The decentralized finance (DeFi) trading platform dYdX has taken a monumental step by announcing its first-ever token buyback program on March 24. This initiative aims to reinvest in its ecosystem, with a focus on enhancing both security and governance.
According to the official announcement, 25% of the protocol’s net fees will be directed towards monthly buybacks of its native DYDX token on the open market. Following this news, the DYDX token surged over 10%, trading around $0.731, and has seen a considerable gain of more than 21% over the past two weeks, as reported by CoinGecko.
DYDX spikes on buyback news. Source: CoinGecko
Related: dYdX explores sale of derivatives trading arm
New dYdX Distribution Model
Traditionally, dYdX distributed 100% of its platform revenue to ecosystem participants. Under the new allocation model, 25% is now earmarked for token buybacks, another 25% will finance its USDC liquidity provision program named MegaVault, 10% will feed into its treasury, and the remaining 40% will continue to serve as staking rewards.
Remarkably, dYdX has indicated that the current allocation for buybacks could increase, subject to ongoing community discussions that may elevate this percentage to as high as 100% over time.
Related: DeFi market stages a comeback as derivatives surge
The platform currently boasts a total value locked (TVL) of $279 million, as detailed by DefiLlama. In terms of revenue, dYdX generated $1.29 million from fees in February, with $1.09 million earned so far in March.
Token buybacks get 25% of revenue, which has been dropping. Source: DefiLlama
The Anticipation of a New DeFi Boom
The DeFi industry often refers to the ‘DeFi summer of 2020’ as a pivotal moment characterized by rapid user growth driven by yield farming and an increase in decentralized applications.
In a recent discussion with Cointelegraph, dYdX Foundation CEO Charles d’Haussy expressed optimism that the next substantial DeFi boom is on the horizon, potentially commencing shortly after summer and extending for “months and months.”
Originally launched in mid-2020 as a platform for spot trading, lending, borrowing, and margin trading, dYdX gained traction in 2021 following the release of its layer-2 perpetual futures exchange and its native DYDX token.
According to its 2024 ecosystem report, dYdX projects that the decentralized derivatives market will expand to $3.48 trillion by 2025, a significant increase from the $1.5 trillion in derivatives volume processed by decentralized exchanges (DEXs) in 2024.
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This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers are encouraged to conduct their own research before making any decisions.
