Crypto Projects Overhaul Tokenomics to Move Beyond 'Air Tokens'

Author: Jae, PANews

For a long time, governance tokens of many crypto projects have been criticized by the market as "air tokens" detached from fundamentals due to the lack of effective value capture mechanisms. Now, as on-chain protocols gradually demonstrate real profitability, crypto assets are undergoing a structural tokenomics reform.

According to PANews statistics, 15 mainstream crypto projects including Ethena, Solana, and Polygon are rewriting their token economic models. From inflation reduction, buyback and burn, to unlock schedule adjustments and staking mechanism upgrades, project teams are beginning to redesign the supply-demand and value capture logic of tokens.

Meanwhile, another set of figures more intuitively reflects this trend: According to Allium Labs statistics, as of the end of August, token buybacks by crypto project teams this year have approached $640 million, far exceeding the $545 million in the same period last year, while the full year 2024 was only $3.66 billion.

This means that tokenomics reform is shifting from "how to issue more tokens" to "how to reduce supply, create real demand, and establish a more direct link between protocol revenue and token value."

Reforms of 15 Projects Converge on Four Main Paths

According to PANews statistics, in recent months, 15 well-known projects covering public chains, DeFi, AI, and DePIN sectors have introduced adjustment plans for tokenomics through community proposals and governance votes. Their reform measures mainly extend along four major paths: inflation reduction, buyback and burn, unlock optimization, and staking empowerment, reflecting strategic differentiation in value capture mechanisms among different types of projects.

Public Chain Layer: Curb Inflation, Set Hard Caps

Public chains represented by Solana, NEAR, and Aptos focus on controlling supply and ending inflationary subsidies.

Solana, through the SIMD-550 governance proposal, doubled the annual inflation decay rate to 30%, accelerating toward a terminal inflation rate of 1.5%, and is expected to reduce the issuance of nearly 18.9 million SOL over the next six years;

NEAR halved the inflation cap to 2.5% and canceled gas subsidies returned to developers, achieving rigid cancellation of full execution fees at the protocol layer;

Aptos set a supply hard cap, alleviating market negative expectations of "continuous significant dilution" from the supply side.

This marks that underlying infrastructure is transitioning from expansion through issuance subsidies to balancing supply and demand through real on-chain demand.

Application Layer: Cash Flow Feedback

Vertical applications represented by Lighter, Aster, io.net, Venice, and SushiSwap aim to embed protocol revenue into the token supply-demand curve.

Lighter and Aster convert the vast majority of platform trading fees into secondary market buying and burn them to alleviate token inflation;

io.net and Venice pioneered the precedent of off-chain revenue feedback: io.net launched a dynamic release mechanism linked to actual computing power revenue, using over 50% of surplus after deducting operating costs for buyback and burn; Venice invests part of subscription fees from AI inference into buybacks, exploring the transmission of off-chain cash flow into token value;

SushiSwap restructured the fee allocation matrix, splitting part of protocol fees and perpetual contract revenue into secondary market buybacks and operational treasury reserves, balancing short-term buying and long-term funds.

Their adjustment approach is to liberate tokens from governance credentials into value carriers that can share business growth.

Unlock Side: Defusing Chips + Smoothing Curves

In response to structural selling pressure from early chips, projects adopted distinctive unlock restructuring strategies.

Ethena chose "short-term pain over long-term pain": releasing the remaining investor share in one go ahead of schedule on October 5 this year, while the team share remains unchanged; at the same time, setting a plan to initiate 95% net revenue buyback after USDe reaches a target scale of $7.5 billion, attempting to eliminate the long-term monthly unlock expectation of gradual decline at once;

World chose to trade time for space: reducing the daily token release rate by 43%, postponing the inflation issue to 2038, exchanging a lower release rate for a gentler market impact;

New projects such as Aligned and Pharos avoid risks from the source: establishing a 12-month cliff lock-up period and phased step unlocks at the early TGE stage, compressing staking inflation to zero during the cold start period to avoid sell-off stampedes when liquidity is insufficient.

Staking Side: From Inflationary Subsidy Issuance to Real Yield Iteration

Polygon and Cronos will restructure staking systems, committed to switching the source of staking yields from inflationary issuance to real business revenue.

Polygon will introduce a native staking mechanism in its PoS architecture, allocating part of network transaction priority fees to stakers, so staking yields will be detached from inflationary subsidies and instead supported by the network's real throughput, while combining sPOL to release liquidity.

Cronos will introduce tiered staking weights mandatorily bound to lock-up periods, switching incentive sources to ecosystem business revenue, guiding long-term capital accumulation and suppressing floating chips in the secondary market.

"Duopoly" Becomes Main Buyback Force, but Buyback Does Not Equal Price Increase

It is worth noting that more than half of the 15 projects involve token buyback or burn, which is becoming a widely adopted adjustment method.

The surge in buyback scale in the crypto field this year also indicates that mainstream decentralized protocols are systematically borrowing capital allocation logic from traditional stock markets, enhancing token unit economic value through profit buybacks and supply cancellation. Project teams with ample cash flow attempt to provide buying support for their protocol tokens through protocol revenue buybacks.

From the market structure perspective, Hyperliquid and pump.fun, the two leading protocols, together account for nearly 90% of the buyback scale of crypto projects.

Hyperliquid is the most aggressive: approximately 99% of its protocol fees are used to buy back HYPE through the Assistance Fund and permanently burn it. As of now, the Assistance Fund has cumulatively bought back approximately $1.1-1.3 billion, accounting for 4.7% of the total token supply, and the HYPE price has repeatedly hit new highs, breaking above $80; pump.fun uses 50% of revenue for buyback and burn, cumulatively burning approximately $445 million, accounting for 16.35% of the total token supply, and the current market price of PUMP is basically flat compared to when the buyback started.

Bitwise CIO Matt Hougan stated that the entire crypto market is undergoing a "revenue revolution." He emphasized that the main obstacle that has long hindered traditional mainstream capital from allocating crypto assets on a large scale is that tokens cannot generate accountable cash flow returns, and when protocols such as Hyperliquid and Uniswap establish mechanisms linking network prosperity with token deflation, token holders will be able to substantively share in the growth dividends of the protocol.

From market performance, the buyback mechanism has indeed produced positive cases with outstanding performance, but buyback itself is not a sufficient condition for determining token price.

As of now, protocols such as Chainlink, Jupiter, and Layerzero that also implement buybacks have seen their token prices fall by approximately 50%, 70%, and 45% respectively compared to when buybacks started. The special feature of Hyperliquid is that while buying back tokens, the protocol also maintains growth, forming a positive flywheel, rather than simply "using money to prop up the market."

Allium Labs research head Elton Shehdula pointed out: Buyback behavior can reduce circulating supply and create buying, but it can neither replace organic growth of protocol revenue nor serve as an inevitable guarantee of long-term token appreciation.

Looking at cases such as Chainlink and Jupiter, even if buybacks are implemented, if business growth slows or the competitive landscape deteriorates, token prices will still continue to fall.

Tokenomics reform is shifting from "designing a set of rules" to "designing a business."

This wave of reform is essentially crypto projects attempting to reposition the role of tokens in business models. In the past, tokens were fundraising tools, growth incentives, and governance credentials; now, more and more projects are trying to make them value-carrying instruments for protocol revenue.

However, the problem is equally significant: if a project cannot generate stable cash flow, the buyback effect may remain only at the expectation level. Deflation does not equal value growth; if users, trading volume, and revenue continue to decline, even if token supply keeps decreasing, token prices may still continue to weaken.

In the future, the criteria for judging token economic models may shift from "how much is issued, how much is unlocked, what is the APY" to indicators such as "how much revenue, how much is distributed, how much is bought back, what is the net issuance, and whether it is sustainable."

The phenomenon that Hyperliquid and pump.fun contribute nearly 90% of buybacks actually reminds the market: the so-called "value capture transformation" is still highly concentrated. The vast majority of projects have not yet established a link between revenue and token value.

Ultimately, every tokenomics model reform needs to be tested by the same question: Does the token price increase come from less supply, or from a bigger pie?