More Than Just Governance: Unpacking Value Accrual Mechanisms (Executive Summary)

“The innovative designs of tokens play a pivotal role; they not only channel value back to the token holders but also exert a direct impact on the token’s market value. Beyond the scope of mere governance tokens, these digital assets offer more than just voting rights; they represent a vital share in the token’s broader ecosystem.”

Key Takeaways

  • Traditional equities confer specific rights to their holders, such as voting power and dividends. In contrast, tokens offer distinct advantages, including implementation versatility, the potential for composability across various use cases—especially within DeFi—and other unique functionalities unattainable with securities.
  • We explore four value accrual mechanisms implemented by tokens. These include:
    • Buyback and Burn
    • Real Yield
    • Tax-Tokens
    • Book Value Tokens
  • Buybacks and burns indirectly accrue value to token holders by introducing buying pressure via secondary market operations, and subsequently also deflating the total token supply.  Tokens typically run up post the announcement of their buyback programs. The longer-term impact of buybacks has yet to be proven yet.
  • Real Yield passes on a portion of protocol earnings to token holders. For example, Gains Network has generated $33M in fees and ~$6.6M in profit as the trader counterparty. GNS stakers earn 62.5% of market orders and 57.5% from limit orders. Around 70% of trades are market orders, resulting in roughly 61% effective fee share for GNS stakers. The gDAI vault receives 18.75% of fees on all orders. Real yield tokens have the unique advantage of restricting rewards exclusively to users who meet specific criteria such as staking, voting, or providing liquidity, ensuring that only those contributing value are rewarded.
  • Tax-tokens impose a tax on any trades/swaps on the project’s token. It’s at the project’s discretion to determine how the tax earned is distributed and utilized. Unibot has amassed 9.18K ETH worth of revenue, of which a significant 7.3K ETH can be traced back to taxes. Tax tokens haven’t proved ideal for value accrual towards token holders. An investor would need to realize a gain of +8.7% just to offset these taxes. Nonetheless, tax tokens offer a viable approach to raising capital for projects without external funding. It’s crucial, however, to establish clear upper limits on capital raised this way.
  • OlympusDAO was one of the book value tokens we’ve looked into. OHM has largely become an afterthought, and the market has overcorrected the speculative premium. Despite having nearly $200M in treasury assets ($160M in stablecoins), OHM has consistently traded at a discount to its liquid backing until recently.
  • Our findings show that while many value accrual mechanisms exist, only those that directly distribute value back to the token holders tangibly benefit. Other strategies, such as buybacks, burns, or building up a treasury, offer indirect value that may not always be realizable.
  • Value accrual aside, the inherent strength and viability of the core product remains paramount. A subpar product will fail to attract value to its associated tokens, regardless of its tokenomics. Hence, while tokenomics plays a crucial role in adding value to a token, the product’s ability to scale and find traction is indispensable in making a token valuable.

Catch our full report, “More Than Just Governance: Unpacking Value Accrual Mechanisms, “today as we dive deeper into the abovementioned.

Additional Charts and Analysis


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