dYdX has announced its first-ever buyback program, committing 25% of protocol fees to buy DYDX on the open market. Based on last year’s revenue numbers, that could amount to over 11M in DYDX purchased per year.
In an exclusive interview, Charles d’Haussy, CEO of the dYdX Foundation, provided his view on the community initiative and shed light on exciting developments coming to the dYdX ecosystem, such as Wallet Integrations and the potential for Spot Trading, Multi-Asset Margining, and EVM Support.
(Disclaimer: The dYdX Foundation does not control, direct, or execute the buyback process. Instead, the buyback is driven and governed by the community.)
Understanding the Buyback Program: A Long-Term Commitment To The DYDX Token
The Buyback program follows a “Buy & Stake” model. Here, 25% of net protocol revenue is allocated to repurchasing DYDX tokens and staking them to validators. This structure helps reduce the active circulating supply and strengthens the dYdX Chain’s security.
“The Buyback Program is designed to align the interests of the dYdX community with the long-term growth of the dYdX protocol while enhancing network security. By allocating a portion of net protocol revenue—initially 25%—to buybacks, the dYdX community has voted to reinforce the DYDX token as a central part of the ecosystem,” Charles d’Haussy emphasized.
This structured, systematic buyback program shows confidence in dYdX’s revenue model and future growth.
The protocol will consistently reinvest its earnings into the ecosystem by implementing a predictable, monthly buyback strategy. This will help improve the connection between protocol growth (270 billion trading volume in 2024) and the community, all while improving network security.
How the Buyback Works
The dYdX Buyback Program is designed to balance protocol sustainability, security, and governance transparency.
Revenue Allocation for Buyback
25% of dYdX’s net protocol revenue is directed towards repurchasing DYDX tokens from the open market.
This allocation was determined through a governance vote.
Any future changes will require another on-chain community proposal. So, the community will approve actions like increasing or decreasing the buyback percentage.
Execution by the Treasury subDAO
The Treasury subDAO, an independent governance entity, executes the buybacks.
The buyback process follows a TWAP execution strategy. TWAP stands for Time-Weighted Average Price, and it spreads purchases over time to avoid market instability.
Staking to Validators
Repurchased DYDX tokens are staked to validators. This process helps to increase their stake and improve network security.
Staking rewards, paid in USDC, provide incentives for validators and contribute to protocol growth.
dYdX buyback structure reduces the risk of validator centralization.
Key Governance Principles
On-Chain Decision-Making: The buyback and staking mechanisms were approved through governance proposals.
Transparency: All transactions are recorded and visible on the dYdX Chain.
Scalability: The program can be expanded based on future governance votes and market conditions.
“Instead of merely repurchasing tokens and holding them in treasury, the administrator of the Program will stake the acquired DYDX to validators, strengthening network security while generating additional rewards. This dual-purpose strategy—buying and staking—ensures that buybacks not only align with the community’s interests but also contribute to the long-term resilience of the dYdX protocol,” d’Haussy explained
How dYdX’s Buyback Model Differs from Competitors
While token buybacks are not new, dYdX’s Buy & Stake model differs fundamentally from competitors. The “Buy & Stake” model differentiates dYdX from other networks that use buyback programs. Platforms like Binance permanently remove tokens from circulation through burns. Others, like Hyperliquid and Jupiter, use buybacks to fund liquidity incentives.
Like Binance’s BNB burn strategy, most buyback models focus on reducing supply to drive price appreciation. In contrast, dYdX reinvests buybacks directly into staking. This ensures that network security and decentralization are strengthened in parallel with price stability.
“By publicly committing to a predictable, monthly buyback mechanism, the Treasury SubDAO will ensure that a portion of net revenue is consistently reinvested into the ecosystem. This reassures the community that the protocol is not only generating revenue but also allocating it in a strategic way,” according to d’Haussy.
dYdX’s protocol revenue is now distributed as follows:
10% – Treasury SubDAO for financial sustainability initiatives
25% – MegaVault
25% – Buyback Program
40% – Staking Rewards
The Buyback’s Impact on Security, Price Stability, and Market Confidence
An essential part of the Buyback Program is its direct contribution to network security. Validators on the dYdX Chain need a large amount of delegated stake to function effectively. By staking the purchased DYDX, the Buyback Program ensures that validators receive ongoing support. It also adds more decentralization and minimizes the risks of collusion.
Beyond security, staking these tokens generates additional USDC rewards, which are reinvested into the ecosystem.
Here are key details to keep in mind:
Strengthening Network Security
A higher validator stake reduces attack risks and ensures protocol resilience.
Staking promotes decentralization. It creates an ecosystem without the risk of a few large validators controlling governance.
There’s sustainable long-term security because buybacks help to improve validator stakes continuously.
All buybacks will be executed through a dedicated account on the dYdX Chain to maintain transparency. More details show that the Treasury subDAO will manage the account, allowing stakeholders to track how funds are allocated. The dYdX community will be part of this program throughout its duration.
Product Innovations in the Pipeline
dYdX is preparing upgrades that will enhance trading and strengthen the platform’s ecosystem.
With Spot Trading, Multi-Asset Margining, and EVM Support on the horizon through IBC Eureka, the Buyback Program strengthens the alignment between the DYDX token and platform growth. As platform usage expands, protocol revenue increases, leading to larger DYDX buybacks and staking allocations, further reinforcing the security of the network and the broader ecosystem.
dYdX’s Previous Performance in 2024
2024 marked a major milestone for dYdX, with 270 billion in trading volume. The launch of dYdX Unlimited in November brought features like:
Instant Market Listings: Enabled the permissionless creation of new markets, leading to 50+ new listings since November.
MegaVault Liquidity Tool: Surpassed 79M in USDC total value locked (TVL) within six weeks, with an APR exceeding 40% by December.
These features increased tradable assets and strengthened dYdX’s position in decentralized perpetual trading. dYdX’s Trading Rewards Program distributed over 63M in rewards and incentives, with an additional 1.5M allocated for 2025.
Here are some of the key highlights of dYdX in 2024:
290% Increase in DYDX Holders: The number of DYDX holders increased to 53,000.
270B Growth in Trading Volume: dYdX reached a cumulative trading volume of nearly 1.5T since 2021.
150+ New Markets Launched: The community introduced over 150 new markets, showcasing decentralized innovation.
Transparent On-Chain Tracking
A dedicated on-chain account ensures that all buybacks are publicly verifiable.
Regular reports are shared with the community for full transparency.
Governance can adjust buyback allocations depending on what happens in the future.
In the coming weeks, the community will provide a real-time dashboard to help track wallet activity and assess the effectiveness of the Buyback Program.
The dashboard will aim to show if buybacks contribute to protocol security while providing a birds-eye view of network health. Besides the dashboard, discussions in governance forums are an additional layer of transparency. Community members can openly discuss the program’s effectiveness and make proposals.
“To maintain transparency, buybacks will be executed in a structured and trackable manner, with the Treasury SubDAO managing an Account on the dYdX Chain dedicated to the Buyback. The community will be able to monitor fund flows, ensuring that the process remains aligned with its intended objectives. Over time, as buybacks reduce circulating supply and strengthen network security, this initiative is expected to contribute to a more positive market perception,” d’Haussy added.
Expanding DYDX’s Utility Beyond Buybacks
While buybacks contribute to token dynamics, dYdX is also exploring ways to increase DYDX’s utility beyond staking. In the future, here are things that might be implemented:
Fee Discounts for Traders: Traders who hold or stake DYDX could receive trading fee discounts.
Governance Rewards: Active participants in governance decisions could be rewarded.
Expanded Liquidity Incentives: Bought-back DYDX could be redistributed to stakers and liquidity providers. This strategy will help increase the protocol’s incentives while maintaining deflationary effects.
Conclusion
The dYdX Buyback Program is an important milestone in the history of one of DeFi’s OGs. Founded in 2017, dYdX’s first-ever buyback program is designed to enhance network security, market stability, and community-driven governance. By allocating a portion of net protocol fees to repurchase and stake DYDX, the program strengthens decentralization and increases confidence in the token.
Coupled with the product innovations on the horizon thanks to IBC Eureka, like Spot Trading, Multi-Asset Margining, and EVM Support, dYdX is clearly continuing the momentum they ended 2024 with.
Looking ahead, discussions within the community focus on expanding DYDX’s utility beyond buybacks and staking. Future considerations could introduce fee discounts, liquidity incentives, or direct distributions of bought-back tokens to stakers. The program’s success may also lead to changes to trading rewards and treasury-funded initiatives.
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