The post How a Disciplined Token Burn and Buyback Model Can Underpin Long‑Term Token Value appeared first on Coinpedia Fintech News
1. What is token burn and why it matters
Token burning refers to the deliberate removal of tokens from circulation, typically by sending them to an irretrievable address. In crypto ecosystems, this mechanism is often used to limit supply and introduce deflationary pressure in a verifiable and transparent manner.
One commonly cited case is BNB (Binance Coin), where Binance conducts regular burns tied to revenue generated from trading activity. These events aim to reduce circulating supply over time, aligning the token’s availability with the platform’s usage.
Ethereum, following the EIP‑1559 upgrade, introduced a different model. A portion of each transaction’s base fee is burned automatically on-chain. This embeds deflationary dynamics into the protocol itself, making it directly responsive to network usage, rather than relying on discretionary decisions.
MultiBank Group has structured a similar mechanism into its $MBG Utility Token. At launch, the company committed to burning $440 million worth of $MBG over four years. According to official press releases, this includes approximately 10.5% of the total supply in the first year, with the cumulative amount reaching 25.5% by year four. These burns will be funded from trading fees and revenues generated across MultiBank’s multi-product ecosystem, ie derivatives trading, tokenized real estate, staking, and exchange services.
This structured reduction in supply is designed to reinforce the token’s economic model by linking scarcity to usage growth.
2. What is token buyback and how it supports value
Token buybacks occur when a project repurchases its tokens from the open market, often using revenue reserves or treasury funds. The goal may be to remove excess supply, strengthen market confidence, or support the token’s perceived value. Although less common than burns, buybacks are used in select cases where token governance allows it.
One of the most notable examples is MakerDAO. In July 2023, Maker activated its Smart Burn Engine, an on-chain program that allocates excess DAI reserves toward buying MKR tokens on Uniswap and burning them.
The system initiates when the surplus buffer exceeds a defined threshold, initially around $50 million, and can allocate up to 45% of daily surplus DAI to token purchases.
In the first 24 hours after the program went live, roughly $230,000 of MKR was bought and burned. Analysts estimated a potential monthly impact of around $7 million, or approximately 0.7% of MKR supply, depending on continued revenue flow.
Such buybacks can send a strong signal to the market: that the protocol is not only generating meaningful returns, but is also willing to use those returns to improve tokenholder economics.
3. How this differs from traditional finance mechanisms
In public equity markets, share buybacks are a well-established practice. Companies like Apple and Amazon regularly repurchase their own shares to return capital to shareholders, reduce dilution, or signal internal confidence. To illustrate, in 2024, Amazon acquired $84 million worth of AMD shares as part of a broader capital allocation strategy.
However, traditional financial systems lack a direct equivalent to crypto’s burn mechanics. Shares cannot be destroyed programmatically. Similarly, monetary authorities like central banks can slow money supply through policy tightening, but the process is indirect and subject to external pressures.
Crypto protocols have more flexibility. Burning tokens allows them to alter supply dynamically and transparently. Buybacks, while effective, can raise regulatory flags, especially if a protocol accumulates its own token.
To avoid these issues, many projects, including MultiBank Group’s $MBG Utility Token, embed supply-reduction mechanisms into their tokenomics at launch. This design avoids discretionary actions and supports a more decentralized, rules-based model of value accrual.
4. Economic and psychological impact
A predictable burn-and-buyback model shapes investor behavior and project perception. When a burn mechanism is embedded in protocol logic, it signals that supply management is automated and immune from managerial interference. Investors often see this as a safeguard against manipulation or dilution, lifting their confidence in the token’s long-term integrity.
Furthermore, tying the burn schedule directly to platform usage or fee revenue provides a rational economic link between utility and scarcity. The activity increases with the burn rate, creating natural alignment between adoption and value retention.
The psychological effect is equally important. Burn announcements often serve as public proof that the project is performing and generating real cash flow. In MultiBank’s case, burns will be executed using revenues from regulated financial activity, including derivatives and tokenized assets. This makes each burn reflective of actual market performance.
5. Potential misconceptions and limits
Despite their appeal, burn and buyback strategies have limitations.
A common misunderstanding is that burning tokens automatically increases price. While reducing supply can be supportive, token value is ultimately governed by demand. In bearish conditions or during periods of low usage, burn activity may do little to offset falling prices.
Another concern is overuse. If a project frequently resorts to burning tokens without concurrent ecosystem growth, it may raise doubts about underlying utility. Investors might interpret repeated buybacks or burns as efforts to prop up token value artificially.
Buybacks also carry reputational risk. While automated and funded by revenue in cases like MakerDAO, some observers are liable to view them as attempts at market intervention. That’s why many protocols favor burn-only models, which avoid accumulation of tokens on treasury balance sheets.
Overall, the effectiveness of these tools depends on timing, execution, and context. Without genuine demand, supply contraction alone cannot sustain long-term value.
6. Why MBG Token chose this route
MultiBank Group’s decision to launch a crypto-native token rather than pursuing a traditional IPO reflects its intent to implement on-chain value mechanics from the start. Through its MBG token, the company integrates a long-term supply management strategy that is visible, verifiable, and rules-based.
The $440 million burn program is backed by the Group’s global financial infrastructure. With an annual revenue of $362 million and daily trading volumes exceeding $35 billion, MultiBank is positioned to fund its burn schedule through real economic activity.
Each burn reflects the performance of its broader ecosystem: from trading and staking to tokenized real estate and regulated settlement.
