As the crypto industry matures and borrows ever more pages from the TradFi playbook, projects are adopting behaviors familiar from public companies. The latest craze is the token buyback: using protocol revenue to repurchase a project's own token. In equity markets, buybacks have long been a cornerstone of capital return — S&P 500 companies have routinely spent hundreds of billions of dollars a year on their own shares — and crypto is now importing the same logic.

So far in 2026, crypto projects have spent roughly $640 million on buybacks — up about 17% from the same period a year earlier, and an order of magnitude more than the $366,000 spent in 2024. Hyperliquid and Pump.fun account for almost 90% of that spending.

What explains the sudden appeal? Buybacks can create demand for a token, while burns reduce supply, making each remaining token more valuable — a dynamic that can put upward pressure on price. Buybacks also give holders a more tangible connection to the economic activity of the underlying protocol. It is not crypto's first experiment with supply reduction: Ethereum's EIP-1559 upgrade in 2021 introduced a fee-burning mechanism that permanently removes ETH from circulation, normalizing the idea that network activity can shrink a token's supply.

Orest Gavryliak, chief legal officer at decentralized exchange aggregator 1inch, told Magazine: "When projects implement revenue-funded buybacks and burns, they typically have one of two objectives in mind: either to decrease the token supply in circulation or to demonstrate the rationale for investing in protocol revenues."

Telling users a project has "bought and burned tokens" is, in Gavryliak's words, "much more straightforward" than explaining how governance rights work, how fees are set, or how the protocol is used.

There is a flipside, however: every dollar a protocol spends buying its token is a dollar that could have gone toward hiring developers, expanding the business, strengthening the balance sheet, or building the product. So as buybacks become one of crypto's hottest tokenomics tools, are they actually good for the projects using them?

Why crypto projects are buying themselves

Buying back their own token might seem counterproductive for projects, which typically sell tokens in the first place to raise funds and cover costs. Not quite — with an important caveat. Using generated revenue to repurchase tokens (then holding or burning them) creates an implicit connection between the protocol's success and the value of its token, something crypto projects have long struggled to establish.

As Max Shannon, senior research associate at Bitwise Europe, explains: "Buybacks and burns remain an effective way to accrue value to tokenholders: they create a continuous bid in the open market for the token, directly tethering token success to the platform's adoption."

That marks a sea change for an industry that has spent the past few years chasing narratives or speculating on the greater fool theory — users who bought Fartcoin or Peanut the Squirrel were not doing so for their sound economic models.

Some protocols are taking the idea much further than others. Hyperliquid has used 99% of its revenue to buy back and burn HYPE (Hyperliquid burn data), while 50% of Pump.fun's revenue goes toward buying and burning its token, with $446.65 million worth of PUMP already removed from circulation (Pump.fun).

DeFi infrastructure protocol Spark offers a slightly different model. It has acquired more than 143 million SPK through open-market buybacks funded by protocol surplus, according to co-founder and CEO Sam MacPherson (Spark financials). Those tokens were not burned; they remain in the Spark treasury to reward long-term ecosystem participants.

MacPherson told Magazine the point is not simply to reduce supply: "Tokenholders should participate in the long-term economic success of the protocol, rather than simply receive a distribution every time it generates revenue."

Buybacks let Spark create that alignment while "retaining flexibility over how and when the acquired SPK is ultimately deployed," he said, allowing the protocol to make its token economically relevant rather than "a simple dividend mechanism."

Token buybacks are also a highly tax-effective way to return revenue to holders, since users avoid the hefty tax bill that can come with dividends or rewards.

Is buying the token really the best use of the money?

Even if all that sounds rational, the bigger question is whether buying back a project's own token is genuinely the best use of its funds. Probably not in every case.

"The question should be: what is the highest-value use of the next dollar of surplus?" MacPherson said. If a protocol can reinvest capital at attractive returns, that can be "far more valuable" than simply distributing revenue as it arrives.

Buybacks can support token economics without actually improving the underlying business. Nor is there any ironclad guarantee that buybacks translate into higher token prices. Pump.fun has been aggressively buying and burning PUMP since July 2025, yet the token still hovers about 50% below its September 2025 all-time high. UNI has also given back roughly half of the gains it made after Uniswap unveiled its UNIfication proposal in November 2025.

Shannon points out that "many factors" contributed to those price movements, so they don't prove buybacks failed, but: "They have prompted investors to debate whether these startup-like projects would be better served by reducing the share of revenue committed to buybacks and burns and reinvesting more in the team and the project itself."

Investors should draw a careful distinction between a buyback scheme that pumps prices and a successful business model. A sustainable protocol generating genuine surplus may decide that buying its token is the best use of some of that money, but a project that is limping along might simply attempt buybacks to move the price. As MacPherson puts it: "A buyback doesn't make an unsustainable protocol sustainable."

When a token starts looking like a stock

Although token buybacks may superficially resemble share buyback programs, that does not mean tokens are becoming stocks.

A shareholder owns part of a company and may have voting rights, dividends, or a claim on residual assets. Tokenholders generally do not have those same legal rights — a distinction Gavryliak calls critical. "This is a market mechanism, not a legally enforceable entitlement," he said.

MacPherson describes SPK as a form of "pseudo-equity" for an onchain protocol. While there is no legal ownership structure in the traditional corporate sense, economically Spark is "trying to create many of the same characteristics: participation in governance, long-term alignment, and a mechanism through which those most committed to the protocol can benefit from its success."

When buybacks start looking like dividends

As crypto emulates TradFi buybacks, storm clouds may be gathering: regulators are considering what these mechanisms actually amount to.

The Digital Asset Market Clarity (CLARITY) Act of 2025 remains a draft and should not be treated as settled law, but Gavryliak says its proposed framework highlights the key question of where a token's value comes from: "If it stems from the functionality of the network itself, then the asset looks like a commodity. But if the value is based on the efforts of the project's team in matters of shipping, marketing, or providing returns to token holders, then it is already a security. In the end, don't put the clothes of a stock on the token and expect it to be a commodity."

Ultimately, crypto investors want to know what sits underneath a token — revenue, users, sustainable economics — and some credible way for the token to benefit from those things. Buybacks may offer one solution, but they can also be just another piece of financial engineering that makes a token look more valuable than it actually is without fixing the issues underneath. As Gavryliak asks: "If the buybacks stopped, would there still be a reason to hold the token? If the answer is no, the problem runs deeper than tokenomics."