Why DeFi teams dropped record $800m on ‘broken’ buyback programmes

Core Insights - Decentralized finance (DeFi) protocols are increasing revenue distribution to token holders through buybacks, but this strategy may not be effective [1][4] - In July, the top 12 revenue-distributing protocols spent nearly $800 million on buybacks, marking a 400% increase since the beginning of 2024 [2] - Token buybacks aim to link token value to the success of DeFi protocols, with the expectation that higher profits will lead to increased buyback spending [3] Financial Analysis - The report from Keyrock indicates that many buyback programs overspend during high price periods and underspend during downturns, which can lead to inefficiencies [4] - A separate report from Messari supports the view that buybacks may not be a wise use of capital, as market performance is more influenced by growth metrics and narrative [5] Market Trends - Hyperliquid has successfully integrated buybacks into its strategy, with its HYPE token increasing by 500% since its launch in November 2024, prompting other protocols like Aave to consider similar programs [6] - Despite the initial surge in DeFi token values in 2021, many tokens have since underperformed as market excitement waned and valuations were questioned [7]