A buyback is when a company uses its own funds to repurchase its stocks or tokens from the market. In the stock market, firms often do this to reduce supply and signal confidence to investors

You’ve probably seen announcements like ‘Project XYZ bought back $5M worth of tokens from revenue’ or ‘We’re allocating 80% of revenue to buybacks.’ In fact, token buybacks jumped from $3.3B in 2024 to $8.1B in 2025, a 145% surge. They’re often promoted as a sign of strength, but the data tells a different story.

Here is the performance report from Tokenomist 2025 Annual report of major token buybacks. And except for a selected few tokens, the numbers don’t look good for a majority of them.

But you must be wondering, if these projects buy such a huge amount of tokens, why doesn’t it reflect in the token price?

There isn’t just one reason for this, several factors influence token prices even after millions are bought back from the market.

Traditional finance has long relied on buybacks as a way to project strength and reassure investors. Its no surprise that this mechanism became the default choice for many crypto projects as well, to solve the “value accrual” problem.

The narrative was seductive in its simplicity: protocols would generate revenue, use that revenue to purchase their own tokens, thereby reducing the supply and forcing price appreciation through the law of supply and demand. However, if you look at the numbers, there’s a profound disconnect between the promise and the reality.

Here are some main reasons why buybacks don’t really work for crypto in most of the cases.

Protocol Re-pricing

Before we even look into crypto-specific concepts, one must first look into the economic theories and check if they justify them. The prevailing narrative in crypto is that if Demand is the same, and Supply decreases, then the Price must go up. Seems logical, right?

It isn’t. According to modern economists (Modigliani-Miller Theorem), the value of a firm should be determined solely by its underlying assets and earning power, independent of how it finances its operations or distributes its capital. Applied to crypto, a protocol’s total value should be derived from the utility of the protocol and network, its Total Value Locked (TVL), and its fee generating capacity. Whether a protocol chooses to hold its revenue in treasury, distribute it as rewards, or use it to buy back tokens should be irrelevant to the total protocol value.

In digital asset markets, this boils down more into a zero-sum game. When a protocol like Uniswap or Aave uses $10 million of treasury funds to buy back its own token, even though it reduces the circulating supply, it also reduces the “book value” of the protocol’s treasury by an equivalent amount. Essentially, the protocol moved from a safe asset like stablecoins, to a more riskier asset (its own token) and depleted its own war-chest: capital that could have been used for development, marketing or other operations, and essentially discounted the protocol’s future growth prospects. Because of this, the market should re-price the token to reflect this reduced capitalization, neutralizing the impact of any supply shock.

Emissions vs Buyback Myth

A core reason why buybacks fail to support price is that they are insignificant compared to the sell pressure from incentives and vesting schedules. Most crypto projects operate with aggressive inflationary schedules to incentivize liquidity, users and developers.

For example, Jupiter implemented a buyback program to utilize 50% of the DEX swap fees to buy JUP tokens. They managed to buyback just 0.33%, while the emissions were 55.97%. The buyback pressure was a drop in the ocean compared to the billions of tokens unlocked for the team and the early investors.

Jupiter recently made the drastic move to halt all token emissions and cancel its planned airdrops. Extreme? Maybe. But it highlights a simple truth: you can’t fill a tank if the faucet is still running wide open.

Buying the Top

Most protocols utilize a "fee-switch" mechanism where a percentage of trading fees is automatically routed to buybacks. In a bull market, trading volumes soar, and protocol revenue hits all-time highs. The automated buyback mechanism executes its largest purchases exactly when the token price is at its peak. Conversely, in a bear market, trading activity dries up, revenue plummets, and the buyback mechanism scales down or stops entirely, exactly when the token is undervalued and the buyback would have the most impact.

Data from Messari confirms that buyback programs often execute heavily above the Simple Moving Average, destroying treasury value. For example, Aave’s buyback in 2025 spent over $15M purchasing tokens at an avg price of $223, only to see the price stagnate or drop, resulting in an unrealized loss for the DAO. By automated buybacks, protocols systematically mis-allocate capital, burning millions at the top of the cycle and providing zero support at the bottom.

The Exit Liquidity Trap

One of the most overlooked aspects of buybacks is who is actually on the other side of the trade. In many cases, protocol revenue acts as a buffer used to provide exit liquidity for investors and the team. Instead of the revenue being reinvested into the ecosystem to build new features or attract new users, it is used to "buy out" early investors, allowing them to exit their positions without crashing the price as severely.

What actually could work?

Every dollar spent on a buyback is a dollar not spent on growth. In the hyper-competitive space of web3 where new protocols launch every few days, capital efficiency is the king.

A few structural changes would put these funds to a meaningful use, rather than these hollow buyback programs.

• Liquidity Provision: Instead of burning tokens in millions, the protocol could use it as Protocol Owned Liquidity (POL). This earns trading fees in revenue for the protocol and also deepens liquidity.

• Yield Generation: Placing the earned revenue into yield bearing sources such as staking or lending markets creates a recurring revenue stream that compounds over time.

• Research and Development: The same funds could be used to fund a world-class engineering team for years to build new innovative products.

The obsession with token buybacks is a symptom for a larger problem: the desire for a shortcut to value accrual. The data is very clear, token buybacks are not a money printer for token price.

A token’s value should come not from how much of it can be bought and burned, but from how much utility it delivers. Buybacks are a shortcut, but shortcuts rarely lead to sustainable value.

Enjoyed the read? A quick like or share goes a long way in helping more people discover it

Share

Check out my previous article on Crypto Wallets for more insights:

If you are not paying for it, you're not the customer; you're the product being sold.

— Andrew Lewis

If you’re a power crypto user, you probably interact with a wallet dozens of times a day. But if you think a wallet is just a place to access your digital coins, you are missing the bigger picture.

For the uninitiated, a wallet is simply a piece of software/hardware that lets you manage your public keys (your account number) and private keys (your password). The wallet doesn’t actually “hold” your tokens, those live on the blockchain. A wallet simply secures your keys and provides an interface to send, receive and interact with crypto apps.

“The interface”. That is the magic word. This is exactly why everyone, from Centralized Exchanges (CEXs), DeFi protocols, browser giants, to big institutions is racing to launch one.

If you are an OG, you must have used a Metamask wallet back in the days where it could only be used to send tokens, and sign transactions on apps. But the wallets have leveled up a lot since those early days. All major wallets now come with a nice view of a summary of your portfolio, send/receive tokens, swaps and other apps like prediction markets baked into the wallet itself, NFT views and the ability to trade them, and so on. You get the idea, right?

Wallets are no longer just tools to store your keys, they’re the new front-doors to web3. They are a strategic tool that everyone wants to own. The trend of “everyone launching a wallet” is driven by a shift in how the industry views value capture. The industry has realized that in a decentralized economy, the interface is the kingmaker.

The "free" wallet model is a myth. Modern wallets are sophisticated revenue engines that monetize user attention, transaction flow, and asset management.

The Gateway Effect

A wallet is the first thing a user touches in crypto. Anyone who controls the interface, controls the relationship. Think of wallets like browsers in the early internet. Owning the entry point means shaping the entire experience. Once you have the users, you can easily provide value added services and charge a premium on those services. And many users don’t mind paying a small premium for the convenience of easy access.

Along with this, wallet users are sticky. Once a user commits to a wallet, switching feels costly. Trusting the new wallet, migrating seed phrases/private keys, getting used to the new interface, all these create friction for the user. This lock-in effect generates powerful network effects, making wallets one of the most defensible assets in crypto.

The Super-App ambition

In web2, the companies that won were mainly the aggregators. Google organized information, Facebook organized social connections, Amazon organized commerce, Netflix organized entertainment. They didn’t necessarily create the content or product. They controlled the distribution. By controlling the wallet, a company controls the distribution. They can determine which apps are featured, which tokens are visible, and which chains are prioritized.

For example, Metamask heavily prioritizes Linea and Infura, products owned by its parent company, Consensys. The goal is to become the WeChat or Paytm of crypto, a single app where users chat, trade, browse, and pay, without leaving the ecosystem. And if you’re someone who’s active in web3, you must have noticed Base/Farcaster trying to exactly follow this playbook.

Wallets are no longer passive tools. They are evolving into “Super Apps” for crypto, enabling projects to monetize through partner fees, sponsored gas-less transaction fees (Rabby Gas Account), premium features (such as on-ramp and off-ramp service fees) , or ecosystem integrations (such as Hyperliquid Perps, Polymarket prediction markets, etc). In a world where attention is very scarce, wallets are the prime real estate.

Swaps are the Golden Goose

The most immediate source of revenue for consumer wallets is the in-app token swaps aka “Trading”.

Wallets such as Metamask, Phantom and Rabby provided a wake-up call to the industry when data revealed their “Swap” features were generating hundreds of millions of dollars in revenue annually, often earning more than the very underlying swap protocols it was routing its trades through. For instance, MetaMask’s swap feature generated a cumulative revenue of approximately $345 million by the end of 2025, while Phantom, the leading wallet on Solana, generated over $79 million in annualized revenue. These figures often dwarf the revenues of the DEXs the wallets route through, validating the premise that the interface is the ultimate aggregator.

This could be mainly because many users might not be aware that the wallet is charging them fees or users are willing to pay a “convenience fee” (ranging from 0.25% to 1%) to swap tokens directly inside the wallet interface rather than navigating to another dapp or aggregator, connecting, approving and trading. Protocols are realizing that they were doing the heavy lifting while wallets were eating their lunch. Launching their own wallet is a defensive move to recapture that value.

But swaps are just the visible layer. Beneath the surface lies an even more controversial revenue stream: MEV

The hidden Goldmine: MEV and Order Flow

One of the most advanced (and controversial) revenue streams for wallets is something the average user never sees: Maximal Extractable Value (MEV). MEV refers to the profit that can be extracted from block production by reordering transactions.

Think of it like this: every time you send a transaction, it’s not just about paying transaction fees (gas fees). The order in which the transactions get processed can itself be valuable. For example, if two people are trying to buy the same token, whoever gets in first might make more profit.

Traditionally, this “extra value” was captured by miners, validators, or trading bots. But since wallets are the starting point for transactions, they can control the flow before it reaches the blockchain. Some wallets sell that priority to block builders. This practice is called Order Flow Auctions (OFA).

For the wallet, it’s a lucrative high margin revenue stream that doesn’t require charging the user a direct fee. Instead, they profit behind the scenes.

While tools exist to share these profits back to the user, most wallets currently keep this revenue for themselves.

The Walled Garden

Centralized exchanges are terrified of on-chain migration. As DeFi becomes easier to use with more user-friendly apps, fast and scalable chains, highly liquid avenues, users tend to move funds off exchanges into self-custody. This results in lower revenues for these CEXs, and is a direct risk to their business model.

But something unexpected happened here. Instead of fighting the trend, exchanges like Binance, OKX and Coinbase launched their own “self-custody web3 wallet”. Some exchanges went on to even create their own Layer 2 chains to capture more of that value. If a user wants to go on-chain to buy a memecoin or lend on a money market, the exchange wants them to do it through their wallet. This keeps the user within the exchange’s own ecosystem (“Walled Garden”). And there’s a good reason for that. It allows the exchanges to capture bridging fees, fiat on-ramp fees, trading fees, and withdrawal fees as well, effectively monetizing the user’s exit.

Account Abstraction changed the game

Earlier, launching a wallet was risky, because the UX was terrible. Users had to manage seed phrases/private keys, and if they lost them or the keys were compromised, the wallet provider was blamed. For a decade, the primary barrier to crypto adoption was the "Externally Owned Account" (EOA), requiring users to manage a cryptic public-private key pair or a 12 or 24 word seed phrase. Loss or a compromise of the phrase meant total loss of funds.

As Account Abstraction made progress, these issues slowly got better.

Developers can now provide a web2 experience with social recovery (Google/X login), sponsored gas fees and transaction bundling. This allowed mainstream consumer brands like Telegram and Reddit to launch wallets that feel like standard apps. The complexity of “crypto” is abstracted away, making it safe and easy for mainstream companies to enter the wallet wars without terrifying their users. Wallet as a Service companies such as Turnkey, Privy, and a few more popped up, allowing companies to create a wrapper wallet on top of this.

What’s next

The infrastructure phase of crypto is maturing. We have enough blockspace, we have enough speed. The next trillion dollars in value won’t come from a faster blockchain, but from the interface that simplifies the chaos for the next billion users.

In the battle for web3, the protocol is the engine, but the wallet is the steering wheel. And everyone wants to drive.

The next wave of wallets won’t just secure keys, it will store identity, reputation and even AI agents. Whoever wins the wallet wars will define how billions of people interact with the decentralized web.

“If you can’t explain it simply, you don’t understand it well enough”

- Albert Einstein

gm gm,

There is something about good content that excites me, and I’m starting DeFi Minutes with a simple goal: to make DeFi and web3 less intimidating and more exciting. This newsletter is my way of sharing the research I already do, distilled into minutes, so you can grasp the essentials without spending hours.

DeFi Minutes has been a long-time dream of mine. For years, I’ve wanted to create a space where I could explain the world of web3 and its complex ideas in a way that my friends and anyone curious about the ecosystem could actually follow. While doing my research, I’ve realized that most content was either too technical, or too shallow to be useful at all. It was hard to find something you could simply forward to someone and say, “Hey, this explains it in a few minutes”

That’s exactly what I want DeFi Minutes to be. My goal with the newsletter is simple: to break down the gist of a topic in minutes, without assuming prior knowledge, without drowning in complexity, but still capturing the essence of why it matters. So you can have a quick read, and carry on with your day without feeling lost.

I’ve been in this space since before DeFi Summer, and I’ve seen it grow at a pace that makes even seasoned users and builders struggle to keep up. Every week, new protocols, narratives and experiments emerge.

To stay informed, I’ve always done my own research: reading protocol docs, trying out protocols, and piecing together insights from different sources such as X, Substack, and podcasts.

The reality is, there’s no shortage of great content out there. Many authors create incredible deep dives and thoughtful analysis. Still, most of us don’t have the time to read every long-form article or spend hours on deep analysis.

That’s the gap I’d like to fill with this newsletter, a way to distill the essentials into something quick, clear and shareable.

Over the years, I’ve worked across different areas of DeFi. My focus has always been on building solutions that add value. That same goal carries into this newsletter. I also believe that learning should feel accessible and exciting. It has become very difficult lately to separate signal from noise, and with the rise of AI-generated filler and clickbait posts, finding quality content has become a challenge in itself. DeFi Minutes is my attempt to cut through that noise and share the research I already do for myself, in a format that’s practical and benefits the community too.

Welcome to DeFi Minutes. If you’ve ever felt lost in the noise of too much information, this is your space to slow down, learn, and engage. Please subscribe and join the journey to decode web3 together.

Share DeFi Minutes