Delegates clash as Optimism token buyback proposal goes to a DAO vote

Optimism DAO delegates are heading to the polls as a landmark proposal to use a portion of Optimism’s revenue to buy back its OP governance token opened for voting on Thursday.

The proposal, if passed, will mandate the Optimism Foundation to use 50% of the revenue generated through the Superchain, a network of blockchains built using Optimism’s software, to buy OP tokens every month.

The vote has split opinions among the DAO’s delegates. While many support the proposal, others argue it’s a poor use of capital.

“Optimism is a net seller of OP (grants, payment-in-kind, etc) and it makes little sense to spend precious hard assets and shorten runway to buy back OP while still net selling,” PaperImperium, a governance liaison for GFX Labs, an Optimism DAO delegate, said on X.

Optimism is a major player in blockchain infrastructure. Its OP stack software framework is used by Coinbase’s Base blockchain, Uniswap’s Unichain, and Kraken’s Ink blockchain, among others.

But the project’s OP token hasn’t benefitted. It’s down more than 93% from its all-time high after hitting an all-time low of $0.25 last month.

The buyback proposal aims to change that. The more revenue Optimism makes, the more OP the nonprofit Optimism Foundation will be required to buy each month, potentially helping shore up the token’s price.

Such buyback programmes have become increasingly popular among crypto projects in recent months. But not everyone agrees that they’re worthwhile.

Researchers at crypto market maker Keyrock and market intelligence platform Messari argue buybacks can be a waste of money as they divert funds from marketing and growth initiatives and do little to impact token prices.

OTC issues

There are several more issues with the proposed buyback programme, according to delegates.

One is that the buybacks will be conducted over-the-counter instead of through the open market, meaning the purchases won’t directly impact market prices.

“A concerning scenario would be that employees or investors are using the OTC buybacks to offload their tokens as they unlock,” Michael Vander Meiden, an Optimism DAO delegate and member of the Optimism grants council, said in a forum post.

In response, the Optimism Foundation said it chose OTC execution as the simplest path to shipping the buyback programme. “All OTC trades will be reported publicly, either via stats.optimism.io or via the governance forum,” the foundation said in a forum post.

Still, not everyone is convinced.

“We would prefer to see more focus on crafting and publishing a business plan to get Optimism to financial sustainability,” GFX Labs said in a forum post. “That’s the real challenge that Optimism Foundation/Labs leadership needs to address, and a buyback does nothing to address this, and may in fact make it worse.”

Several other governance participants said they agree with GFX Labs’ criticisms.

‘A step in the right direction’

Despite the pushback, a large faction of Optimism’s DAO supports the buyback proposal.

“It’s totally fine to have a buyback programme alongside emissions, even if they technically cancel out (partially),” Milo Bowman, an Optimism DAO delegate, said in a forum post. “The meme of the buyback is important. It allows people to clearly project what would happen if the Superchain grows 100x.”

“It’s a step in the right direction,” a spokesperson for PGov, an Optimism DAO delegate, told DL News. “The specifics still need to be discussed and [we] would like to have more dialogue between the community and core teams foundation that propose it.”

The buyback vote will run for six days and ends on January 28.

So far, delegates have cast more than 3.8 million votes in favour of the proposal, with just over 19,000 votes against it.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.