Crypto Token Buybacks, Burns, and Dividends: An In-Depth Look at Value Strategies

Crypto Token Buybacks, Burns, and Dividends: An In-Depth Look at Value Strategies

Uniswap's proposed buyback and burn mechanism, a leading decentralized exchange (DEX), sparked a lively debate about methods for capturing token value in the cryptocurrency market. Industry leaders from Curve and Solana have joined the conversation, offering their perspectives on this crucial topic. In traditional financial markets, buybacks, cancellations, and dividends are common capital management tactics, often acting as a 'safety valve' during market downturns or anticipated earnings pressures. These tools are now gaining traction in the crypto space, as projects increasingly seek to enhance token value, boost investor confidence, and create positive incentive cycles.

Buybacks as a Trending Strategy: Assessing Effectiveness

A buyback involves a company using its available funds to purchase its outstanding shares in the open market, reducing the total number of shares outstanding and signaling confidence to the market. Apple is a prime example of stock buybacks in the US stock market. Over the past decade, Apple has spent nearly $704 billion on share repurchases, a figure surpassing the market capitalization of the majority of S&P 500 companies. However, some view this financial engineering strategy as insufficient to support future growth. The crypto market is experiencing a similar surge in buybacks, especially in the Decentralized Finance (DeFi) sector, providing projects with the flexibility to manage their tokenomic models and optimize ecosystem incentives.

According to CoinGecko's October 2025 Token Buyback Data, 28 token projects have completed cumulative buybacks of over $1.4 billion this year, with an average monthly spend of approximately $146 million. However, there are significant variations in buyback size among projects, with the top 10 buyback projects accounting for 92% of the total. Hyperliquid alone contributed 46% of the total buyback spending. In contrast, buybacks by other projects have been relatively limited, generally ranging from hundreds of thousands to millions of dollars.

However, the market's reaction to token buyback strategies is not always positive. Many projects' token prices often fail to increase significantly following buybacks. This can be attributed to several factors. Firstly, while token buybacks can reduce circulating supply and create a sense of scarcity, most projects lack intrinsic demand, with their prices largely driven by market hype, liquidity, and narrative. Secondly, the impact of buybacks often depends on the project's revenue sustainability and business fundamentals, which are limited or cyclical for most projects, making it difficult to establish long-term support. For example, Hyperliquid has a robust revenue stream, enabling its buybacks to effectively drive token price increases. In contrast, Pump.fun's revenue is significantly affected by MEME trends, and its buybacks can only lead to short-term price fluctuations.

Amir Hajian, Head of Research at Keyrock, stated that the crypto buyback craze is testing the financial maturity of the industry. Although buybacks aim to send a confidence signal by reducing circulating supply, much of the spending comes from treasuries rather than recurring revenue, which could deplete future operating space. To achieve true maturity, protocols must move beyond hype-driven spending and adopt a restrained approach that ties buybacks to valuation metrics, cash flow strength, and market conditions, such as using trigger-based or options-based models. He recommends that buybacks should only be conducted when revenue is stable, treasuries are plentiful, and valuation indicates that the token is undervalued. He emphasized that the true measure is discipline, not the buyback policy itself.

"Buybacks are fairer for every coin holder because everyone can benefit from the spot price. And they are more tax-efficient for most people and easier for retail to understand and spread. However, not all buybacks are the same. For example, Fluid and Lido (proposal) are only triggered when revenue exceeds a certain threshold, which can protect treasuries in bear markets while maintaining buyback value without depleting reserves."

Burns: An Inflationary Narrative Driven

In addition, many projects lack transparency in their buyback operations, with specific mechanisms (such as trigger conditions, buyback volume, funding sources, and usage) being unclear. This makes it difficult to verify the authenticity and purpose of buybacks. In particular, buybacks that do not involve a burn mechanism may cause tokens to re-enter the market through sales or incentives after a short-term buyback. For example, Movement and MyShell, which were required by Binance to repurchase tokens, recently transferred the buyback assets back to exchanges.

In financial markets, not all buybacks truly enhance shareholder value. Buybacks that involve canceling shares are considered the most valuable, as the company buys shares from the market with real money and cancels them, permanently reducing outstanding shares and thus increasing earnings per share and shareholder equity. This differs from buybacks that are only used for equity incentives or as treasury shares, which often conceal future selling pressure and fail to provide lasting value support. Similarly, in the crypto market, token 'burns' are generally regarded as a 'true buyback' behavior, enhancing market sentiment and driving price expectations. From an economic perspective, a burn mechanism is essentially a deflationary measure and a design to strengthen long-term value support in the tokenomic model.

Crypto KOL @qinbafrank points out that for growing assets (tech stocks, cryptocurrencies), buyback burns are usually better than dividends. With the protocol revenue unchanged, buyback burns are equivalent to increasing the intrinsic value of a single token, which is equivalent to injecting the positive externality of the protocol revenue directly into the tokenomic model. In the dividend mechanism, holders may liquidate the received cash, failing to reflect revenue growth in the tokenomic model. For example, BNB has burned for 33 seasons since ICO, cumulatively burning 31% of the tokens, reducing the total from 200 million to 138 million tokens. Experienced dips in the bear market lower than Bitcoin.

Unlike traditional capital markets, the volatility and sentiment of the cryptocurrency market are more extreme, and the effect of burns is often amplified by cycles: in a bull market, it can serve as a catalyst for price increases; in a bear market, weak demand limits the deflationary effects relatively. In addition, burns are often interpreted as a positive signal by the market, easily leading to short-term speculation. However, as the hype fades, prices may decline rapidly. From a project operations perspective, burning also means reallocation of resources. Some projects use it as a marketing tactic, using scarcity to gain short-term confidence. However, it may not lead to sustained value and may even reduce investment in technological research and development, ecosystem incentives, or market expansion.

Another overlooked risk is data accuracy. Not all published burns can be verified on-chain, and some projects may exaggerate, repeat calculations, or even 'fake' burns. For example, Crypto.com announced in March this year that it would reissue 70 billion CRO tokens that were previously 'permanently burned' in 2021. Therefore, investors also need to assess the actual impact of the burn on liquidity and assess multidimensional information based on on-chain data, token distribution changes, and project cash flows.

Dividend Opportunities Open an Era of Passive Income

In the stock market, dividends are a way for companies to reward shareholders and are often used as a market capitalization management tool. Common forms include cash dividends, bonus shares, and reserve transfers. Dividends not only reflect a company's profitability and cash flow but have also become an important reference for investors to assess a company's value and attractiveness.

However, dividends often lead to a decline in stock prices in the short term. For growing companies, excessively high dividends may limit their long-term growth potential. For investors seeking capital appreciation, the dividend yields of some companies may be far less than the gains made by stock price increases. Unlike traditional stock dividends, crypto projects do not typically distribute cash directly based on company profits but use multiple mechanisms to provide coin holders with passive income or rewards. Yield forms include token rewards, fee splits, interest, and airdrops. These mechanisms not only create returns for investors but also support network security, liquidity, and user activity.

Crypto market maker Keyrock reported that the top 12 DeFi protocols spent approximately $800 million on buybacks and dividends in 2025, up 400% from early 2024. For example, users can participate in network verification or governance by pledging tokens, which not only rewards but also enhances network security and consensus efficiency. At the same time, users can also participate in yield farming by placing assets into liquidity pools, which increases market liquidity while earning rewards. In addition, some projects allow coin holders to share revenue generated from transactions or uses through protocol fee splits, incentivizing users to hold long-term and actively participate in governance.

In the opinion of DeFi researcher Ignas, he prefers stakes and locks, because non-participants are effectively subsidizing active participants. For example, if CRV generates $10 million in revenue, only staking will get the revenue. Coin holders at CEXs (centralized exchanges) get nothing. Moreover, locking tokens simply temporarily stops trading, and they can eventually be unlocked and re-enter the market.

Compared to traditional markets, crypto dividend mechanisms have multiple advantages, including earning stable income without active trading; pledging or locking tokens can also obtain governance voting rights, enhancing the sense of belonging to the community; many protocols support automatic reinvestment, making returns achieve a compound snowball effect; the entry threshold is low, and small amounts of funds can participate; the real-time currency source is transparent, all transaction values, interest or protocol revenue is recorded on the asset itself; However, risks also exist, such as smart contract vulnerabilities or protocol centralization problems that may lead to theft or transfer of funds; providing liquidity may lead to impermanent loss; price fluctuations can lead to a reduction in asset value, offsetting returns or even losing principal; collateral price declines in lending scenarios may trigger forced liquidation; the lock-up time also means opportunity cost, which may miss other investment opportunities, etc.

In addition, compared to buybacks and burns that belong to market behavior, the dividend mechanism of governance tokens may trigger regulatory concerns and may be identified as securities. For example, UNI's fee switch proposal has been repeatedly suspended or delayed due to regulatory risks.