Repurchase and destroy tokens, while mergers and acquisitions (M&A) destroy competitors.
In traditional finance, buybacks are a defensive retirement choice made by giants "due to an inability to grow further."
The point of this article is: why might startup projects miss the moat in the illusion of buybacks? Why in Web3 is expansion more important than buybacks?
Buybacks are not suitable for Web3 (at least not now).
2025 will be dominated by the "buyback narrative"—an obvious, straightforward price support mechanism, but it has long-term structural issues.
It's understandable why this idea became popular in Web3—it precisely leverages the core element of Web3: speculation.
When a mechanism can continuously buy tokens and create a "sustainable buy pressure," this design is highly tempting. A very easy story to explain and sell.
But it is destroying projects for the following reasons:
The buyback mechanism comes from traditional finance (TradFi). Simply put, buybacks are exclusive tools for large, mature companies. Moreover, they were not invented to drive up prices—but rather as the optimal growth method for these companies at a specific stage.
The reality is: when a company becomes very large, continuing to expand the business becomes increasingly difficult. The reason is simple—you have already covered most industries and opportunities, and each new product's marginal contribution to overall revenue declines.
When management sees this, they realize: rather than persist in active expansion/new products/R&D, it is better to choose another path—optimizing the overall structure of the company through buybacks.
Stock buybacks and destruction mean: with company revenue unchanged, earnings per share (EPS) rise, thus driving up the stock price. This is similar to dividends, but instead of directly distributing money, it transfers value to shareholders by "reducing equity and increasing per-share value."
Therefore, the traditional path is usually: Startup → Growth → Expansion → Buyback.
Mature companies often allocate 20%–50% of cash flow to buybacks.
Hyperliquid breaks this path—skipping the expansion phase and entering the buyback phase directly. In the short term, this indeed brought positive feedback: HYPE once soared to $40–60.
But a year later, people began to realize: this is unsustainable in the medium to long term, and the reason is simple—you missed the most critical growth phase.
As mentioned earlier, buybacks are only suitable for companies that are already struggling to grow: they are large, have numerous product lines, and cover multiple industries.
But this does not align with the current state of Web3.
In the Web3 space, apart from Binance, Coinbase, Tether, and Circle, almost all projects are essentially startups.
The mission of a startup is rapid growth and aggressive expansion into new areas. This is the fundamental reason for "small fighting big," David defeating Goliath.
The reason is also simple: the long-term benefits of developing new products and expanding new businesses far outweigh the gains from buybacks themselves.
For growth companies: buybacks should not exceed 20% of revenue. The meaning of buybacks should not be speculation, but a signal of the sustainability of the business model.
Taking Hyperliquid as an example:
Hyperliquid earned $900 million in 2025, almost all of which was used for buybacks.
If only $180 million were allocated for buybacks (about $500,000/day, which is already very exaggerated).
The remaining $720 million/year could be fully used for active expansion.
This amount of money, even in most Web2 companies, is a huge growth capital.
If you really want to benchmark against Binance, just look at how Binance did it back in the day. Let's see what Binance did from 2017 to 2021, still in its startup phase:
Crazy launch of new products: Spot, Margin, Futures, Launchpad, two L1s, Earn, DeFi, NFT, Payments.
Active acquisitions: Trust Wallet, CoinMarketCap, WazirX, Jex.
Established a VC investment department: Binance Labs team expanded to thousands.
Global layout: Asia, Europe, the United States, the Middle East.
BNB Chain ecosystem construction, deeply coordinated with Binance.
Binance's profits in 2018-2019 were also close to $1 billion per year, but they allocated 80% to expansion and market capture, only 20% to buybacks. It was this aggressive product and business expansion that created today's Binance.
They used resources to buy the moat and the team.
Hyperliquid's current state resembles Binance from 2018-2020. If it truly wants to achieve such dominance, it must completely adjust its strategy.
The reality is: its buyback ratio is as high as 97%, behaving like a mature company, but essentially, it is still a startup project lacking an active growth strategy.
Buybacks burn tokens.
M&A burns competitors.
Other PerpDEXs like Lighter have more opportunities in this regard. While Hyperliquid indulges in buybacks and self-consumes through horizontal expansion, competitors should focus their resources on:
Building new products.
Acquiring new users.
Establishing a legal operational foundation in multiple jurisdictions.
Actively recruiting talent and teams.
Mergers and acquisitions (M&A).
Even establishing a VC investment department.
In my view, Lighter is the most likely to become a strong competitor to Hyperliquid because:
They have highly attractive products (I personally think it's one of the best PerpDEXs).
They have a strong development and business (BizDev) team.
The founders are experienced and know how to build large companies and scale them.
They have direct connections with the U.S. government and a compliance foundation.
Hundreds of millions in annual revenue, enough to support rapid growth.
In summary: Buybacks are not a panacea; expansion and product iteration are the right path.
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