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In 2025, DeFi is not losing on price, but on value.
Introduction: The era of prevalent buybacks, a crisis is quietly forming.
If 2020–2022 was the 'era of liquidity mining', then 2024–2025 is undoubtedly the 'era of buybacks'.
Almost all major DeFi protocols have launched buyback programs:
Aave's Treasury buyback
MakerDAO's surplus auction
PancakeSwap's burn mechanism
Curve's lending income buyback
Uniswap's fee switch has become an industry focus
But the reality is extremely ironic:
The more buybacks there are, the lower the price.
In this year alone, the market witnessed another side:
Balancer lost 128 million
Stream bad debt 285 million
Four stablecoins hit zero
Multiple LP pools encountered slippage trample
The industry is buying back to 'support the market', while being consumed by explosions.
This is not a coincidence, but structural.
Part One: Buybacks are not a moat, but rather an overdraw of the future
Buybacks can only change the supply curve, not the demand curve
All the logic of DeFi buybacks is built on one assumption:
'Reducing token supply will increase token prices.'
But this assumption overlooks the most critical variable: demand.
If user growth declines, protocol revenue stagnates, and competitors rapidly replace, then buybacks are just:
Replacing growth with savings, hiding business decline with financial engineering.
This game will ultimately lose because you cannot make a company stronger by buying your own stocks.
Why are buybacks misused?
Buybacks are mature tools in traditional finance. But in DeFi, two core distortions appear:
(1) Buyback costs come from 'users', not profits
Traditional companies buy back stocks with profits.
But many DeFi buybacks come from:
Protocol treasury (essentially the past contributions of users)
Inflation issuance (essentially the future contributions of users)
Various 'taxes' and protocol fees (essentially the current contributions of users)
In other words:
This is taking users' money out and distributing it to token holders.
It is a zero-sum game.
(2) Buybacks are often treated as products rather than tools
In many protocol narratives:
❌ 'We are launching buybacks' → treated as product updates
❌ 'We are starting to destroy tokens' → treated as a growth strategy
But real-world growth comes from:
Higher security
Lower costs
Better UX
Stronger network effects
Buybacks have never been a product.
It can only add icing on the cake, not provide timely assistance.
Part Two: Why did the Uniswap fee switch become a dangerous turning point?
Uniswap's fee switch is a microcosm of the industry's buyback maze.
The market misreads as 'buyback logic', but in reality it is:
Extract 17–25% from LP earnings and distribute to UNI holders.
This means:
Protocol revenues increase
UNI value increases
LP earnings decline
Declining competitiveness
This is a typical zero-sum game.
The problem is not 'how much to distribute', but that the direction is reversed:
When you treat LPs as a cost of the product rather than the core asset of the protocol, you are effectively killing the protocol itself.
Various AMMs on Aerodrome, Curve, and Base are rapidly eating away at Uniswap's liquidity.
The only definitive conclusion about the fee switch is:
UNI will rise short-term, Uniswap will lose long-term.
Part Three: The deep reasons for the failure of buybacks: the disconnection of value creation in DeFi
The overall slump in DeFi token prices is not a valuation crisis, but a value creation crisis.
TVL increase ≠ value creation return
Although DeFi TVL has returned to 89% of its historical peak, token prices have only recovered by 20–40%.
Note:
Users are willing to come to make money, but are not willing to buy your tokens.
Users believe in returns but do not trust the system itself.
Security incidents destroy trust; buybacks cannot repair it
Balancer, Stream, and other events tell us:
Audits are not security
DAO governance is not responsibility
Claiming decentralization does not mean transparency
70% of black box funds can drag the entire ecosystem down
Buybacks can buy back TVL, but cannot buy back trust.
Lack of 'liability binding mechanism' leads to complete governance imbalance
Today's governance mechanism is:
Having power without responsibility;
Dividends without bearing risks.
Curator charges fees, strategies explode but require no compensation.
The only reasonable direction is:
Staking liability funds
Failure forfeits
Deferred returns
Integration of roles and risks
Liability binding is the foundation on which the financial system stands.
Part Four: The correct stance on buybacks: there is only one
Hyperliquid has provided the only correct answer:
Product → User growth → Revenue growth → Buybacks
(Driven by real value)
Rather than:
Buybacks → Price increase → Imagined growth
(Driven by financial engineering)
When buybacks come from real income, they are positive-sum.
When buybacks come from 'squeezing users', 'using savings', 'future prepayments', it is zero-sum or even negative-sum.
Part Five: The future of DeFi buybacks: redemption or abyss?
Three types of differentiation may emerge in the future:
(A) Protocols that only do buybacks and do not produce: decline
Experiences from Aave, Maker, and Pancake have proven:
Buybacks cannot reverse the decline in growth.
(B) Protocols with buybacks + transparency + user growth: moving towards positive-sum
For example:
Hyperliquid's automatic buyback
Jupiter's fee distribution model
Frax's multi-asset income
They are fundamentally not reliant on 'buybacks', but on 'growth'.
(C) New generation protocols: treating transparency as a product
After the collapse of Stream, market demand inverted:
Users prefer transparency even if returns are low.
The protocols with the greatest opportunities in the future are those:
Real-time verifiable
Risks are measurable
Governance is accountable
Transparency will become the core of DeFi competition from 2025 to 2027.
Conclusion: DeFi does not need more buybacks, but rather more value creation
When DeFi treats buybacks as a growth engine, it has already strayed from the path.
In the next decade, the winners of DeFi must possess three points:
Transparency surpasses yield
(Trust priority increases)
Governance must balance rights and responsibilities
(Institutionalized risk-taking)
Product innovation surpasses financial engineering
(Buybacks are just a result, not a driver)
What can truly change DeFi is not a more sophisticated buyback model, but a stronger capacity for value creation.
Capital games are always short-term
Product value is what lasts long-term.
