Opinion: Buybacks are not suitable for Web3; opportunities are emerging for other Perp DEXs.

Buy back and burn tokens, and destroy competitors through mergers and acquisitions (M&A).

In traditional finance, buybacks are a defensive retirement option for giants who are "unable to grow further".

This article argues that startups may miss out on their competitive advantage by clinging to the illusion of buybacks, and that scaling is more important than buybacks in the Web3 space.

Buybacks are not suitable for Web3 (at least not now).

2025 will be dominated by the “buyback narrative”—an obvious and straightforward price support mechanism, but one with long-term structural problems.

It's understandable why this idea quickly gained popularity in Web3—it precisely capitalizes on a core element of Web3: speculation.

This design is extremely attractive when a mechanism can continuously buy tokens and create "sustainable buying pressure." It's a great story that's very easy to tell and very easy to sell.

But it's ruining the project for the following reasons:

Buyback mechanisms originate from traditional finance (TradFi). To put it simply, buybacks are a tool exclusive to large, established companies. Moreover, they weren't invented to inflate prices—rather, they represent the optimal growth strategy for these companies at a specific stage.

The reality is that as a company grows very large, it becomes increasingly difficult to expand its business. The reason is simple—you've already covered most industries and opportunities, and the marginal contribution of each new product to overall revenue decreases.

Once management sees this, they will realize that instead of continuing to focus on proactive expansion, new products, and R&D, they should choose another path—optimizing the company's overall structure through share buybacks.

Stock buybacks and burns mean that, with company revenue remaining constant, earnings per share (EPS) increase, thereby driving up the stock price. This is similar to dividends, but instead of directly distributing cash, it transfers value to shareholders by "reducing share capital and increasing the value per share."

Therefore, the traditional path is usually: startup → growth → expansion → buyback.

Mature companies often allocate 20%–50% of their cash flow to share buybacks.

Hyperliquid broke this path—skipping the expansion phase and jumping straight into a buyback phase. In the short term, this did generate positive feedback: HYPE briefly surged to $40–60.

But a year later, people began to realize that this was unsustainable in the medium to long term, for a simple reason—you missed the most critical growth phase.

As mentioned earlier, buybacks are only suitable for companies that are struggling to continue growing: these companies are large, have numerous product lines, and cover multiple industries.

But this does not reflect the current state of Web3.

In the Web3 space, apart from Binance, Coinbase, Tether, and Circle, almost all projects are essentially startups.

The mission of a startup is rapid growth and aggressive expansion into new areas. This is the fundamental reason why David was able to "take on a lot of risk" and defeat Goliath.

The reason is simple: the long-term benefits of developing new products and expanding new businesses far outweigh the gains from share buybacks.

For growth companies: Buybacks should not exceed 20% of revenue. The purpose of buybacks should not be speculation, but rather a signal of the sustainability of the business model.

Taking Hyperliquid as an example:

• Hyperliquid earned $900 million in 2025, almost all of which was used for share buybacks.

• If only $180 million is allocated for buybacks (approximately $500,000 per day, which is already quite extravagant), then...

• The remaining $720 million per year can be used entirely for proactive expansion.

Even for most Web2 companies, this amount of money would be a huge amount of growth capital.

If we really want to compare ourselves to Binance, let's look at what Binance did back then. Let's examine what Binance did from 2017 to 2021, when it was still in its early stages:

• A flurry of new product launches: Spot, Margin, Futures, Launchpad, two L1 tokens, Earn, DeFi, NFT, Payments

• Actively pursuing mergers and acquisitions: Trust Wallet, CoinMarketCap, WazirX, Jex

• Binance Labs establishes VC investment arm; team expands to thousands.

• Global footprint: Asia, Europe, the United States, the Middle East

• Building the BNB Chain ecosystem and collaborating deeply with Binance.

Binance's profits in 2018–2019 were also close to $1 billion annually, but they invested 80% in expansion and market share acquisition, and only 20% in share buybacks. It is this aggressive product and business expansion that has made Binance what it is today.

They used their resources to buy the moat and the team.

Hyperliquid's current state is more like Binance's in 2018–2020. If it truly wants to achieve that level of dominance, it must completely overhaul its strategy.

The reality is: its buyback rate is as high as 97%, behaving like a mature company, but in essence, it is still a startup project lacking a proactive growth strategy.

• The buyback is burning tokens.

• Mergers and acquisitions burn down competitors

Other PerpDEXs (perpetual contract exchanges) like Lighter have a better chance in this regard. While Hyperliquid is indulging in buybacks and self-consuming through horizontal scaling, competitors should focus their resources on:

• Develop new products

• Acquiring new users

• Establish a legal operating foundation in multiple jurisdictions

• Actively recruit talent and teams

• Mergers and acquisitions (M&A)

• They even set up a VC investment department.

In my opinion, Lighter has the best chance of becoming a strong competitor to Hyperliquid because:

• They have a very attractive product (in my opinion, one of the best PerpDEXs).

• Possesses an extremely strong development and business (BizDev) team.

• The founders are experienced and know how to build and scale large companies.

• It has direct ties with the US government and possesses a compliance basis.

• Annual revenue of hundreds of millions of US dollars is sufficient to support its rapid growth.

In conclusion, buybacks are not a panacea; expansion and product iteration are the right path forward.