A quiet but important evolution is underway in the dYdX ecosystem. The dYdX Buyback Program - approved through on-chain governance and backed by real protocol revenue - has been actively acquiring DYDX from the open market and staking it to help secure the network. While its mechanism is simple in principle, its implications for token holder alignment are profound.
Turning Protocol Revenue Into Token Demand
At the heart of the Buyback Program lies a simple principle: as the protocol earns fees, a portion of that revenue is used to purchase DYDX and stake it. But the second-order effects go much further - strengthening validator incentives, reducing the circulating supply of DYDX, and converting usage of the protocol into structural demand for the token.
This architecture did not emerge overnight. It was implemented through open governance, via Proposals #225 and #231, which outlined the framework for monthly buybacks funded by 25% of net protocol fees. All acquired tokens are staked, directly reinforcing the validator set. Discussions remain open to increasing the buyback allocation in the future.
Transparent Execution, Measurable Impact
Since its launch, the Buyback Program has acquired 2.87M DYDX, spent over $1.88 million in cumulative protocol fees, and staked 100% of the purchased tokens. The initiative is fully transparent, with real-time data publicly available via the Buyback Tracker, a dashboard developed and maintained by community contributors.
This mechanism is powered entirely by organic protocol usage - specifically, trading volume generated through perpetuals markets on the dYdX Chain. In doing so, it establishes a sustainable, circular economic model: traders generate fees → fees are used to buy DYDX → DYDX is staked to secure the protocol.
Moving Beyond Inflation-Based Incentives
Most DeFi protocols rely on inflationary token emissions to incentivise usage. dYdX turns this model on its head. Rather than bootstrap growth through token dilution, the protocol prioritised infrastructure, scalability, and market leadership. The launch of the Buyback Program is the next logical step - recycling earned value back into the ecosystem.
It also strengthens the staking proposition. With rewards from both native staking and buybacks, DYDX staking becomes more attractive - reducing float, deepening validator alignment, and increasing protocol resilience. In this model, staking is not just a governance function, but an integral part of the protocol’s value loop.
Long-Term Capital Allocation Through Governance
Importantly, the program’s structure remains flexible. Should the dYdX DAO vote to increase the percentage of revenue allocated to buybacks, every additional dollar compounds the impact - further reducing circulating supply and reinforcing the economic value of DYDX.
This is what makes the program unique. It is not a fixed mechanism but a community-directed treasury strategy - one that connects capital allocation with long-term protocol sustainability.
Adding Momentum
The program operates alongside major milestones in the protocol’s evolution. Since inception, dYdX has processed over $1.46 trillion in trading volume across all versions. Since the launch of the dYdX Chain, the protocol has seen $316 billion in volume, $56 million in net protocol fees, and a growing base of over 71,000 DYDX token holders. More than 306 million DYDX is now staked.
As spot trading and EVM compatibility roll out, protocol revenue - and therefore the potential scale of buybacks - is positioned to grow. These developments add further momentum to a model already proving its effectiveness.
A Blueprint for Sustainable Tokenomics
The dYdX Buyback Program is a case study in how decentralized governance can craft structured, forward-looking incentive systems. It brings together protocol performance, token utility, validator alignment, and capital efficiency under a single framework - backed by real usage, governed by the community, and built for scale.
In this case study, kpk explores how dYdX mobilises the Community Treasury to secure the chain, reinforce protocol economics, and deliver on the Fat App Thesis.
As DeFi matures, this is a model worth watching.
About the dYdX Foundation
Legitimacy and Disclaimer
Crypto-assets can be highly volatile and trading crypto-assets involves risk of loss, particularly when using leverage. Investment into crypto-assets may not be regulated and may not be adequate for retail investors. Do your own research and due diligence before engaging in any activity involving crypto-assets.
dYdX is a decentralised, disintermediated and permissionless protocol, and is not available in the U.S. or to U.S. persons as well as in other restricted jurisdictions. The dYdX Foundation does not operate or participate in the operation of any component of the dYdX Chain's infrastructure.
The dYdX Foundation’s purpose is to support the current implementation and any future implementations of the dYdX protocol and to foster community-driven growth in the dYdX ecosystem.
The dYdX Chain software (including dYdX Unlimited) is open-source software to be used or implemented by any party in accordance with the applicable license. At no time should the dYdX Chain and/or its software or related components (including dYdX Unlimited) be deemed to be a product or service provided or made available in any way by the dYdX Foundation. Interactions with the dYdX Chain software (including dYdX Unlimited) or any implementation thereof are permissionless and disintermediated, subject to the terms of the applicable licenses and code. Users who interact with the dYdX Chain software, i ncluding dYdX Unlimited (or any implementations thereof) will not be interacting with the dYdX Foundation in any way whatsoever. The dYdX Foundation does not make any representations, warranties or covenants in connection with the dYdX Chain software (or any implementations and/or components thereof, including dYdX Unlimited), including (without limitation) with regard to their technical properties or performance, as well as their actual or potential usefulness or suitability for any particular purpose, and users agree to rely on the dYdX Chain software (or any implementations and/or components thereof, including dYdX Unlimited) “AS IS, WHERE IS”.
Nothing in this post should be used or considered as legal, financial, tax, or any other advice, nor as an instruction or invitation to act by anyone. Users should conduct their own research and due diligence before making any decisions. The dYdX Foundation may alter or update any information in this post in the future at its sole discretion and assumes no obligation to publicly disclose any such change. This post is solely based on the information available to the dYdX Foundation at the time it was published and should only be read and taken into consideration at the time it was published and on the basis of the circumstances that surrounded it. The dYdX Foundation makes no guarantees of future performance and is under no obligation to undertake any of the activities contemplated herein.
Depositing into the MegaVault carries risks. Do your own research and make sure to understand the risks before depositing funds. MegaVault returns are not guaranteed and may fluctuate over time depending on multiple factors. MegaVault returns may be negative and you may lose your entire investment.The dYdX Foundation does not operate or has control over the MegaVault and has not been involved in the development, deployment and operation of any component of the dYdX Unlimited software (including the MegaVault).
Get Involved with the Community
Become a part of our journey to reshape the financial landscape
