Opinion: Buybacks are not suitable for Web3; the opportunity is being reserved for other Perp DEXs

Buyback and burn tokens, while M&A destroys competitors.

In traditional finance, buybacks are a defensive retirement choice made by giants “due to inability to grow further.”

The point of this article is: why might early-stage projects miss out on a moat in the illusion of buybacks? Why in Web3, expansion is more important than buybacks.

Buybacks are not suitable for Web3 (at least not now).

By 2025, the “buyback narrative” will dominate — an obvious, straightforward price support method, but with long-term structural issues.

It’s understandable why this idea has quickly gained popularity in Web3 — it precisely leverages Web3’s core element: speculation.

When a mechanism can continuously buy tokens and create a “sustainable buy-side,” this design is highly tempting. A story that is easy to explain and sell.

But it is destroying projects, for the following reasons:

Buyback mechanisms originate from traditional finance (TradFi). Simply put, buybacks are an exclusive tool for large, mature companies. They were not invented to push prices higher — rather, they are the optimal growth method for these companies at certain stages.

The reality is: once a company becomes very large, continuing to expand becomes increasingly difficult. The reason is simple — you have already covered most industries and opportunities, and each new product’s marginal contribution to overall revenue decreases.

Management, seeing this, realizes: rather than obsessively pursuing active expansion/new products/R&D, it’s better to choose another path — optimizing the company’s overall structure through buybacks.

Stock buybacks and burns mean: with company revenue unchanged, earnings per share (EPS) increase, thereby driving up the stock price. This is similar to dividends, but instead of paying out directly, it transfers value to shareholders by “reducing share capital and increasing per-share value.”

Therefore, the traditional path is: Startup → Growth → Expansion → Buyback.

Mature companies often allocate 20%–50% of cash flow to buybacks.

Hyperliquid breaks this path — skipping the expansion phase directly into buybacks. In the short term, this indeed created positive feedback: HYPE once soared to $40–$60.

But after a year, people began to realize: this is unsustainable in the medium to long term, for a simple reason — you missed the most critical growth phase.

As mentioned earlier, buybacks are only suitable for companies that are already difficult to grow further: they are large, with many products, covering multiple industries.

But this does not match the current state of Web3.

In the Web3 space, except for Binance, Coinbase, Tether, and Circle, almost all projects are essentially startups.

The mission of startups is rapid growth and aggressive expansion into new areas. This is the fundamental reason why “small can beat big,” David can defeat Goliath.

The reason is simple: the long-term benefits of developing new products and expanding into new businesses far outweigh the gains from buybacks themselves.

For growth-stage companies: buybacks should not exceed 20% of revenue. The purpose of buybacks should not be speculation, but a signal of the sustainability of the business model.

Taking Hyperliquid as an example:

• Hyperliquid earned $900 million in 2025, almost all used for buybacks
• If only $180 million (about $500,000/day, already very aggressive) is used for buybacks
• The remaining $720 million/year could be used for active expansion

Even if this money were invested in most Web2 companies, it would be a huge growth capital.

If you really want to benchmark Binance, look at what Binance did back then. Let’s review what Binance did during 2017–2021, when it was still a startup:

• Launched new products wildly: Spot, Margin, Futures, Launchpad, two Layer 1s, Earn, DeFi, NFT, Payments
• Actively acquired: Trust Wallet, CoinMarketCap, WazirX, Jex
• Established VC investment arm: Binance Labs expanded to thousands of staff
• Global layout: Asia, Europe, US, Middle East
• Built the BNB Chain ecosystem, with deep synergy with Binance

Binance’s profits in 2018–2019 were also close to $1 billion annually, but they allocated 80% to expansion and market capture, only 20% to buybacks. It was this aggressive product and business expansion that built today’s Binance.

They used resources to buy the moat and the team.

Hyperliquid’s current state is more like Binance in 2018–2020. If it truly wants to reach that level of dominance, it must fundamentally adjust its strategy.

The reality is: its buyback ratio is as high as 97%, behaving like a mature company, but in essence, it remains a startup lacking an active growth strategy.

• Buyback burns tokens
• M&A burns competitors

Other PerpDEXs like Lighter have more opportunities in this regard. When Hyperliquid is obsessed with buybacks and self-consuming through horizontal expansion, competitors should focus resources on:

• Developing new products
• Acquiring new users
• Establishing legitimate operations in multiple jurisdictions
• Actively recruiting talent and teams
• Mergers & Acquisitions
• Even setting up VC investment arms

In my opinion, Lighter has the best chance to become a strong rival to Hyperliquid because:

• They have highly attractive products (personally, I think they are one of the best PerpDEXs)
• They have a strong development and BizDev team
• The founders are experienced and know how to build large-scale companies
• They have direct contacts with the US government, with a solid compliance foundation
• Hundreds of millions in annual revenue, enough to support rapid growth

Summary: Buybacks are not a panacea; expansion and product iteration are the right path.