Former COO of Harvest Exchange debunked all myths about the notion that apportioning capital for token buybacks is a bad option. He explained that the main reason for the misunderstanding was that people fail to differentiate between equities and tokens.
COO of Harvest Exchange, Jeff Dorman, stated, “Token buybacks are by far the best use of capital for protocols, full stop.” Untangling the confusion, the COO pieced out the tokens from equities to support his argument as to why token buybacks are the best way to use the capital.
‘The key difference between token & equity buybacks is that equity issuance is perpetual.’
There are no supply limits to how much stock one could create, and therefore it could be outstanding forever, as a company can always issue more. So buying back stock is a trade, with the goal of buying low and reselling higher.
As such, the decision to either allocate for buybacks in stocks and equities or invest in growth is a vital decision. However, as far as tokens are concerned, protocols have a limited supply, and “every stakeholder owns it (founding team, employees, customers, passive investors) and benefits from the buyback.”
Giving real-life examples about buybacks, Dorman pointed out how PUMP and HYPE are buying back. PUMP, in particular, is buying ~14% of the total supply every year at current prices. Given that PUMP continues this rate of buying, in 6.5 years, the company will buy back the entire supply if prices don’t go up.
He further stated: “The best-performing tokens in history are all amortizers.”
Token buybacks are often more optics than substance. In most cases, the amount being bought back is tiny compared to the constant sell pressure from emissions, unlocks, and early holders exiting. Without real rights to cash flows or clear value accrual, buybacks don’t fix the core problem.
Analyst Lavneet Bansal
Furthermore, showing his disagreement, Bansal stated that the buybacks just create the illusion of support, and they work only after a protocol has already succeeded, not as a way to make it succeed.
