DeFi's Growing Focus on Token Value Accrual

Author: @ManoppoMarco, PrimitiveCrypto Investor

Translation by: zhouzhou, BlockBeats

Editor’s Note: DeFi protocols are accelerating the value accrual for token holders, with protocols like Aave, Ethena, Hyperliquid, and Jupiter implementing buyback plans, fee switches, and new incentive structures. Ethena plans to enable a fee switch to share revenue with stakers and is currently achieving key milestones. Other protocols are also enhancing token value through buybacks, fee distribution, and optimized governance.

The following is the original content (reorganized for readability):

If you’ve spent 8-9 figures on growth but haven’t seen revenue at least grow linearly, buybacks may not be a bad thing. DeFi protocols are under increasing pressure to allocate a portion of their revenue to token holders. Major projects like Aave, Ethena, and Hyperliquid are exploring how to introduce value accrual mechanisms for their native tokens.

What’s the key driver behind this trend? The election of Donald Trump has ushered in a more favorable regulatory environment for DeFi. Here are the latest updates on the token economics of Aave, Athena, Jupiter, and Hyperliquid, including their buyback plans and fee adjustments.

AAVE

Aave has just launched a significant reform in its token economics, focusing on buybacks, fee distribution, and providing better incentives for token holders. According to Marc Zeller, founder of the Aave Chan Initiative (ACI), this is one of the most important proposals in Aave's history.

Buybacks & Fee Adjustments

Aave has initiated a six-month buyback plan, investing $1 million weekly (approximately $4 million monthly) to cover the emission of AAVE tokens and enhance the protocol's sustainability. After six months, the buyback fund could reach $100 million (about 3% of the circulating supply), with the specific deployment pace to be determined by the DAO.

What’s the goal? To control token emissions while strengthening Aave's treasury.

New Financial & Governance Initiatives

Aave is establishing the Aave Financial Committee (AFC), dedicated to treasury fund management and liquidity strategies. Additionally, Aave is completing the transition from the LEND token, reclaiming 320,000 AAVE (approximately $65 million) for future use.

Umbrella: Aave's New Risk Management System:

Aave spends $27 million annually on liquidity costs, thus launching the Umbrella system to optimize capital efficiency and reduce risk. This system will be integrated across multiple blockchains, including Ethereum, Avalanche, Arbitrum, Gnosis, and Base.

Anti-GHO: A New Reward Mechanism for Stablecoin Holders:

Anti-GHO, as a new reward mechanism, will replace the old discount model for GHO holders. The held tokens can be burned at a 1:1 ratio to offset GHO debt or converted to StkGHO, linking the incentive mechanism directly to Aave's revenue. This mechanism is still under development and may be launched as part of the future "Aavenomics Part Two" update.

What’s Next?

With the release of Aave v4, more on-chain deployments, and additional revenue from Chainlink SVR, this update lays the groundwork for larger-scale and more sustainable buybacks in the future.

Jupiter

Since February 17, 2025, Jupiter has begun using 50% of its protocol fees for buybacks and locking JUP tokens for three years. This initiative aims to reduce circulating supply, enhance long-term stability, and promote user engagement in the Solana ecosystem. In February of this year, Jupiter completed its first buyback, purchasing 48,800 JUP for $3.33 million. Currently, Jupiter's Litterbox Trust buyback plan has accumulated over 10 million JUP (approximately $6 million).

What’s Next?

On an annual basis, Jupiter's $3.33 million buyback scale translates to over $35 million in annual buybacks. If estimated more aggressively, with projected revenue of $102 million in 2024, the buyback scale could exceed $50 million.

Hyperliquid

Token Distribution

Hyperliquid's native token HYPE has a total supply of 1 billion tokens, with no financing and no investor allocation. The specific distribution is as follows:

• 31.0%: Airdropped to early users (fully circulating)
• 38.888%: Reserved for future emissions and community rewards
• 23.8%: Team allocation, locked for 1 year, with most unlocking in 2027-2028
• 6.0%: Hyper Foundation
• 0.3%: Community funding
• 0.012%: HIP-2

The token ratio between the team and the community is 3:7, with the largest non-team holder being the Assistance Fund (AF), holding 1.16% of the total supply, accounting for 3.74% of the circulating supply.

Revenue Model & Buyback Mechanism

Hyperliquid's main revenue sources include trading fees (spot + derivatives) and HIP-1 auction fees. Since Hyperliquid L1 currently does not charge gas fees, gas-related revenue is not included.

Revenue Distribution

• 46% of perpetual contract trading fees are distributed to HLP holders (supply-side rewards)
• 54% is used to buy back HYPE through the Assistance Fund (AF)

Additionally, HIP-1 auction fees and spot trading fees (USDC portion) are currently all used for HYPE token buybacks.

Dual Deflationary Mechanism

• Buyback: AF uses part of the revenue to buy back HYPE tokens, but they are not destroyed; instead, they are held by AF.
• Destruction:

1. All HYPE-priced spot trading fees (e.g., HYPE-USDC trading pair) will be directly destroyed.
2. After the launch of the HyperEVM mainnet, all gas fees will also be paid in HYPE and will be fully destroyed.

Buyback Impact & Staking Mechanism

Based on publicly available Hyperliquid trading fee data, as of March 2025, AF is expected to buy back approximately 2.5 million HYPE monthly, valued at about $35 million, through 54% of perpetual contract revenue. HYPE staking will launch on December 30, 2024, using a PoS reward mechanism (similar to Ethereum), with a current annual yield of about 2.5%. Currently, 30 million HYPE has been staked (excluding the 300 million tokens held by the team/foundation).

Future Outlook

Hyperliquid may introduce a fee-sharing model that allows part of the on-chain trading fees to be directly distributed to HYPE holders, creating a more sustainable incentive system. However, some believe that the current model can create a stronger flywheel effect in both market upswings and downturns.

Hyperliquid's revenue mainly comes from trading fees and HIP-1 auction fees, and it may expand into revenue sources like HyperEVM trading in the future. Currently, in addition to being used for buybacks and incentives, part of the fees can also be:

• Distributed to HYPE holders based on their holdings or staking amounts.
• Reward long-term stakers to promote deeper community engagement.
• Deposited into the community treasury for governance to decide on usage.

Possible Distribution Models:

• Direct fee sharing: A portion of trading fees converted to USDC or HYPE, periodically distributed to holders (similar to dividends).
• Staking enhanced rewards: Only users staking HYPE can receive a share, incentivizing long-term holding.
• Hybrid model: Combining fee distribution + HYPE buybacks, balancing price support with holding incentives.

Ethena

Ethena Labs has now entered the top five DeFi protocols by TVL, with annual revenue exceeding $300 million. As the protocol grows, the fee distribution proposal put forward by Wintermute has been approved by the Ethena Risk Committee. Currently, 824 million ENA (valued at $324 million) is staked, accounting for 5.5% of the total supply, but stakers can only receive point rewards and unclaimed ENA airdrops, without enjoying the revenue sharing generated by Ethena.

Ethena Fee Switch and Future Plans:

The activation of the fee switch will provide stakers with direct revenue sharing opportunities and enhance the effectiveness of DAO governance through alignment of incentives with ENA holders. Ethena's revenue primarily comes from the funding rates of the perpetual contract market. Currently, 100% of the revenue is allocated to USDe stakers and the reserve fund. Over the past three months, the average monthly revenue has been $50 million.

Preparations before enabling the fee switch: The Risk Committee has set five key metrics to ensure Ethena is in a solid position before sharing revenue.

Current Metric Progress:

• USDe Supply Target: 6B – Only 9% remains to reach the target.
• Cumulative Revenue: 250M+ – Achieved $330 million in January, exceeding expectations.
• Exchange Integration: Binance/OKX – No timeline yet, but Binance currently holds 4 million USDe.
• Reserve Fund Ratio ≥ 1% of USDe Supply – $61 million in reserves supports 6.1 billion USDe.
• sUSDe and sUSDS APY Gap ≥ 5% – The gap has narrowed due to market downturns, but may widen again in the future.

Future Outlook

Ethena is close to achieving its goals, but the fee switch will remain paused until all metrics are met. In the meantime, the team will focus on increasing USDe supply, ensuring more exchange integrations, and monitoring market conditions.

Once all conditions are satisfied, ENA stakers will begin to enjoy revenue sharing.

Summary

Major DeFi protocols are accelerating their transformation towards value accrual for token holders, with Aave, Ethena, Hyperliquid, and Jupiter implementing buyback plans, fee switches, and new incentive structures to make their tokens more valuable beyond speculation.

This trend reflects the industry's overall shift towards sustainable token economics, with projects placing greater emphasis on real revenue distribution rather than inflationary incentives.

Aave leverages its deep reserves to support buybacks and governance improvements, Ethena is committed to providing direct revenue sharing for stakers, Hyperliquid optimizes buyback and fee distribution models, and Jupiter locks up buyback tokens to stabilize supply.

As the regulatory environment gradually improves and DeFi matures, those protocols that successfully align with community incentives will thrive.

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