# Protocol Acceleration Fund

*Programmatic HYDX Buybacks to Close Hydrex’s Tokenomic Loop*

By [Hydrex](https://paragraph.com/@hydrex) · 2025-12-31

hydrex, hydx, coinbase, base, protocol, acceleration, fund, paf, basechain

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The Hydrex protocol is proud to introduce a new initiative called the "Protocol Acceleration Fund,” a programmatic mechanic which accumulates Earning Power specifically designed to buy back HYDX tokens.

**How the Protocol Acceleration Fund Works**

The Protocol Acceleration Fund is an algorithmic mechanism that is designed to buy back HYDX from the open market on a weekly basis. This is achieved by accruing a Protocol Account position (e.g., veHYDX), which competes for fees and uses all acquired fees to purchase HYDX.

The Protocol Acceleration Fund’s Protocol Account grows in 3 ways:

1.  Locked oHYDX from Strategic Protocol Reserve liquidity provisioning
    
2.  Locked HYDX from the Hydrex Treasury’s weekly 4% allocation
    
3.  Bought back HYDX that are permanently locked
    

![](https://storage.googleapis.com/papyrus_images/272107fdd0677aa95beab17de7f39e45c7fe257b556d979e27176fee9fb14cc5.png)

The Protocol Acceleration Fund Flow

Similar to how the Strategic Protocol Reserve is designed to grow liquid assets to generate yield for voters, the Protocol Acceleration Fund is designed to accumulate Earning Power which is utilized on a weekly basis for buying back HYDX.

**Programmatic Buybacks, Without Compromises**

As consistently voiced by the community and shared by the Core Contributors, the Strategic Protocol Reserve is an essential component to the long-term viability of Hydrex. It is mission-critical to continue growing the Strategic Protocol Reserve, and the design of any buyback program should not diminish these efforts.

The Protocol Acceleration Fund provides a well-balanced middleground that mutually supports the value and growth efforts of the Strategic Protocol Reserve. 

![](https://storage.googleapis.com/papyrus_images/b5a51e3a78b1f97e401415624d58e7b6f4a7dc1389af15ecb63da9452fb7fa83.png)

Breakdown of the SPR vs. PAF

The more oHYDX accumulated by the Strategic Protocol Reserve, the more Earning Power the Protocol Acceleration Fund can accumulate. The more Earning Power accrued by the Protocol Acceleration Fund, the more demand it can offer to the HYDX token, creating a higher USDC redemption value for oHYDX – thus increasing the reserve.

Additionally, the introduction of the Protocol Acceleration Fund does not change the current voting behavior of the Hydrex Treasury. The Treasury still will exclusively vote for the Partner & Community Growth Gauge, instead of competing for fees.

**Coming January 8th**

The Protocol Acceleration Fund is an effort to better align all components of Hydrex’s tokenomics, introduce additional hedges for inflation, and increase appetite for the HYDX asset.

All contracts & operational procedures for the Protocol Acceleration Fund are under development and expected to go live during the epoch flip on January 8th. 

The Hydrex Documentation will be updated at the time of go live with all corresponding logistics and smart contract information.

If you have any questions, we encourage you to join our [**Discord**](https://discord.gg/hydrexfi) channel to get in touch with the team.

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*Originally published on [Hydrex](https://paragraph.com/@hydrex/protocol-acceleration-fund)*