Bitwise Chief Investment Officer Matt Hougan believes crypto valuations could at least double as decentralized protocols increasingly connect revenue generation with native-token value. Hougan expects revenue-capture mechanisms, including token buybacks and burns, to spread across decentralized finance applications and layer-1 networks over the next 12 to 24 months. He argues that investors have yet to fully price the shift toward revenue-driven crypto assets, although differences between tokens and traditional equities remain significant because token holders generally lack direct legal claims to protocol cash flows.
Crypto Moves Toward Revenue-Driven Valuations
Crypto assets outside Bitcoin are increasingly developing business models that connect network activity with the value of their native tokens, according to Bitwise CIO Matt Hougan.
In a Wednesday commentary, Hougan said the industry is becoming more revenue-driven as protocols use fees and other sources of income to support token buybacks and burns.
He believes investors have not fully incorporated this change into crypto valuations, potentially leaving some assets undervalued.
“If the market is moving toward a model where protocol revenue directly supports token value, traditional valuation frameworks could become increasingly relevant to crypto,” the thesis suggests.
Hougan expects the trend to accelerate across the industry over the next 12 to 24 months.
Protocol Revenue Creates Token Demand
Several major DeFi protocols already provide examples of mechanisms that connect network activity with token economics.
Hyperliquid, a decentralized exchange, generated more than $800 million in revenue last year and uses approximately 99% of that revenue to buy and burn HYPE tokens.
The protocol reported $169 million in second-quarter revenue, with approximately $141 million directed toward HYPE token buybacks.
The mechanism effectively links trading activity on the network with demand for its native token and reductions in circulating supply.
Uniswap Links Fees to UNI Burns
Uniswap has also moved toward connecting protocol revenue with its token.
Following its “UNIfication” overhaul, the Uniswap community approved the activation of protocol fees to fund UNI burns.
Under the mechanism, collected fees can be claimed by burning UNI, creating a relationship between activity on the decentralized exchange and the token’s supply.
The change represents a broader shift from purely governance-focused tokens toward models in which protocol economics can directly influence token supply.
Aave Expands Its Buyback Strategy
Aave has similarly introduced mechanisms designed to return protocol value to its token ecosystem.
Aave DAO’s buyback program purchased more than 205,000 AAVE during its first 10 months.
Aave founder Stani Kulechov has also said the team was designing an automated, non-discretionary buyback mechanism.
The protocol’s approach seeks to connect revenue generated by Aave and its GHO stablecoin with AAVE token economics.
These mechanisms give token holders a stronger connection to protocol activity, although the structure remains different from conventional equity ownership.
More Protocols Could Follow
Hougan expects the revenue-capture model to spread beyond established DeFi applications.
Layer-1 blockchain networks and other decentralized applications could increasingly adopt token buybacks, burns or similar mechanisms as regulatory conditions become more favorable.
Protocols including Hyperliquid, Uniswap, Aave, Pump.fun and Lighter are among the projects Hougan identified as examples of the emerging trend.
If more networks establish clear connections between revenue and token value, investors could begin evaluating crypto assets using metrics more familiar from traditional financial markets.
That could potentially change how digital assets are valued across the industry.
Regulation Could Accelerate the Shift
Hougan attributed part of the development to a more permissive regulatory environment in the United States.
For years, crypto projects avoided revenue-sharing mechanisms because of concerns that distributing economic value to token holders could create securities-law complications.
A changing regulatory environment could give protocols greater flexibility to develop token economics tied to actual network revenue.
Hougan has previously argued that crypto could continue expanding even without passage of the CLARITY Act if regulatory conditions continue to improve.
Token Valuation Still Carries Risks
Despite the potential for more conventional valuation frameworks, Hougan acknowledged that crypto tokens remain fundamentally different from company shares.
Token holders generally do not have the same legal claims to cash flows that shareholders have.
Protocol governance can also change tokenomics, potentially altering buyback, burn or revenue-sharing mechanisms after investors have already purchased tokens.
These differences mean that stronger connections between revenue and token value do not eliminate the risks associated with crypto assets.
Closing Insights
The growing use of revenue-funded token buybacks and burns could represent an important evolution in crypto market structure. If DeFi applications and layer-1 networks increasingly connect economic activity with native-token value, investors may begin applying more traditional valuation frameworks to digital assets. Bitwise’s Matt Hougan believes that transition could drive significant repricing across the sector, but the absence of shareholder-style legal rights and the ability of communities to change tokenomics remain important distinctions that investors will need to consider.
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