DeFi protocol dYdX launches token buyback program, spending 25% of its net protocol fees on buying back the DYDX token

The protocol plans to spend 25% of its net protocol fees on buying back the DYDX token from the open market.

DeFi protocol dYdX has announced the launch of a token buyback program. The protocol plans to spend 25% of its net protocol fees on buying back the DYDX token from the open market.

In an announcement today, the protocol stated that the move would reinforce confidence in the token and align it with the protocol’s broader vision. The acquired tokens would be used for staking to improve network security, which aligns with the token’s significant role in the protocol ecosystem.

“This initiative marks a significant milestone for dYdX tokenomics, further aligning platform growth with the role of the DYDX token in the ecosystem,” dYdX said.

The protocol also detailed the full distribution of the protocol revenue, noting that all the revenue has been allocated to ecosystem participants in the past year.

40% of the revenue will go towards staking rewards, 25% for MegaVault, its USDC liquidity program, and 10% for the Treasury SubDAO. The announcement noted that the distribution structure ensures that all revenue generated by the protocol is reinvested into the ecosystem to improve its security and governance and ensure its long-term sustainability. It added that the percentage allocated to buyback could increase to 100% later.

DYDX surges 8% after news of buyback

Following news of the buyback, the DYDX token saw an almost 8% increase in value, taking its price to $0.715. This is a welcome development for a token that has struggled for most of this year and is currently down 51% year-to-date. CoinGecko data shows the token is down 84% from its peak price of $4.51, reached back in March 2024.

Interestingly, the move to adopt buyback aligns with what appears to be the common trend in the DeFi sector today, with multiple projects modifying their tokenomics to enable token buyback programs.

Leading lending protocol Aave is working on implementing Aavenomics, which includes a buyback program that will see the protocol buy $1 million worth of AAVE tokens weekly for six months. Other projects, including Hyperliquid, Jupiter, and Uniswap, also have plans to initiate a similar program.

The interest is not totally surprising as token buybacks create constant demand for tokens, usually leading to a price increase and reduction in the circulating supply of the token. While there have also been a few criticisms of the practice, many in the crypto industry consider it a bullish sign for any project.

Despite the token price struggling this year, dYdX has seen its TVL decline. At the start of the year, the protocol’s TVL stood at over $1 billion, but it has since dropped to $279 million.

One of the factors contributing to the decline in TVL was the decision to move away from Ethereum to its own Layer-1 network in 2023. Although 86% of the token supply is now on the dYdX L1 network, 14% has not been bridged from Ethereum. Holders of these remaining tokens may need to act fast with the community proposal for ending support for the Ethereum cross-chain bridge by June 2025.