token projects have accumulated buyback amounts exceeding $1.4 billion, with an average monthly expenditure of about $146 million. However, the scale of buybacks varies significantly among projects, with the top ten buyback projects accounting for 92% of the total, and Hyperliquid alone contributing 46% of the buyback expenditure. In contrast, the buyback amounts of other projects are relatively limited, mostly ranging from hundreds of thousands to millions of dollars.

However, the market's response to token buyback strategies is not always positive, and the prices of many projects have not significantly increased as a result. The reasons are multifaceted: on one hand, while token buybacks can reduce market circulation and create a sense of scarcity, most projects lack intrinsic demand, and prices are more driven by market enthusiasm, liquidity, and narratives;

On the other hand, the effectiveness of buybacks often depends on the sustainability of the project's revenue and business fundamentals, while the vast majority of projects have limited or highly cyclical revenues, making it difficult to form long-term support. For example, Hyperliquid has a robust revenue source, and its buyback actions can effectively drive up token prices; whereas Pump.fun's revenue is significantly influenced by MEME popularity, and buybacks can only bring about short-term price fluctuations.

Amir Hajian, research director at Keyrock, also stated that the crypto buyback craze is testing the financial maturity of the industry. Although buybacks aim to send confidence signals by reducing circulating supply, most of the expenditures come from the treasury rather than recurring income, which may deplete future operational space. To achieve true maturity, protocols must move beyond speculation-driven expenditures and adopt a restrained approach, linking buybacks to valuation metrics, cash flow strength, and market conditions, such as through trigger-based or options-based models. He suggested that buybacks should only be conducted when revenue is stable, the treasury is ample, and valuations indicate that tokens are undervalued, emphasizing that the true measure is discipline rather than the buyback policy itself.

"Buybacks are fairer for every token holder because everyone can benefit from the spot price. Moreover, for most people, buybacks are more tax-efficient. They are also easier for retail to understand and spread. However, not all buybacks are the same. For instance, Fluid and Lido (in the proposal stage) only trigger buybacks when revenue exceeds a certain threshold, which can protect the treasury during bear markets while keeping buybacks sustainable without depleting reserves. Research also shows that when liquidity is thin, the impact of buybacks on price is stronger (this effect may be offset when traders sell after the buyback?). Maker and Lido have taken it a step further by pairing the buyback tokens with ETH or stablecoins (into liquidity pools), which increases liquidity while reducing supply," noted DeFi researcher Ignas.

Buybacks Are Not Enough; Burn Drives Deflationary Narrative

However, many projects lack transparency in their buyback operations, with specific mechanisms (such as trigger conditions, buyback amounts, sources of funds, and usage methods) unclear, making it difficult to verify the authenticity and purpose of the buybacks. Especially in the absence of a burn mechanism, tokens may flow back into the market shortly after buybacks through sales or incentives. For example, Movement and MyShell, which were previously required by Binance to buy back tokens, have recently transferred the buyback assets back to exchanges.

In capital markets, not all buybacks can genuinely enhance shareholder value. Among them, cancellation buybacks are considered the most valuable, as companies use real cash to repurchase shares from the market and cancel them, permanently reducing the number of outstanding shares, thereby enhancing earnings per share and shareholder equity. This is different from buybacks that are only used for equity incentives or as treasury stock, which often hide future selling pressure and are difficult to form lasting value support.

Similarly, in the crypto market, token "burning" is often seen as a form of "true buyback," which not only strengthens market sentiment but also boosts price expectations. From an economic perspective, the burn mechanism is essentially a deflationary measure and one of the designs that reinforce long-term value support in token economic models.

Crypto KOL @qinbafrank pointed out that for growth assets (tech stocks, cryptocurrencies), buyback and burn are usually superior to dividends. In the case of unchanged protocol revenue, buyback and burn effectively increase the intrinsic value of individual tokens, directly injecting the positive externality of protocol revenue into the token economic model. In contrast, in a dividend mechanism, holders receiving cash may cash out, failing to reflect revenue growth in the token economic model. For example, BNB has conducted 33 quarterly burns since its ICO, cumulatively burning 31% of tokens, reducing the total from 200 million to 138 million, and experiencing a decline during bear markets that is lower than Bitcoin.

Unlike traditional capital markets, the volatility and sentiment in the crypto market are more extreme, and the effects of burning are often amplified by cycles: in bull markets, it can serve as a catalyst for price increases; while in bear markets, weak demand makes the deflationary effect relatively limited.

Moreover, burning is often interpreted by the market as a positive signal, easily triggering short-term speculation, but as enthusiasm wanes, prices may also quickly retreat. From a project operation perspective, burning also means resource redistribution, with some projects using it as a marketing tool to gain short-term confidence through scarcity, but it may not necessarily bring sustained value and could even reduce investment in technological research and development, ecological incentives, or market expansion.

Another overlooked risk is the authenticity of data. Not all announced burns can be verified on-chain, and some projects may have issues with false reporting, double counting, or even "fake burns." For instance, Crypto.com announced in March this year the reissuance of 70 billion CRO tokens that were previously promised to be "permanently burned" in 2021. Therefore, investors also need to assess the actual impact of burning on circulation, combining on-chain data, changes in token distribution, and multi-dimensional information on the flow of funds from project parties for judgment.

Dividend Opportunities Open the Era of Passive Income

In the stock market, dividends are a way for companies to return value to shareholders and are often used as a means of market capitalization management, with common forms including cash dividends, stock bonuses, and stock splits. Dividends not only reflect a company's profitability and cash flow status but also become an important reference for investors to assess company value and attractiveness. However, dividends often lead to short-term declines in stock prices. For growth-oriented companies, excessively high dividends may limit their long-term development potential; for investors seeking capital appreciation, the dividend income from some companies may be far less than the gains from stock price increases.

Unlike traditional stock dividends, crypto projects typically do not distribute cash directly based on company profits but provide passive income or rewards to holders through various mechanisms, with forms of income including token rewards, fee sharing, interest, and airdrops. These mechanisms not only create income for investors but also support the security, liquidity, and user activity of the network. A report from crypto market maker Keyrock indicated that the top 12 DeFi protocols spent about $800 million on buybacks and dividends in 2025, a 400% increase from early 2024.

For example, users can participate in network validation or governance by staking tokens, earning rewards while enhancing the security and consensus efficiency of the network. At the same time, users can also earn rewards by providing liquidity to liquidity pools, increasing market liquidity while earning rewards. Additionally, some projects allow holders to share the revenue generated from platform transactions or usage through protocol fee sharing, thereby incentivizing users to hold long-term and actively participate in governance.

In the view of DeFi researcher Ignas, he prefers staking and locking because non-participants are effectively subsidizing active participants. For instance, if CRV generates $10 million in revenue, but only 50% is staked, then only stakers can receive the revenue. Meanwhile, holders on centralized exchanges (CEX) receive nothing. Moreover, locking tokens only temporarily halts circulation; ultimately, they can be unlocked and re-enter the market.

Compared to traditional markets, crypto dividend mechanisms have multiple advantages, including the ability to earn stable income without active trading; staked or locked tokens can also grant governance voting rights, enhancing community belonging; many protocols support automatic reinvestment, allowing for a compound interest effect; low entry barriers, allowing participation with small amounts of capital; transparent sources of income, with all transaction fees, interest, or protocol revenue recorded on-chain and verifiable in real-time; and the dividend tokens themselves also have asset appreciation potential.

However, risks also exist, such as smart contract vulnerabilities or protocol centralization issues that may lead to theft or transfer of funds; providing liquidity may encounter impermanent loss; price volatility can cause asset value depreciation, offsetting earnings or even resulting in principal loss; in lending scenarios, a decline in collateral prices may trigger forced liquidation; and lock-up periods also imply opportunity costs, potentially missing out on other investment opportunities. Additionally, compared to buybacks and burns, which are market behaviors, the dividend mechanisms of governance tokens may attract regulatory scrutiny and could be classified as securities. For example, UNI has previously delayed or shelved its fee switch proposal multiple times due to regulatory risks.

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