Fully Aligned: The First 100% Buyback-and-Burn LST

Magma has been aligning ourselves directly with our community on Monad since day one. We’ve also been focused on innovation, not afraid to push the frontier on what’s been done before in the LST space. Magma is a project full of firsts - the first high-throughput DV, novel approaches to MEV, our Proof of Community among many other innovations. Today we are excited to unveil a protocol feature that is both radical and fully aligned with our community. Magma is the first LST in crypto to offer a 100% buyback-and-burn from all staking fees.

The Success of Buybacks

Buybacks have been successfully employed by a number of leading protocols, including Binance, MakerDAO, Aave, Ether.fi, and OKX among many others. Buybacks reduce circulating supply, leading to more sustainable economics. For instance, in early March 2025, the lending platform Aave (AAVE) introduced an updated version of its Aavenomics. The new model involves repurchasing tokens to decrease supply while transitioning from staking rewards to a more sustainable liquidity approach. As part of this shift, Aave committed to weekly token buybacks totaling $1 million over a six-month period, financed through protocol-generated fees. If fully executed, the plan could amount to $100 million in buybacks—approximately 3% of AAVE's circulating supply.

Another project that has utilized buybacks extensively is Hyperliquid. Hyperliquid became a community favorite in part due to their buyback and burn program, which earned them the trust of the community. One recent analysis of HYPE’s economic model showed that HYPE currently converts 54% of the platform’s gross profit and 100% of its net profit into buybacks or token burns for HYPE.

Power of the Burn

In the past, some have suggested that projects shouldn’t burn, and rather should use buybacks to “build”. Today this position is barely tenable. Forcing stakeholders to trust centralized teams to make correct decisions with large stockpiles of funds creates misaligned incentives. Historically, crypto protocols that have accumulated large treasuries have often struggled to deploy those funds in ways that demonstrably advance long-term protocol development. Empirical observations suggest that such treasuries frequently lead to inefficiencies, organizational bloat, or speculative financial strategies rather than focused investment in core infrastructure or user growth. There are plenty of case studies to support this conclusion such as EOS and Tezos, both of which accumulated large treasuries under control of a centralized team whose interests and actions did not align with the community.

For projects with real decentralized governance, there is limited practical ability to direct these revenue stockpiles back towards uses that will actually create long term sustainable value add for the protocol. Governance funding has been systemically inefficient, as we have seen with DAOs such as Aragon, Optimism and Arbitrum that had well publicized problems effectively deploying capital towards useful development.

We believe that buybacks alone are not enough. Burning introduces a certainty in the process otherwise lacking. If a protocol gathers a large stockpile of buybacks, but does not burn, it creates new questions and uncertainties about what will happen with those buybacks. We’ve seen governance expenditures throughout crypto fail to deliver lasting value for protocols. Community members should be skeptical, after all, one of the favorite motto’s in crypto is “don’t trust, verify”.

Trend Towards Sound Economics in DeFi

The new meta in crypto is sound economics. We’ve seen from protocols like Katana designed completely around this. At the core of sound economics is ensuring that all stakeholders in a team are balanced and aligned. This takes shape in many ways, from offering retail participants equal opportunities as offered to insiders, to designing a protocol with a sustainable business model, and finally to designing an economic policy such as buyback-and-burn that can create a sustainable flywheel for growth.

Too many projects today have a principal-agent problem between their own team and communities. Too many projects choose predatory token economics or TGE launch strategies such as low-float-high-FDV. Too many projects become bloated and inefficient, and fail to support their community members and earliest supporters. At Magma we are committed to stand firmly in the camp of sound economics.

Protocol Fees

Magma is committed to a 100% buyback-and-burn of all net staking fees generated. When users stake with Magma, there is no fee charged on their principal MON deposits. Magma takes a standard fee on fees accrued from staking rewards, part of which is split with validators and the rest retained by the protocol (the remainder of the split being the net total staking fees).

Community Alignment

A 100% buyback and burn program means that Magma is fully aligned with the community in a way that no other staking project has been before. When teams take protocol fees and keep them, without utilizing them to sustain the protocol economics, there is an economic misalignment between stakeholders. We’re choosing a different path: a commitment to align fully with our community, as has been our mission from day one. Following the success of Hyperliquid and the new generation of community-first protocols, we’re excited to take this leap towards sustainability and sound economics.

---

Disclaimer

The information in this blog post is provided strictly for general, educational, and exploratory purposes. It may contain forward-looking statements, projections, or expectations that are inherently subject to change without notice and may differ materially from actual results. Nothing herein should be construed as:

1. Financial, investment, legal, tax, or accounting advice. Always consult a qualified professional before making any decision based on this content.

2. An offer, solicitation, or recommendation to buy, sell, or hold any security, cryptocurrency, or other financial instrument.

3. A guarantee of accuracy, completeness, or timeliness. While we strive to ensure reliability, all information is provided “as-is” and may be updated, revised, or withdrawn at any time.

4. A contractual promise or agreement between the author(s) and the reader. No fiduciary or advisory relationship is created through your access to or use of this material.

5. Assurance of future performance. Past performance or historical trends are not indicative of future outcomes.

By reading this post, you acknowledge and agree that you bear full responsibility for your own research and decisions, and you release the author(s) and publisher from any and all liability arising from the use of or reliance on this information. Digital Assets may carry risks including, but not limited to: smart contract vulnerabilities, protocol changes, slashing penalties, price volatility, market liquidity constraints, and potential loss of principal. Participation in staking, governance activities, or the use of liquid staking derivatives involves financial risk and may not be suitable for all participants. Furthermore, the regulatory status of digital assets remains uncertain or evolving in many jurisdictions. It is the responsibility of each user to ensure compliance with all applicable laws and regulations in their country of residence or operation. This information is provided “as is” without warranties of any kind. Magma Staking disclaims all liability for any direct, indirect, or consequential loss arising from the use of or reliance on this content.