Solana founder Toly reflects on buybacks: Staking is the right approach to build long-term capital

Solana founder Toly recently shared in-depth thoughts on token economics on the X platform. He believes that, compared to direct token buybacks, building a long-term capital structure through staking mechanisms is a more reasonable approach. This view not only reflects lessons from traditional finance but also offers new ideas for token economic design across the entire crypto industry.

How Staking Mechanisms Reshape Capital Structure

Toly’s core logic

Toly’s argument is based on a simple but profound observation: capital accumulation itself is very difficult. Traditional finance typically takes more than 10 years to achieve real capital accumulation. Based on this, he proposes a solution for the crypto industry—the staking mechanism.

His specific approach is as follows:

• Protocols deposit profits into future protocol assets that can be claimed by tokens
• Allow users to lock and stake for one year to earn token rewards
• Participants willing to hold long-term will be diluted by those unwilling to hold long-term
• As the protocol’s balance sheet continues to expand, those who choose long-term staking will gain a larger share of actual rights

The brilliance of this design lies in the fact that it is not merely wealth redistribution but rather a mechanism to incentivize long-term participants and penalize short-term arbitrageurs.

Staking vs Buyback: The fundamental difference between the two approaches

Toly also provided an answer to how to prevent hedge-style short-selling arbitrage: the rights themselves are linked to the protocol’s future profits, which grow with future earnings. This means that staking rewards do not come from token price speculation but from the actual value generated by the protocol.

Practical progress in the Solana ecosystem

Why is this viewpoint being raised now?

Interestingly, the timing of Toly’s proposal is very critical. According to the latest data:

• SOL spot ETF continues to see inflows, with a net inflow of $2.3 million on January 1, and a total net inflow of $765 million
• On-chain developers on Solana maintain over 80% annual growth
• Western Union plans to launch a stablecoin on Solana in the first half of 2026, potentially attracting billions of dollars in new capital
• On January 2, the Solana ETF saw a single-day net inflow of 30,799 SOL (about $3.97 million)

These data points indicate that Solana is transitioning from a speculative phase to one of real application and capital accumulation. Against this backdrop, Toly’s discussion of staking mechanisms is no longer just theoretical but provides practical guidance for the ecosystem’s long-term development.

Insights for Token Economics

Toly’s viewpoint essentially addresses a key question: in the crypto industry, what kind of mechanism design can make participants more focused on the protocol’s long-term value rather than short-term price fluctuations?

His answer is: enable long-term participants to gain greater actual rights through mechanisms. This aligns with the logic in traditional finance where shareholders earn long-term returns through dividends and capital appreciation, but in crypto, it is achieved through more flexible methods like staking.

Summary

Toly’s perspective touches on the core issues of crypto token economics. Compared to short-term price-boosting methods like buybacks, staking mechanisms incentivize long-term participation, accumulate protocol assets, and expand the balance sheet, thereby constructing a long-term capital structure closer to traditional finance.

This not only reflects Solana’s thinking on how to become a more mature infrastructure but also provides a new reference framework for the entire industry. Especially as the Solana ecosystem is rapidly expanding and real applications are emerging continuously, this long-term token design approach may become an important criterion for distinguishing high-quality protocols.