Let’s talk about one of the most debated topics in the Web3 space: revenue share models versus buy and burn mechanisms. Both have their merits, but after diving into the numbers, the nuances, and the long-term implications, I’m leaning heavily toward buy and burn. Here’s why.

The Problem with Revenue Share Models First, let’s address the elephant in the room: revenue share models. On paper, they sound amazing. You’re sharing the project’s success directly with the community. Holders get a piece of the pie, and everyone’s happy, right? Well, not so fast.

When you actually crunch the numbers, most revenue share models in Web3 are… underwhelming. Like, really underwhelming. Often, the amounts distributed are so small that they end up causing more harm than good. Imagine being a holder, excitedly checking your wallet for your share, only to find a few cents staring back at you. It’s not exactly inspiring confidence. In fact, it can lead to FUD (fear, uncertainty, and doubt) within the community, which is the last thing any project wants.

And then there’s the regulatory side of things. Revenue share models can sometimes blur the lines into security token territory. If your token starts looking like a security, you’re opening yourself up to a whole host of legal and compliance headaches. Not exactly the kind of attention you want.

Why Buy and Burn Makes More Sense Now, let’s talk about buy and burn. At its core, this mechanism involves using a portion of the project’s revenue to buy back tokens from the market and then burning them (sending them to an irretrievable address). This does two key things:

Injects Liquidity into the Market When you buy tokens from the market, you’re adding liquidity. This can help stabilize the price and create a healthier trading environment. A 100 K b u y , f o r e x a m p l e , d o e s n ’ t j u s t a d d 100Kbuy,forexample,doesn’tjustadd100K to the market cap—it can actually shift the market cap more significantly depending on the liquidity of the DEX (decentralized exchange). It’s a multiplier effect that benefits everyone.

Reduces Supply, Creating Deflationary Pressure Burning tokens reduces the overall supply, which can have a deflationary effect on the token’s price. Scarcity drives value, and a decreasing supply can create upward pressure on the price over time. It’s a simple economic principle, but it works.

The Hidden Benefits of Buy and Burn Beyond the obvious liquidity and deflationary benefits, buy and burn has some less-talked-about advantages:

Avoids Regulatory Gray Areas Unlike revenue share models, buy and burn doesn’t directly distribute value to holders. This helps avoid the potential classification of your token as a security, keeping you on the right side of regulators.

Builds Community Confidence When the community sees the project actively buying and burning tokens, it sends a strong signal that the team is committed to the token’s long-term value. It’s a tangible action that speaks louder than promises or roadmaps.

Flexibility in Execution Buy and burn can be tailored to fit the project’s needs. You can adjust the frequency and size of the burns based on revenue, market conditions, or other factors. It’s a dynamic tool that can grow with your project.

The Emotional Side of Buy and Burn Let’s not forget the human element here. Web3 is as much about community as it is about technology. Revenue share models, while well-intentioned, can sometimes feel like a letdown when the numbers don’t add up. Buy and burn, on the other hand, feels like a collective win. It’s not about handing out crumbs; it’s about building something bigger together. When the community sees tokens being burned, it’s a reminder that everyone is in this for the long haul.

Final Thoughts At the end of the day, both revenue share and buy and burn have their place in the Web3 ecosystem. But if I had to choose one, I’d go with buy and burn. It’s cleaner, more impactful, and avoids the pitfalls of revenue share models. Plus, it aligns incentives in a way that benefits the entire community—not just a select few.

So, the next time you’re debating which model to implement in your project, take a step back and think about the long-term implications. Sometimes, less (supply) really is more (value).