Token Valuation Shifts to Value Recapture Structure from Revenue

As protocols begin to generate revenue, the focus of token valuation is shifting from revenue scale to a value recapture structure. Jeff Dorman, Chief Investment Officer at Arca, presented token buybacks as a key means of capital allocation in protocols in a post on March 24, 2025, explaining that buybacks are a way to return value to token holders rather than a mechanism to prevent price declines. Dorman emphasized the difference between stocks and tokens, arguing that if a mature protocol does not return cash flow to token holders, it is difficult to explain its long-term existence. Arca stated that unconditional buyback theories are not valid, and that any remaining cash flow should be meaningfully used for buybacks, burns, or direct distributions. In contrast, Morpho argued that early high-growth projects should reinvest profits, explaining that reinvesting profits to support network growth creates greater value. Uniswap announced on November 10, 2025, in the UNIfication proposal that it would introduce protocol fees and a burn mechanism. Aave has repurchased over 205,000 AAVE as of February 28, 2026, but halted buybacks after an external incident. Hyperliquid stated in a memo on August 12, 2026, that it generated over $800 million in revenue and used 99% for buybacks and burns. This debate is also a significant issue for domestic investors, as the path from revenue to tokens is crucial.

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