This is a segment from the 0xResearch newsletter. To read full editions, <\/em>subscribe<\/em><\/a>.<\/em><\/p>\n When crypto projects make big announcements using words like \u201cbuyback,\u201d \u201cburn,\u201d or \u201crevenue sharing,\u201d that\u2019s usually taken to mean there are bullish investing tailwinds at play.<\/p>\n But I have questions. How much does an annualized 10% buyback yield actually matter when these tokens can plummet 20% in a day?<\/p>\n Does value accrual matter because it is valuable for reasons of fundamental analysis (i.e. cash flows), or merely for narrative optics?\u00a0<\/p>\n Over the weekend, Solana DEX aggregator Jupiter announced a significant JUP buyback program with 50% of fee revenues.<\/p>\n Based on estimates by Blockworks Research analyst Carlos Gonzalez, that translates to about $750 million in annualized JUP buybacks, or about a significant 40% of JUP\u2019s circulating supply in a year.<\/p>\n That\u2019s a pretty impressive annualized buyback yield of about 42%.\u00a0<\/p>\n But what does 42% matter when token prices can tank 90% in a week?<\/p>\n Well, it\u2019s not a flash in the pan solution, but it helps to sustain against selling pressure. Carlos pointed to Raydium\u2019s<\/a> successful experiment with buybacks:<\/p>\n \u201cRaydium has accumulated 20% of RAY\u2019s supply since the start of their buyback program. In terms of market structure, it adds buying pressure to the token and RAY has outperformed most of Solana DeFi. Fundamentals matter but of course you could also find examples to argue that buybacks aren\u2019t that bullish. For instance, Maker.\u201d<\/p>\n Virtuals, the leading AI agent launchpad on Base (now expanding to Solana), also committed<\/a> two weeks ago to an estimated $40 million in buybacks and burns for 10k+ agent tokens over a 30-day TWAP.\u00a0<\/p>\n Since the buybacks were announced on Jan. 15, the five largest agent token buybacks by far<\/a> are GAME, CONVO, AIXBT, SEKOIA and MISATO, all of which have given up all their gains as of yesterday\u2019s market crash.<\/p>\n Over the last year, many blue-chip DeFi protocols with actual product-market fit have also sought to return revenues to token holders.<\/p>\n Compound, for instance, proposed<\/a> in August a fee switch to allocate 30% of its reserves to COMP stakers.<\/p>\n Marc Zeller of Aave proposed last July a \u201cBuy & Distribute\u201d proposal to buy back AAVE on the open market with \u201cnet excess revenue of the protocol.\u201d<\/p>\n Then there\u2019s Uniswap, which planned<\/a> to implement a UNI fee switch for stakers, but quickly abandoned the proposal after receiving<\/a> an SEC Wells notice two months later (Uniswap is again attempting<\/a> some form of value accrual on its upcoming Unichain).<\/p>\n Major L2s like Arbitrum<\/a>, Starknet<\/a> and Gnosis<\/a> have floated proposals last year to return value to token holders who stake their tokens.<\/p>\n Starknet voted last September to enable Starknet staking (12.94%<\/a> APY) and Gnosis passed a proposal in June to spend $30 million of the DAO\u2019s treasury to buy back liquid GNO over a six-month period.<\/p>\n As far as I can tell, out of all the above-mentioned value accrual proposals, only Starknet and Gnosis have actually implemented their value accretive mechanisms.<\/p>\n Yet from the time these value accrual mechanisms were put in place, GNO has seen a 46% decline, while STRK has stayed flat.<\/p>\n So what are the right mental models to think about value accrual mechanisms? They\u2019re not a magic bullet. But they\u2019re a key ingredient in the recipe of getting a successful token launch right.<\/p>\n Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter<\/a>.<\/strong><\/p>\n Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter<\/a>.<\/strong><\/p>\n Get alpha directly in your inbox with the 0xResearch newsletter<\/a> \u2014 market highlights, charts, degen trade ideas, governance updates, and more.<\/strong><\/p>\n
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