Optimism DAO Approves OP Buyback Initiative with 84% Support – What's Next?

The Optimism Collective has endorsed a significant proposal that allocates 50% of Superchain revenue for monthly OP token buybacks, achieving an impressive 84.4% approval rate.

Key Takeaways

The Optimism Collective has approved a proposal for OP token buybacks using 50% of Superchain revenues, with 84.4% support.
The program links OP’s value to sequencer revenues from various platforms.
It aims to utilize approximately $8 million for Open-Market purchases over the next year.
The initiative will operate with transparency and flexibility for ongoing development.
Critics raised concerns about the executed strategy, but the proposal successfully passed and is now set for implementation.

Optimism DAO Passes OP Buyback Proposal With 84% Approval

This new 12-month initiative begins in February and will convert OP from merely a governance token into one that is closely linked to the sequencer revenue generated across various platforms, including Base, Unichain, Ink, World Chain, Soneium, and OP Mainnet.

Based on the 5,868 ETH gathered over the last year, this initiative aims to utilize approximately 2,700 ETH, valued at around $8 million currently, to make open-market purchases through an OTC provider.

The tokens acquired will return to the collective treasury and may eventually be burned, given as staking rewards, or utilized for the platform's expanding ecosystem.

Optimism DAO OP Buyback - Vote Result

Revenue Mechanism Links Token Demand to L2 Growth

The Foundation plans to collaborate with an OTC provider to conduct monthly ETH-to-OP conversions within specific time frames, starting with revenue collected in January which will be processed in February.

According to the proposal, these conversions will be paused if monthly earnings dip below $200,000 or if the OTC provider cannot execute trades under allowable fee spreads, with any halted allocation rolling over into the next month.

All transactions will be transparently reported through Optimism's stats dashboard or the governance forum, while the Foundation will maintain an execution dashboard to track fills, pacing, pricing, and balances.

The remaining 50% of ETH revenue will be left flexible for development purposes, helping to nurture ecosystem growth and shared infrastructure among the Superchain's 30+ partners, thereby decreasing the governance overhead that often restricts active treasury management.

Though the program starts modestly, it is expected to scale with the expansion of the Superchain, where each transaction on participating chains boosts the buyback potential and establishes a stronger demand for OP tokens.

The mechanism will operate based on sequencer revenue from the chains that contributed the 5,868 ETH over the previous year, managed by Optimism governance.

Optimism Foundation Sees Buyback as a Step Forward in Token Development

Bobby Dresser, the Executive Director of the Optimism Foundation, characterized the proposal’s approval as a pivotal moment for the economic influence of the OP token.

“The governance approval of the buyback proposal marks an exciting first step in expanding the role of the OP token,” Dresser stated.

“Optimism's OP Stack is evolving into the settlement layer for the next generation of financial systems, and this program will help link the OP token’s value with the Superchain ecosystem's success.“

In a conversation with Cryptonews, Dresser elaborated on the strategic intent behind this transition. “This proposal aims to directly align the OP token with the Superchain's success,” he mentioned.

“While Optimism generates real and increasing revenue from Superchain usage, the OP token has historically only served governance purposes. Buybacks will connect Superchain demand with OP, making OP a shared resource for the ecosystem.“

When asked about the indicators of success at the conclusion of the program, Dresser underscored the importance of long-term infrastructure instead of focusing solely on short-term price fluctuations.

“For us, success means fostering an ecosystem capable of enduring, which involves establishing the right infrastructure to create a new paradigm for Optimism and the OP token,” he said. “In the end, it will be up to the governance community to determine if this should evolve into a long-term mechanism.“

Implementation Moves Forward Amid Governance Scrutiny

The proposal initially faced scrutiny from delegates concerned about merging buyback authorization with expanded Treasury discretion in a single vote.

GFXlabs advocated for separating these two policy decisions, arguing that combining them limits thorough evaluation of each proposal and risks having delegates favor treasury management authority primarily due to anticipated price increases from buybacks.

Some delegates also expressed worries about the OTC execution strategy, claiming that off-chain purchases lack transparency and could present corruption risks, indicating that Optimism may not adequately support trading activities using its own DeFi infrastructure.

Optimism DAO OP Buyback - Community Comment

Certain members of the community suggested that on-chain execution would align better with the network’s decentralized principles and provide essential transparency to prevent any potential conflicts of interest.

Despite these concerns, the proposal successfully passed Special Voting Cycle #47 under Joint House approval, surpassing the necessary 60% threshold, leading to immediate action.

The Foundation will execute initial operations by adhering to predetermined guidelines, minimizing discretionary power, while the mechanism may gradually shift to being completely on-chain through Protocol Upgrade 18, ensuring that all sequencer revenue from OP Chains is collected without the Foundation's direct involvement.

Importantly, this program comes at a time when buyback mechanisms are increasingly frequent in the crypto space, though results have been varied.

For instance, Jupiter recently contemplated whether to continue its $70 million buyback program after the JUP token plummeted nearly 90% from peaks earlier in 2024. Meanwhile, Helium suspended its HNT buybacks despite generating $3.4 million in monthly revenue, with both projects recognizing that supply dynamics often outweigh demand.