SKY Explodes With $100M Buyback — Is This the DeFi Power Move of 2025?

How Sky Protocol Turned a $370,000 Buyback Into a $100 Million Token Strategy in Just One Year

Sky Protocol has emerged as one of the most closely watched decentralized finance projects of 2025 after dramatically expanding its token buyback program from just $370,000 the previous year to nearly $100 million. The scale of that growth has sparked widespread attention across the DeFi sector, as investors and analysts examine how revenue-backed repurchases are reshaping the token’s economic structure.

According to the protocol’s latest disclosures, Sky Protocol executed approximately $96.8 million worth of SKY token repurchases throughout 2025. Combined with prior buybacks, the total now exceeds $106 million. The program represents a shift toward value-accrual mechanisms that resemble traditional equity buybacks in public markets — but implemented within a blockchain-based governance ecosystem.

The strategy is not only about optics. It reflects a broader effort to strengthen token scarcity, reward long-term holders, and align protocol revenue with ecosystem incentives.

A 261x Expansion in Buybacks

In 2024, Sky Protocol’s token buyback activity totaled roughly $370,000. In 2025, that number surged to nearly $100 million — a more than 260-fold increase year over year.

The dramatic rise signals that Sky Protocol’s underlying revenue engine has strengthened significantly. Rather than relying on inflationary token emissions to incentivize participation, the protocol has redirected a portion of its fee-generated income toward purchasing SKY tokens from the open market.

Source: Official X

This capital allocation approach mirrors corporate share repurchase programs, where profitable companies buy back outstanding shares to reduce supply and enhance shareholder value. In the DeFi context, the model seeks to improve token scarcity while reinforcing confidence among stakers and governance participants.

Industry analysts note that revenue-funded buybacks represent a maturation phase for decentralized finance, moving beyond the high-inflation token distribution cycles that characterized earlier market waves.

How Much SKY Supply Has Been Reduced?

The most immediate impact of the buyback expansion has been a measurable reduction in circulating supply.

Quarterly data released by the ecosystem shows that SKY’s circulating supply declined from approximately 23.41 billion tokens in Q3 2025 to 22.94 billion tokens in Q4 2025. That represents roughly a 2 percent contraction in supply within a single quarter.

In total, around 1.55 billion SKY tokens were repurchased and removed from circulation during the period.

This deflationary shift was further supported by quarterly burns of non-upgraded MKR tokens, linking the new SKY tokenomics framework to the legacy governance structure inherited from MakerDAO’s ecosystem design.

Reducing supply while demand mechanisms remain active can create structural support for token price stability over the long term. While market conditions still influence valuation, scarcity dynamics are often viewed as foundational to sustainable token economies.

Revenue Growth Behind the Strategy

Sky Protocol’s buyback expansion would not be possible without strong revenue generation.

The protocol reportedly generated approximately $338 million in annual revenue during 2025. That income base provided the liquidity required to fund large-scale repurchases without destabilizing treasury reserves.

Forward-looking projections suggest continued expansion:

• 2026 revenue estimate: $611.5 million, representing roughly 81 percent annual growth
• 2026 earnings forecast: $157.8 million, implying nearly 198 percent year-over-year earnings growth

If those projections materialize, Sky Protocol could maintain or even accelerate its buyback pace in 2026. With cumulative repurchases already surpassing $106 million, the deflationary mechanism may remain central to the protocol’s economic strategy.

Unlike many earlier DeFi models that relied on aggressive token emissions to attract liquidity, Sky’s structure ties value creation directly to revenue performance.

Impact on SKY Stakers

Beyond supply reduction, the buyback strategy is closely integrated with staking rewards.

During Q4 2025 alone, stakers reportedly received approximately 324 million SKY tokens. Annualized staking returns averaged around 16.14 percent APY.

This incentive structure positions Sky Protocol among the more yield-generating stablecoin-based DeFi ecosystems, supported by:

• USDS stablecoin supply of approximately $9.2 billion
• Total value locked estimated at $11.9 billion

The combination of buybacks, staking rewards, and expanding stablecoin adoption creates a multi-layered incentive model. Token holders benefit from reduced supply, while active participants earn yield through staking mechanisms.

The approach reflects an attempt to balance short-term liquidity incentives with long-term sustainability.

The Rise of Revenue-Funded Tokenomics

Sky Protocol’s model marks a departure from earlier DeFi cycles characterized by inflation-heavy token distributions.

Instead of prioritizing emissions, the protocol emphasizes:

• Revenue-funded buybacks
• Supply contraction
• Competitive staking rewards
• Stablecoin ecosystem expansion

This framework resembles shareholder-value models in traditional finance, where profitability supports repurchases and dividend-like incentives.

Analysts suggest that such models could influence broader DeFi architecture, particularly as regulators scrutinize inflationary token structures that resemble unregistered securities distributions.

By linking token value to measurable revenue streams, Sky Protocol aims to strengthen credibility and institutional appeal.

Stablecoin Growth as a Core Driver

At the center of Sky Protocol’s ecosystem expansion is USDS, the protocol’s stablecoin.

With a circulating supply of $9.2 billion, USDS serves as both a liquidity anchor and a revenue driver. Stablecoin-based transaction fees and credit products contribute to the protocol’s earnings base.

The protocol is also expanding non-custodial savings products and decentralized credit infrastructure, potentially increasing fee generation in 2026 and beyond.

If USDS adoption continues to rise, the feedback loop between stablecoin growth and buyback funding could reinforce the deflationary model.

However, stablecoin expansion remains subject to regulatory developments and competitive market pressures.

Can the Buyback Program Continue Into 2026?

The sustainability of Sky Protocol’s buyback strategy depends on three core variables:

Revenue Stability
Projected revenue growth must materialize to sustain large-scale repurchases.

Stablecoin Adoption
Continued expansion of USDS is essential for maintaining fee generation.

Broader DeFi Market Conditions
Macroeconomic trends and digital asset sentiment will influence both demand and liquidity dynamics.

With over $106 million already committed to token repurchases and revenue projections pointing upward, the program appears positioned to remain active in 2026. Whether buybacks expand beyond current levels will depend on execution and market conditions.

Final Analysis

Sky Protocol’s transformation from a $370,000 buyback in 2024 to nearly $100 million in 2025 represents one of the most notable tokenomic shifts in decentralized finance this year.

By combining deflationary supply mechanics, strong revenue generation, staking incentives, and stablecoin ecosystem growth, the protocol is attempting to construct a more durable economic foundation.

While risks remain — including regulatory scrutiny, competitive pressures, and broader crypto market volatility — the model reflects a growing maturity within DeFi.

Rather than relying on perpetual emissions, Sky Protocol is testing whether revenue-backed buybacks can deliver long-term sustainability.

If the strategy succeeds, it may serve as a blueprint for other decentralized finance projects seeking to balance user incentives, token scarcity, and institutional credibility.

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Writer @Erlin
Erlin is an experienced crypto writer who loves to explore the intersection of blockchain technology and financial markets. She regularly provides insights into the latest trends and innovations in the digital currency space.
 
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