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Welcome…

@TimHaldorsson @HyperliquidX

A team can generate revenue, use a portion of it to purchase and burn tokens, and create a recurring source of buying pressure. Traders see this and begin pricing in future buybacks. Some will hold because they believe in the project, while others will hold because they expect the team to keep buying. Both groups contribute to demand, but they are holding for different reasons. And if the buyback becomes the primary reason people want the token, the team has created an expectation it must continue to satisfy. What happens when revenue declines, the market turns or the team decides that the money would be better spent on product development? This is where I think the argument gets complicated. Take Hyperliquid and HYPE, for example. Hyperliquid has built a highly competitive onchain perpetual futures exchange that generates substantial revenue from actual trading activity. The platform has demonstrated that people are willing to use its technology. Yet the success of the exchange and the question of how much value should accrue to HYPE are two separate things. The buyback mechanism helps connect the economic activity of the platform to demand for its token, giving holders a reason to care about the revenue the business generates. I understand why this makes sense. If a platform generates substantial revenue, holders naturally want to know how they benefit from that success. But it also raises a question: how much of HYPE’s investment appeal comes from the platform’s technology, ecosystem and future potential, and how much comes from expectations surrounding future buybacks? Those things can coexist. The existence of buybacks doesn’t mean HYPE holders lack conviction in the project. It simply means we should distinguish between demand driven by the product and demand driven by the token’s economic mechanism. And to be clear, I don’t think teams should be allowed to generate revenue while ignoring the economic interests of their token holders indefinitely. If people provide capital and take on risk, they have every reason to question why the business is succeeding while the token struggles to capture any of that success. However, I also think there is a danger in expecting every project to prove its commitment to holders through buybacks. A new project needs room to experiment, find product-market fit and build something people genuinely want to use. If the team is already expected to dedicate revenue to buying tokens, that money comes with an opportunity cost. It could have gone towards hiring better developers, improving the product, attracting users or expanding the ecosystem. The decision should depend on the stage of the project, the strength of its business and what it needs to accomplish next. With the benefit of hindsight, I think the bigger question crypto needs to answer is how to create tokens that people have compelling reasons to own as the underlying technology becomes more useful. Buybacks can be part of that answer. They can align incentives, create demand and return economic value to holders. But they can also attract capital that is primarily interested in the buyback itself. For me, the goal should be to build projects where the technology creates real demand, the business generates sustainable revenue and the token has a credible way to capture some of that economic success. The strongest position, IMO, is one where people have reasons to hold the token even when the team isn’t buying it. That’s the kind of token economy I’d like to see more of in crypto.

I’ve been thinking about the whole debate around token buybacks, and I think both sides have a valid argument. On one hand, holders want to see the projects they support return some of the value they help create. On the other hand, there are people who believe buybacks are a short-term mechanism that doesn’t necessarily contribute to the long-term success of a project. IMO, the underlying issue is a lot more interesting than whether buybacks are good or bad. One thing I’ve always found interesting about Ethereum and Solana is that their tokens have had years to develop their own economic roles through the growth of their respective ecosystems. ETH is used to pay for transactions and secure Ethereum through staking, while SOL is used to pay fees and participate in Solana’s network economy. Both networks have managed to attract users, developers and capital without making recurring revenue-funded token buybacks the central reason to hold their tokens. Imagine if these networks had started with a buyback mechanism as a core part of their investment thesis. Would people have spent as much time exploring what they could build on these networks, or would a larger part of the conversation have revolved around how much revenue was being generated and how many tokens were being bought and burned? Obviously, we can’t know the answer. But I think it’s worth asking whether introducing buybacks too early can influence the kind of people a project attracts before its technology has had enough time to prove itself. This brings me to what I consider the biggest problem with buybacks.

Vitalik knows ball

Gm 🐼