The 2025 DeFi Buyback Wave:
Leading DeFi protocols spent approximately $800 million on buybacks and dividends in 2025—a 400% increase from early 2024—aiming to boost confidence by emulating public company strategies.

Key Project Case Studies:

• Aave: Conducts weekly buybacks of ~$1 million in AAVE tokens, yet reported negative book profits after the pilot phase.

• MakerDAO: Uses DAI surplus via its Smart Burn engine to repurchase MKR, but the token price remains at only one-third of its all-time high.

• Ether.fi: Authorized a $50 million buyback for ETHFI, but its reliance on treasury reserves raises sustainability concerns.

• PancakeSwap: Implements a "Buyback & Burn" mechanism to achieve token deflation, though prices remain far below peak bull market levels.

• Hyperliquid: Invested $645 million in HYPE buybacks, driving a 500% token surge, largely fueled by revenue and user growth.

Why Buybacks Often Fail:

• Poor Timing: Buybacks often occur at cycle highs, while funding shrinks during bear markets.

• Funding Source Issues: Reliance on treasury reserves rather than sustainable revenue makes buybacks hard to maintain.

• High Opportunity Cost: Diverts resources from product development, leading to inefficient capital allocation.

• Diluted Impact: Continuous token unlocks and new emissions offset the effects of buybacks.

• Structural Market Challenges: Despite a rebound in Total Value Locked (TVL) to $160 billion, weak secondary market liquidity and tepid demand limit the efficacy of buybacks. True recovery depends on capital inflows and growth cycles, not short-term confidence boosts.

Conclusion: While buybacks may temporarily lift sentiment, they cannot substitute for organic growth and sustainable capital flow in revitalizing DeFi.

DeFi Projects Learn a Trick from Wall Street, but Is It Working?
2025 has not been easy for DeFi projects, but they have certainly learned one trick from Wall Street: using buybacks to signal confidence.

According to a report by crypto market maker Keyrock, the top 12 DeFi protocols spent approximately $800 million on buybacks and dividends in 2025—a 400% increase from early 2024.

Report analyst Amir Hajian wrote: "Just as publicly traded companies use buybacks to signal long-term commitment, DeFi teams hope to prove they are profitable, have cash flow, and possess a future."

However, in a market starved of liquidity and risk appetite, are these "token holder rewards" a return to value or merely burning money?

Who’s Riding the Buyback Wave?
This round of buybacks has extended from early players like Aave and MakerDAO to later participants such as PancakeSwap, Synthetix, Hyperliquid, and Ether.fi—covering nearly all major DeFi sectors.

Aave (AAVE) was one of the first major projects to initiate systematic buybacks.
Since April 2025, Aave DAO has used protocol revenue to repurchase approximately $1 million worth of AAVE weekly. In October, discussions began to "normalize" this mechanism, with an annual budget of up to $50 million.
The day the proposal was approved, AAVE briefly surged 13%, but after six months, the pilot resulted in negative book profits.

MakerDAO (MKR) launched the Smart Burn Engine in 2023, using DAI surplus to periodically buy back and burn MKR. In the first week after the mechanism went live, MKR rebounded 28%, hailed as a model for "cash flow returning to token holders."
However, a year later, the market reveals a paradox of "restored confidence, lagging valuation."
Despite strong fundamentals (MakerDAO continuously boosts DAI reserve yields through real-world assets, or RWA), MKR’s price (around $1,800 as of late October 2025) remains only one-third of its 2021 bull market peak (~$6,292).

Ether.fi (ETHFI), an Ethereum liquid staking protocol, recently proposed one of the most watched "major moves." The DAO authorized up to $50 million to repurchase ETHFI in batches below $3, via Snapshot fast-track voting, aiming to "stabilize the token price and restore confidence."
Yet the market remains wary: if funds come mainly from treasury reserves rather than sustainable revenue, such "price-support buybacks" will inevitably lose momentum.

PancakeSwap (CAKE) has chosen the most programmatic path. Its "Buyback & Burn" mechanism is embedded into the token model, with monthly net inflation data disclosures. In April 2025, CAKE’s net supply shrank by 0.61%, entering a sustained deflationary state.
Yet the price hovers just above $2, far below its 2021 peak of $44—supply improvement brings stability, not premium.

Synthetix (SNX) and GMX also use protocol fees to buy back and burn tokens.
Synthetix embedded a buyback module in its 2024 version update, while GMX automatically directs a portion of trading fees into a repurchase pool.
Both saw 30% to 40% rebounds during peak buyback periods in 2024, but when stablecoin pegs came under pressure and fees declined, they paused buybacks to redirect funds toward risk reserves.

The true "exceptional winner" is the perpetual contract platform Hyperliquid (HYPE).
It integrates buybacks as part of its business narrative: a portion of protocol revenue automatically flows into a secondary market buy pool.
Dune data shows Hyperliquid invested $645 million over the past year, accounting for 46% of the industry total. Its HYPE token has surged 500% since its November 2024 launch.
However, HYPE’s success stems not only from buybacks but also from revenue and user growth—daily trading volume tripled in one year.

Why Buybacks Often "Fail"
From a traditional finance perspective, buybacks are favored for three main reasons:

• They promise to increase value per share: By using real funds to repurchase and burn tokens, reduced circulation means each token claims a higher share of future earnings.

• They signal governance confidence: Launching buybacks demonstrates profitability, financial flexibility, and governance efficiency—a sign of DeFi maturing from "burning money on subsidies" to "operating with dividends."

• They create scarcity expectations: When combined with lock-ups or reduced emissions, buybacks can deflate supply and optimize tokenomics.

However, perfect theory doesn’t always translate to reality.

First, timing often backfires. Most DAOs are generous during bull markets but reduce funding in bear markets, creating an awkward "buy high, watch low" dynamic that contradicts value investing principles.

Second, funding sources raise concerns. Many projects draw from treasury reserves rather than sustained profits. Once revenue declines, buybacks become unsustainable "face-saving" measures.

Third, opportunity cost is high. Every dollar spent on buybacks is one less dollar for product iteration and ecosystem development. Market maker Keyrock warned in October: "Excessive buybacks may be one of the least efficient forms of capital allocation."

Even when executed, buyback effects are often diluted by continuous token unlocks and new emissions. When supply-side pressure persists, limited buybacks are like pouring a cup of water to extinguish a fire.

Messari researcher Sunny Shi noted:
"We haven’t observed the market sustainably boosting valuations due to buybacks. Prices are still determined by growth and narratives."

Moreover, the macro liquidity structure of the entire DeFi market has shifted. Although Total Value Locked (TVL) has strongly rebounded to a three-year high (~$160 billion), it still falls short of the 2021 bull market peak (~$180 billion). More importantly, while protocol revenue and capital efficiency are high, secondary market trading volume and speculative capital inflows still need time to return to the "exuberance" of the last cycle.

In a capital-constrained environment, even the most generous buybacks struggle to overcome structural demand deficiencies.

Confidence can be bought momentarily, but only genuine capital inflows and growth cycles can enable DeFi to "self-heal" once again.

Author: OXStill, BitPush

The 2025 DeFi Buyback Wave:
Leading DeFi protocols spent approximately $800 million on buybacks and dividends in 2025—a 400% increase from early 2024—aiming to boost confidence by emulating public company strategies.

Key Project Case Studies:

• Aave: Conducts weekly buybacks of ~$1 million in AAVE tokens, yet reported negative book profits after the pilot phase.

• MakerDAO: Uses DAI surplus via its Smart Burn engine to repurchase MKR, but the token price remains at only one-third of its all-time high.

• Ether.fi: Authorized a $50 million buyback for ETHFI, but its reliance on treasury reserves raises sustainability concerns.

• PancakeSwap: Implements a "Buyback & Burn" mechanism to achieve token deflation, though prices remain far below peak bull market levels.

• Hyperliquid: Invested $645 million in HYPE buybacks, driving a 500% token surge, largely fueled by revenue and user growth.

Why Buybacks Often Fail:

• Poor Timing: Buybacks often occur at cycle highs, while funding shrinks during bear markets.

• Funding Source Issues: Reliance on treasury reserves rather than sustainable revenue makes buybacks hard to maintain.

• High Opportunity Cost: Diverts resources from product development, leading to inefficient capital allocation.

• Diluted Impact: Continuous token unlocks and new emissions offset the effects of buybacks.

• Structural Market Challenges: Despite a rebound in Total Value Locked (TVL) to $160 billion, weak secondary market liquidity and tepid demand limit the efficacy of buybacks. True recovery depends on capital inflows and growth cycles, not short-term confidence boosts.

Conclusion: While buybacks may temporarily lift sentiment, they cannot substitute for organic growth and sustainable capital flow in revitalizing DeFi.

DeFi Projects Learn a Trick from Wall Street, but Is It Working?
2025 has not been easy for DeFi projects, but they have certainly learned one trick from Wall Street: using buybacks to signal confidence.

According to a report by crypto market maker Keyrock, the top 12 DeFi protocols spent approximately $800 million on buybacks and dividends in 2025—a 400% increase from early 2024.

Report analyst Amir Hajian wrote: "Just as publicly traded companies use buybacks to signal long-term commitment, DeFi teams hope to prove they are profitable, have cash flow, and possess a future."

However, in a market starved of liquidity and risk appetite, are these "token holder rewards" a return to value or merely burning money?

Who’s Riding the Buyback Wave?
This round of buybacks has extended from early players like Aave and MakerDAO to later participants such as PancakeSwap, Synthetix, Hyperliquid, and Ether.fi—covering nearly all major DeFi sectors.

Aave (AAVE) was one of the first major projects to initiate systematic buybacks.
Since April 2025, Aave DAO has used protocol revenue to repurchase approximately $1 million worth of AAVE weekly. In October, discussions began to "normalize" this mechanism, with an annual budget of up to $50 million.
The day the proposal was approved, AAVE briefly surged 13%, but after six months, the pilot resulted in negative book profits.

MakerDAO (MKR) launched the Smart Burn Engine in 2023, using DAI surplus to periodically buy back and burn MKR. In the first week after the mechanism went live, MKR rebounded 28%, hailed as a model for "cash flow returning to token holders."
However, a year later, the market reveals a paradox of "restored confidence, lagging valuation."
Despite strong fundamentals (MakerDAO continuously boosts DAI reserve yields through real-world assets, or RWA), MKR’s price (around $1,800 as of late October 2025) remains only one-third of its 2021 bull market peak (~$6,292).

Ether.fi (ETHFI), an Ethereum liquid staking protocol, recently proposed one of the most watched "major moves." The DAO authorized up to $50 million to repurchase ETHFI in batches below $3, via Snapshot fast-track voting, aiming to "stabilize the token price and restore confidence."
Yet the market remains wary: if funds come mainly from treasury reserves rather than sustainable revenue, such "price-support buybacks" will inevitably lose momentum.

PancakeSwap (CAKE) has chosen the most programmatic path. Its "Buyback & Burn" mechanism is embedded into the token model, with monthly net inflation data disclosures. In April 2025, CAKE’s net supply shrank by 0.61%, entering a sustained deflationary state.
Yet the price hovers just above $2, far below its 2021 peak of $44—supply improvement brings stability, not premium.

Synthetix (SNX) and GMX also use protocol fees to buy back and burn tokens.
Synthetix embedded a buyback module in its 2024 version update, while GMX automatically directs a portion of trading fees into a repurchase pool.
Both saw 30% to 40% rebounds during peak buyback periods in 2024, but when stablecoin pegs came under pressure and fees declined, they paused buybacks to redirect funds toward risk reserves.

The true "exceptional winner" is the perpetual contract platform Hyperliquid (HYPE).
It integrates buybacks as part of its business narrative: a portion of protocol revenue automatically flows into a secondary market buy pool.
Dune data shows Hyperliquid invested $645 million over the past year, accounting for 46% of the industry total. Its HYPE token has surged 500% since its November 2024 launch.
However, HYPE’s success stems not only from buybacks but also from revenue and user growth—daily trading volume tripled in one year.

Why Buybacks Often "Fail"
From a traditional finance perspective, buybacks are favored for three main reasons:

• They promise to increase value per share: By using real funds to repurchase and burn tokens, reduced circulation means each token claims a higher share of future earnings.

• They signal governance confidence: Launching buybacks demonstrates profitability, financial flexibility, and governance efficiency—a sign of DeFi maturing from "burning money on subsidies" to "operating with dividends."

• They create scarcity expectations: When combined with lock-ups or reduced emissions, buybacks can deflate supply and optimize tokenomics.

However, perfect theory doesn’t always translate to reality.

First, timing often backfires. Most DAOs are generous during bull markets but reduce funding in bear markets, creating an awkward "buy high, watch low" dynamic that contradicts value investing principles.

Second, funding sources raise concerns. Many projects draw from treasury reserves rather than sustained profits. Once revenue declines, buybacks become unsustainable "face-saving" measures.

Third, opportunity cost is high. Every dollar spent on buybacks is one less dollar for product iteration and ecosystem development. Market maker Keyrock warned in October: "Excessive buybacks may be one of the least efficient forms of capital allocation."

Even when executed, buyback effects are often diluted by continuous token unlocks and new emissions. When supply-side pressure persists, limited buybacks are like pouring a cup of water to extinguish a fire.

Messari researcher Sunny Shi noted:
"We haven’t observed the market sustainably boosting valuations due to buybacks. Prices are still determined by growth and narratives."

Moreover, the macro liquidity structure of the entire DeFi market has shifted. Although Total Value Locked (TVL) has strongly rebounded to a three-year high (~$160 billion), it still falls short of the 2021 bull market peak (~$180 billion). More importantly, while protocol revenue and capital efficiency are high, secondary market trading volume and speculative capital inflows still need time to return to the "exuberance" of the last cycle.

In a capital-constrained environment, even the most generous buybacks struggle to overcome structural demand deficiencies.

Confidence can be bought momentarily, but only genuine capital inflows and growth cycles can enable DeFi to "self-heal" once again.

Author: OXStill, BitPush