Introduction

The fact that Chainlink launched the Reserve is empirical evidence that off-chain revenues for Web3 infrastructure are meaningful and there is a need for that value to be redistributed to token holders. And as off-chain revenues begin to account for a growing share of Web3 infrastructure and dApp monetisation, programmatic token buybacks are likely to become increasingly common, with Chainlink’s new Reserve acting as the first blueprint.

Chainlink’s upgrade isn’t just a LINK-specific feature; it introduces a model for converting institutional SaaS-style revenues paid in fiat/stables into on-chain token value via automated buybacks. Institutions may use decentralized infrastructure, but they still don’t want exposure to volatile utility tokens which limits value accrual unless those revenues are converted back into the token.

Programmatic buybacks solve that by letting value accrue to the token holders indirectly. And if history is any guide, equities have seen buybacks overtake dividends over the past two decades, with higher-buyback-yield companies consistently outperforming, crypto infrastructure may be heading in the same direction. 

Chainlink is very possibly the one of the first of many (DePIN, dAI, utilities & tools to follow) more programmatic buyback programs.

Chainlink Reserve

Earlier this month, Chainlink announced the Chainlink Reserve, an onchain reserve of LINK tokens funded by both on- and offchain revenue (e.g. enterprise integration). Thanks to Payment Abstraction, any fees paid in other tokens or stablecoins are automatically converted into LINK and deposited into the Reserve.With the reserve, Chainlink wants to build a long-term strategic reserve that supports the sustainability and growth of the network and ecosystem with no near term plans to withdraw it. 

Blockchain, Not Utility Token Adoption

Paying in stablecoins is one thing, paying in utility tokens is another

Programmatic token buybacks solves a very real problem that is emerging in Web3 and Crypto. On the one hand, large institutions and corporations are increasingly comfortable using blockchain-based infrastructure and stablecoins to access or settle digital asset services. On the other hand, explicitly paying for services in a utility token (and taking mark-to-market exposure to that token) is still a bridge too far for many. 

LINK’s Payment Abstraction effectively bridges that gap. It allows enterprises to pay in a currency they are comfortable with (e.g. stables), while ensuring that the value of that payment ultimately flows back to the token via automated conversions and smart-contract enforced buybacks. 

In our view, this is the first programmatic “stablecoin → token → buyback” loop implemented by a mature Web3 infrastructure provider, and sets a precedent that others in the space will likely follow.

Let Offchain Revenue Accrue To Token Holders

As corporates and institutions begin onboarding to blockchain infrastructure, using oracles, decentralized compute, and indexing, an increasing share of revenues is now generated off-chain and paid in fiat or stablecoins. This looks far more like traditional SaaS/API usage models than native token payments.

The challenge is that most utility tokens were originally designed under the assumption that all users would pay in the native token. As a result, off-chain revenues do not naturally flow back to token holders, particularly in the case of infrastructure projects, which sit at the interface between on-chain and off-chain systems.

The key point is that the adoption of stablecoins as a settlement medium (what we are seeing today) does not translate into direct demand for utility tokens. Institutions may want to use the infrastructure, but they’re not willing (yet) to take liquidity or volatility risk by paying in the native token. We’ve just entered the normalization phase where Web3 infrastructure is being used commercially (e.g. Chainlink already derives a large share of revenues off-chain), but the take-rate on utility tokens remains low, dApps and Infra usage is still settled in fiat, stables or majors.

Blockchain and smart contract adoption ≠ utility token adoption

This is where programmatic token buybacks become essential: they allow protocols to adopt SaaS-style revenue models (stablecoin invoicing, API usage, subscription fees) while still recycling value back into the token via automated buybacks. With Chainlink now implementing this model and given its status as the most widely adopted piece of Web3 infrastructure outside of base L1s, this sets a powerful precedent that other infrastructure providers are likely to follow.

Chainlink Buyback vs Traditional Equity

At the time of writing, Chainlink has accumulated 109,664 $LINK in the Reserve over the past two weeks (65k + 44k). Annualised, that translates to a ~0.4% buyback yield based on the current circulating supply of 678.1m $LINK.

At face value, that may look meaningful, particularly in a crypto context, but in reality it is still small relative to traditional markets. The below contextualizes the current Chainlink buyback yield ($ tokens purchased per year/circulating supply). The buyback sits below comparables such as the S&P average (2.0%) and the information technology cohort average (1.69%)

That said, we argue that the size of the buyback isn’t of much relevance, the important thing is that the buyback mechanism has been activated.

Having Chainlink one of the largest (ex. L1/L2s) web3 infrastructure providers showcasing a recurring, programmatic buyback framework converts off-chain revenues into token buybacks will be a blueprint for similar projects that are getting inbound from more traditional institutions and want to have part of that value be captured by the utility token.

It’s reasonable to expect similar headlines like these over the short to medium term.

The Equity Analogy

Most tokens today are focused on value accrual directly to the token holder, through revenue sharing and other mechanisms. This, albeit in a simplified, less programmable fashion, closely resembles dividends on the equity side.

Token buybacks on the other hand mimic closely the equity share buy backs which are common practice on the equity side. Over the past two decades we’ve seen a shift in preference between both. Rather than paying out equity holders through dividends, we’ve seen a tendency to reward the equity holders and support the share price through share buybacks. The below illustrates this trend over the past 15 years by looking at the $ allocated to SBBs and dividends over time across the S&P 500.

While fiscal considerations certainly play a role (in some jurisdictions buybacks are more tax-efficient than dividends), performance data across the S&P 500 shows that investors tend to reward companies that actively support their share price through buybacks, these firms consistently deliver stronger returns and attract greater investor interest.

And this isn’t limited to large caps. Even across S&P size buckets, smaller listed companies have been steadily increasing their use of buybacks. The data from 1990–2020 shows that small caps are also increasingly engaging in SBBs, albeit at a lower absolute scale than large caps.

In other words: although we’re comparing LINK with the largest U.S. corporations, the structural trend towards buybacks is evident across the entire market cap spectrum on the equity side.

Outlook And implications

It’s clear that share buybacks are a useful mechanism to add value to equity holders and there’s no real reason to believe this is any different based on the initial reception and price activity of $LINK.

Based on all of the above, we believe two things will likely happen in the short to medium term:

• First, Chainlink’s move will act as a blueprint for the broader Web3 infrastructure space. As more projects generate off-chain and stablecoin-denominated revenues, we expect programmatic buyback mechanisms to become a widely used way to ensure that value accrues back to token holders.
• Second, as Chainlink’s own offchain revenue base continues to grow, driven by increased adoption of CCIP, Data Streams and other services, the buyback yield is likely to rise materially over time, ultimately converging toward similar levels seen in traditional markets such as the S&P 500.