OP token holders approve buyback plan redirecting 50% of Optimism protocol revenue to OTC swaps

Holders of Optimism's native OP tokens voted to approve a proposal that could redirect millions of dollars worth of protocol revenue to token buybacks. The vote, which closed on Wednesday, received about 84% support from about 450 voters, including seven representing chains in Optimism’s Superchain and five apps.

The Optimism Foundation first floated the buyback idea earlier this month, as part of a plan "to align the OP token" with the Superchain, the largest network of Ethereum Layer 2s built using the Optimism tech stack, including major blockchains like Base, OP Mainnet, Unichain, Soneium, Worldchain, and others.

In its proposal, the foundation noted the Superchain generated around 5,868 ETH, worth over $17.5 million at current prices, in revenue last year. The open-market buybacks will begin in February, with the OP entering a “collective treasury” alongside the remaining ETH earned via Optimism’s sequencer. 

OP is down over 8% on the day, amid a wider market pullback, with bitcoin down 2.2% and losing ETH 2.9%, according to The Block’s price page.

With the plan, Optimism will now join the ranks of successful crypto projects like Hyperliquid and Pump that are redeploying a portion of their protocol revenue to bolster their fledgling tokens. It is also the first major Ethereum Layer 2 to experiment with the scheme, with other major L2s like Arbitrum and Polygon so far eschewing direct buybacks. 

“ETH to OP conversion using the month of January’s revenue will be completed between T+25–35 from February 1,” the foundation wrote. “After the first month, execution will happen at the same time each month during the same window. OTC execution is a temporary implementation until we transition execution fully onchain within the next ~6 months.”

OP buyback pushback

While broadly popular, some commentators opposed the plan. Research firm GFXlabs, for instance, argued buybacks would be “financially self-cancelling and value destructive” if enacted alongside OP’s emissions and difficult to audit.

Meanwhile, others proposed more constructive capital plans, like using revenue to fund OP lending pool liquidity. 

“We still have a large OP and ETH treasury to use to incentivize growth for many years to come; this buyback does not come at the expense of ecosystem growth, but instead links demand for blockspace to the OP token,” Optimism’s governance account said in response.

Notably, the proposal also included a provision for Optimism governance to take more control over the protocol’s ETH, which was opposed by some users on different grounds.