Uniswap, Lido, Aave?! How Token Buybacks Are Quietly Centralizing DeFi

When Uniswap’s administrators filed their “UNIfication” proposal on Nov. 10, it read less like a protocol update and more like a corporate overhaul. The plan would activate dormant protocol fees, channel them through a new on-chain treasury engine, and utilize the proceeds to purchase and burn UNI tokens. This approach mirrors share-repurchase programs in traditional finance.

Meanwhile, a similar mechanism was introduced by Lido DAO. The DAO proposed an automated buyback system redirecting excess staking revenue toward repurchasing its governance token, LDO, under specific conditions like Ethereum prices exceeding $3,000 and annualized revenue surpassing $40 million. This anti-cyclical model adjusts its approach based on market conditions, acting aggressively during bullish markets and more conservatively when conditions tighten.

These initiatives mark a strategic pivot for decentralized finance (DeFi). After years led by meme tokens and incentive-heavy liquidity campaigns, major DeFi protocols are now refocusing on market fundamentals such as revenue generation, fee capture, and capital efficiency.

However, this shift introduces uncomfortable questions about control, sustainability, and whether decentralization is giving way to corporate logic. The debate reflects broader tensions surrounding DeFi's evolution and its engagement with the principles of decentralized governance.

For much of 2024, DeFi’s growth relied heavily on cultural momentum, incentive programs, and liquidity mining. However, the recent reactivation of fees and adoption of buyback frameworks aims to directly tie token value to business performance.

In Uniswap’s case, the plan to retire up to 100 million UNI tokens reframes UNI not just as a governance asset but as a stake in protocol economics. This aligns with traditional financial practices, while lacking legal protections tied to equity markets. Researcher BREAD estimates that Uniswap could generate $38 million monthly under current fee assumptions, while Lido's plan could enable $10 million annually, with LDO being paired with wstETH to enhance liquidity.

Other protocols, such as Jupiter, dYdX, and Aave, are similarly integrating buyback models, reallocating significant operational revenues. This emerging financial logic, focused on recurring revenue and token scarcity, reflects a mature evolution of DeFi token economics.

DeFi is increasingly aligned with institutional finance practices, adopting familiar metrics like price-to-sales ratios, yield thresholds, and net distribution rates. These metrics build a bridge to investors evaluating protocols similarly to growth-stage companies.

However, analysts have noted concerns. For instance, Keyrock’s analysis indicates many programs rely more on existing treasury reserves than durable, recurring cash flows—raising questions about long-term sustainability. Additionally, discretionary repurchase programs may have limited market effects and expose protocols to losses during token price declines. As Marc Ajoon of Blockworks argues, buybacks might be prioritized over more ROI-driven alternatives, raising doubts about their universal effectiveness.

While buyback frameworks are reshaping DeFi’s financial basis, their governance implications remain contentious. Uniswap’s UNIfication proposal, for example, would shift operational control from the community foundation to Uniswap Labs, causing concerns about increasing centralization.

DeFi researcher Ignas observed that such moves undermine the original vision of decentralization, as seen in emergency decisions and concentrated authority within protocol teams. However, supporters like Eddy Lazzarin of A16z argue for a balanced approach. By describing UNIfication as a “closed-loop” revenue flow model, he proposes maintaining flexibility for future issuance alongside fiscal discipline. The tension between decentralized governance and centralized oversight is becoming one of execution rather than ideology.

The trend of token buybacks highlights DeFi's shift toward structured, metrics-driven industry practices. Transparency, cash-flow visibility, and investor accountability are supplanting experimental early-stage approaches.

Yet, this maturity introduces risks: governance may tip toward centralization, buybacks might attract regulatory scrutiny as de facto dividends, and innovation efforts could decline in favor of financial engineering. Hybrid systems, linking repurchases to verifiable network metrics, may present a middle ground, but their resilience in live markets remains unproven.

What is clear is that DeFi has evolved beyond mirroring traditional finance. It is merging corporate disciplines like treasury management and capital allocation into its open-source foundation, creating revenue-driven organizations accountable to their communities.