DeFi's Capital Shift: Buybacks Align Token Value With Protocol Performance

Ether.fi DAO has initiated a $50 million ETHFI token buyback proposal, aiming to stabilize its price and reduce supply as the token trades near historic lows, according to a livebitcoinnews report. The buyback, which would activate when ETHFI dips below $3, aligns with a growing trend in decentralized finance (DeFi) where protocols use treasury funds to support token value. This marks Ether.fi's third such initiative since 2024, reflecting a broader shift toward revenue-driven capital allocation in the crypto sector, as noted in a CoinMarketCap article.

The proposal outlines a flexible, market-responsive buyback model, with repurchases limited to $50 million or until the DAO votes to end the program. Transactions will occur via open market purchases, with on-chain data publicly accessible via Dune Analytics. The strategy ties buyback activity directly to price levels, ensuring funds are deployed during periods of low demand. Ether.fi Foundation officials emphasized the program's scalability, stating they plan to expand buyback capacity proportionally to protocol revenue as it grows, a point also covered in the livebitcoinnews report.

Ether.fi's move comes as ETHFI trades at $0.93, over 89% below its 2024 peak. Despite the decline, the protocol maintains robust financials: $10 billion in total value locked (TVL) and $360 million in annualized fees, metrics highlighted by the livebitcoinnews report. These metrics suggest the buyback can be executed without compromising core operations, while potentially aligning tokenholder value with protocol performance. The initiative also underscores DeFi's evolving approach to governance, where token utility and market dynamics increasingly shape capital strategies.

The buyback trend has gained momentum in 2025, with DeFi protocols allocating over $1.4 billion to such programs. Aave DAO recently approved a $50 million annual buyback, while OpenSea plans to dedicate 50% of revenue to token repurchases, trends chronicled in the livebitcoinnews report. This shift reflects a broader industry move toward treating DeFi platforms as revenue-generating entities, prioritizing tokenholder returns and price stability. Ether.fi's proposal, however, distinguishes itself by linking buyback activity directly to price thresholds, creating a dynamic mechanism responsive to market conditions, as described in the CoinMarketCap article.

Critics note that while buybacks can temporarily bolster prices, long-term success depends on protocol fundamentals. Ether.fi's ability to maintain TVL and fee growth will be critical to the initiative's effectiveness. Meanwhile, the DeFi sector remains cautious about regulatory risks, particularly as U.S. President Donald Trump's recent tariff announcements have disrupted global markets.