Buy-Back-and-Burn

A buy-back-and-burn program is a mechanism where a protocol uses its excess revenue to purchase its own native tokens from the open market and then permanently removes them from circulation. This reduces the total supply, which can lead to upward pressure on the token price, assuming demand remains constant or increases.

It is a popular way for protocols to return value to token holders, acting similarly to a stock buyback in traditional finance. This mechanism is often used to make the token more deflationary over time.

It provides a tangible link between protocol success and token value. However, it must be carefully managed to ensure it does not create artificial market manipulation.

It is a powerful tool for aligning the interests of the protocol and its investors.