Proposal to Align the OP Token with Superchain Success

[system]

Proposal to Align OP Token with Superchain Success

This proposal was updated on 1/15/26 to reflect community feedback to split the original proposal into two separate proposals.

Executive Summary

• This proposal would implement a buyback program to align the OP token to the Superchain’s success. This proposal would authorize a 12 month program, dedicating 50% of incoming Superchain revenue to buying back OP, beginning in February. This includes the revenue contribution of OP Chains within the Superchain such as Base, Uniswap, and World.

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Motivation

Today, the Optimism Foundation is excited to introduce a proposal to align the OP token with the Superchain’s success. Optimism earns revenue from the Superchain, a network of L2 chains built on the OP Stack that includes Base, Unichain, Ink, World Chain, Soneium, OP Mainnet, and more. These chains all contribute a portion of their sequencer revenue back to Optimism. In the past twelve months, Optimism has collected 5,868 ETH in revenue, 100% of which has been dedicated to a treasury overseen by Optimism governance. As the Superchain expands, so does this treasury.

This proposal introduces a buyback mechanism using 50% of Superchain revenue to buy the OP token. We believe 50% is the right starting point to strike a balance that aligns the OP token with Superchain success while reserving flexibility for alternate uses of ETH.

With this buyback mechanism, OP transitions from a pure governance token to a token that is tightly aligned with the growth of the Superchain. While OP will still retain important governance rights, now Superchain activity will drive buybacks of the OP token. Every transaction across every OP Chain expands the base from which buybacks operate. The more blockspace consumed across the Superchain, the more structural demand flows into OP.

Buyback Specifications

If approved, the Foundation will partner with an OTC provider to execute monthly conversions of ETH to OP. We will initiate this program with an OTC provider due to liquidity requirements that are not currently met by DEX or CEX platforms.

• You can view sequencer revenue by month here to verify proper conversion.

• The conversion of ETH to OP with the OTC provider will occur within a predetermined window each month, without regard to conversion price.

• If any of the following occur, conversion for that month will be paused and rolled over to the next month: (1) the Collective does not generate at least $200,000 equivalent in revenue in a month; (2) the OTC provider cannot or will not execute the conversion under the maximum allowable fee spread, which will be determined in advance between Foundation and the OTC provider; or (3) the conversion cannot occur within the predetermined window for any reason.

• The Foundation will publish an execution dashboard to track execution data (fills, pacing, pricing, balances).

Initial operations of the buyback mechanism will be executed by the Foundation, subject to predetermined parameters to eliminate any discretion. Over time, this mechanism can move more onchain so that execution takes place without the Foundation. To start, Protocol Upgrade 18 will ensure that all sequencer revenue from other OP Chains is collected onchain.

The purchased OP will be held in the Collective treasury, along with the remaining sequencer ETH.

• In the future, repurchased tokens may be directed to a burn mechanism, deployed to fund ecosystem expansion, or distributed to tokenholders who participate in securing the network as interop and sequencer customizations come online throughout 2026.

• Governance will still retain oversight over important capital allocation parameters, ensuring the Foundation remains accountable to stakeholders and allowing the Superchain to remain credibly neutral. See more here.

The Foundation will begin this process in February using 50% of January’s revenue. This program will continue for the following 11 months and will be re-evaluated at the conclusion of this initial 12 month program.

Impact summary

• Buybacks: Based on last year’s Superchain revenue, a comparable allocation would have resulted in approximately 2.7k ETH used for buybacks, or roughly $8M in OP at prevailing prices.

Governance Process

• This proposal will go to vote in Special Voting Cycle #47 and will be subject to Joint House approval at a 60% approval threshold. During Season 9, the Foundation will update the Operating Manual with additional proposal types to support Capital Allocation 2.0.

Action Plan

If this proposal is approved:

• The Foundation will promptly enter into an agreement with an OTC provider to execute the conversion of January sequencer revenue and begin publicly confirming monthly execution.

Any important updates or substantial deviations in execution will be noted by the Foundation as a comment on this post.

[Gonna.eth]

I strongly suggest splitting this into two separate proposals:

1. OP buyback mechanism
2. Foundation discretionary management of the ETH treasury

These are fundamentally different policy decisions and deserve independent discussion, signaling, and voting.

The buyback proposal materially changes OP’s economic narrative and will naturally bias delegate sentiment. The treasury management proposal, on the other hand, is about governance structure, delegation of authority, and accountability over ETH that, frankly, has been poorly utilized since inception.

Bundling them together creates a risk where:

Delegates support the proposal primarily due to expected OP price appreciation from buybacks.

As a consequence, the Foundation is granted significantly expanded discretionary power without that authority being evaluated on its own merits.

Even if one agrees with improving treasury management, that conversation should happen without the emotional or speculative pressure of a buyback narrative attached.

Please separate these proposals so the Collective can:

1. Debate buybacks on their own economic and philosophical merits.
2. Independently evaluate whether, how, and under what constraints discretionary ETH management should be expanded.

This would lead to a clearer mandate, better governance hygiene, and more credible outcomes for both decisions.

[wildmolasses]

I’m excited by this proposal. I’d like to engage with the buyback part of this proposal:

@system

If approved, the Foundation will partner with an OTC provider to execute monthly conversions of ETH to OP. We will initiate this program with an OTC provider due to liquidity requirements that are not currently met by DEX or CEX platforms.

If liquidity requirements weren’t an issue, could this proposal pursue an open, onchain, and possibly more efficient solution instead? There’s a good bit of prior art here, and while the world may not be ready for TWAMMs, a dutch auction if done right could efficiently and fairly arrive at an optimal price for the Collective’s ETH. So why not a dutch auction smart contract that receives the monthly tranche of ETH and allows bidders to buy as much of it as they’d like w/ their OP?

How would this work and can I see a smart contract PoC?

To illustrate the idea using the dashboard for December data: we’d send 82.95 of the 165.9 ETH in revenue to December’s auction contract. Auction begins at some high OP/ETH exchange rate. As time passes, the exchange rate goes lower and lower until some bidder is incentivized to buy. She can purchase up to 82.95 ETH with her OP, but could purchase 1 ETH, or .1 ETH, etc, leaving the rest for other bidders. The auction continues, and the exchange rate slowly decreases, until all ETH has been purchased with OP! I wrote a quick PoC here, and would be happy to expand/secure it (factory pattern? algorithmic or oracle-based determination of start price? that’s my bag baby…)

A few possible benefits to doing this on-chain come to mind: no reliance on centralized OTC providers. No overhead or reliance on Foundation updating spreadsheets, etc. Maybe even creates demand for OP for auction participation? I’m no Mises, but I hope it’s not too late to explore on-chain solutions to convert treasury ETH into OP. I expect the DAB would love to help here, and I’d personally love to discuss more.

[joanbp]

I agree with @Gonna.eth’s comment.

At the same time, I also have a question to the proposal as it is now:

If approved, the buy-back would be evaluated and re-considered after the initial 12 months.

What would happen to the Foundation’s discretionary management of the ETH treasury at that point? Would that also be up for re-evaluation - ie. would there be a new joint house vote on that as well?

[gunboats]

Yearn already have this in production so it’s simple to do it.

Auctions | Yearn Docs

[GFXlabs]

Thank you to the Foundation for taking the time to address the lack of alignment with OP tokenholders. Recognizing that tokenholders – who finance the ongoing development of Optimism through dilution – need a stronger value proposition is a positive step forward.

That being said, this proposal needs significant work before going to a vote, and we would actively urge voters to oppose it as it is currently written.

First, this is effectively two proposals and need to be split accordingly for discussion and voting: one proposal to initiate a buyback program and one proposal to give Foundation more control over the ETH that is owned by Optimism governance. We trust that these will be voted upon individually once it is time for the proposals to be posted onchain.

Buyback Proposal:
We don’t believe it makes sense to initiate a buyback program while ongoing OP emissions are financing everything from business development to grants. It is financially self cancelling and value destructive.

There is no capital benefit to issuing 100 OP and buying back 10 OP vs reducing issuance to 90 OP. It is financially simpler to reduce supply pressure in other ways, like using sequencer fees to cover 10% of all expenses this year, 20% next year, and so on until the need to emit OP becomes trivial.

Other policies could be considered to lower supply growth as well, but creating a buyback program while relying on emissions for financing will signal to the market that Optimism is financially unsophisticated and is a poor steward of capital.

As written, the buyback proposal’s execution plan is also not well considered.

@system

We will initiate this program with an OTC provider due to liquidity requirements that are not currently met by DEX or CEX platforms.

This signals that Optimism – a chain built on decentralized finance use cases – cannot even trade its own token on its own network. Why even have a chain with a DeFi ecosystem if it can’t support $500k-$1m in OP purchases? Even if OTC can be more efficient – which is not obvious – it is not worth saying Optimism can’t support relatively low levels of economic activity. Why would a project deploy to such a chain?

We must eat our own cooking if we expect anyone else to do so.

A separate concern is that OTC purchases are hard for governance to audit and don’t directly impact quoted prices. It also creates an appearance that the buyback program is designed to benefit specific tokenholders who may want to unload their OP, rather than transparent purchases on the open market. Whether that would be the case is immaterial – it will have the appearance of backdoor funneling project funds to favored parties that has become so typical in crypto. It will break trust to use OTC, and we cannot support it in any execution plan.

To the extent that we could support a buyback proposal, it would need to have a more thoughtful execution plan that is transparent, signals a belief in Optimism as a venue for transactions in OP and other assets, and minimizes corruption risk.

But overall, we would prefer to see more focus on crafting and publishing a business plan to get Optimism to financial sustainability. That’s the real challenge that Optimism Foundation/Labs leadership needs to address, and a buyback does nothing to address this, and may in fact make it worse.

Foundation Discretion Over ETH Treasury:
This moves in the wrong direction. Foundation should instead be turning over the ETH to governance, not seeking more control. The Optimism Foundation has consistently shown itself to be a poor manager of these assets.

ETH sat idle, without any staking or utilization until a Feb 2025 proposal. While the proposal was welcome to finally mobilize governance’s assets, Optimism Foundation appeared completely in the dark about the most basic terms of the first staking agreement – most notably believing yield was ~1.25% higher than it actually was.

Ultimately, approval was given to stake 60% of the L1 ETH with institutional stakers, but that was only fully executed in November 2025, indicating that Foundation moves slowly on execution and does not prioritize ETH utilization.

This historic underperformance, willingness to leave assets idle, and opaque selection process for staking providers makes Foundation an especially poor choice to have discretion over surplus ETH not required for operations.

@system

This reduces undue governance overhead that has historically limited our ability to actively, and effectively, manage the ETH treasury.

Facts and history make it clear that governance is not the obstacle to Foundation taking action. It is typically Optimism Foundation that is the obstacle to governance action.

There is also this RFP for the other 40% of available ETH, which should be announcing allocation recommendations shortly.

We oppose giving Foundation any further discretion over surplus ETH, and would recommend instead that the ETH be fully put under the control of the governance contract.

Our hope is that the Foundation will do the following:

1. Break this into two separate proposals so they are not bundled.
2. Withdraw the buyback plan.
3. If dead-set on initiating a buyback plan, revise the mechanisms to both utilize Optimism’s own financial infrastructure and lower the risk of unreported self-dealing or corruption.
4. Withdraw the plan for Foundation to have discretion over the ETH treasury, and instead put it under the control of the governance contract.

[Michael]

In general I am thrilled by the proposal and I think it’s an important milestone in aligning incentives congrats to everyone on arriving at this point!

To me, the weakest part of the proposal is using an OTC provider to do the buybacks.

An OTC buyback strategy lacks the transparency necessary for incentives to be aligned.

A concerning scenario would be that employees or investors are using the OTC buybacks to offload their tokens as they unlock. This would be concerning because it defeats the purpose of aligning incentives, with unlocks currently happening at a rate much higher than the planned buybacks.

Without the transparency of onchain buybacks, it would be difficult to disprove that this is happening.

I think I speak for a lot of token holders when I say that the transparency gained from hosting the buyback mechanism onchain is worth losing value in regards to execution price.

In addition, an onchain mechanism for buybacks would actually create incentives for more liquidity to exist onchain and may actually be a solution to the perceived problem.

I do think that @wildmolasses has some great ideas on how this could be executed in practice.

[Myles]

Counter Proposal: Increasing OP Capital Efficiency—Subsidized Lending Pools vs. Passive Buybacks

Executive Summary: The current Foundation proposal to allocate 50% of Superchain revenue toward buybacks is a positive step toward value accrual. However, passive buybacks often act as exit liquidity for short-term sellers. I propose a more capital-efficient alternative (or parallel pilot): using a portion of those funds to subsidize a dedicated OP lending pool (via Aave or Fluid). This creates a structural lock-up of tokens, lowers the cost of capital for builders, and prevents “grant dumping” by allowing developers to borrow stables against their OP holdings rather than selling them.

Motivation: While buybacks signal “value,” they don’t necessarily build “utility.” If the market knows a buyback is coming, sellers often front-run the liquidity, neutralizing the price impact. By pivoting toward a Lending Liquidity Model, we transition OP from a “governance-only” asset to a “productive-collateral” asset.

The Proposal: The “Developer Liquidity Engine” Instead of just buying tokens to sit in a treasury, the Collective should:

1. Partner with a Liquidity Protocol: Establish a “Superchain-Native” lending market on Aave or Fluid.

2. Interest Rate Subsidies: Use a portion of the 50% revenue to provide “Liquidity Mining” rewards for lenders of Stablecoins (USDC/USDT) only when the collateral used is the OP token.

3. The Goal: Create a market where the borrowing rate for builders is artificially low (e.g., 1–2%).

Key Benefits:

• Structural Supply Reduction: When a developer borrows against OP, those tokens are locked in a smart contract. This reduces “circulating supply” more effectively than a buyback because the tokens remain productive but off-market.

• Preventing “Grant Dumping”: Currently, many projects receive OP grants and immediately sell them to cover operational costs (USDC). In this model, they can keep their OP, deposit it, and borrow the USDC they need at a negligible cost.

• Venture Upside: Every dollar spent subsidizing a developer loan has a “multiplier effect.” It keeps a builder in the ecosystem who might create the next “killer app” for the Superchain. A buyback has a multiplier of zero.

Execution Strategy:

• Pilot Phase: Divert 10% of the proposed buyback funds to a 3-month trial of this subsidized pool.

• Success Metric: Measure the amount of OP “locked” as collateral versus the volume of OP purchased via buybacks.

[Myles]

I guess i would also like to mention that this can just be considered a v1 draft, there are other mechanisms we can use, maybe we can have the buybacks go into this lending pool which makes this more of a middle ground proposal

[gunboats]

As a reminder, Yearn already run dutch auction that they used for their own operation with a frontend here https://auctionscan.info/ And it can be setup to swap ETH to OP right now.

[gunboats]

According to Tokenomist, we will be getting 30% diluted from token unlocks. Take it as what you will.

[Luckyhooman.eth]

Thanks to all who spent time putting this proposal together.
firstly id like to address the bundling of these two very different proposals. this is a common tactic in DAOs but its unethical, the buy back proposal is something everyone is likely to vote FOR but pairing it up with a proposal that gives full discretion of our ETH treasury to the foundation is absurd and which i am sure most delegates would be against.

I am in alignment with all @GFXlabs comments/opinions on this proposal and I would like to reiterate GFXlabs points on what I too hope changes in this proposal before this proceeds to vote

@GFXlabs

Our hope is that the Foundation will do the following:

1. Break this into two separate proposals so they are not bundled.
2. Withdraw the buyback plan.
3. If dead-set on initiating a buyback plan, revise the mechanisms to both utilize Optimism’s own financial infrastructure and lower the risk of unreported self-dealing or corruption.
4. Withdraw the plan for Foundation to have discretion over the ETH treasury, and instead put it under the control of the governance contract.

[mud2monarch]

I support this proposal! Thanks for making it, I know from personal experience how much planning, diligence, and thought goes into something like this. Given the long arc of the Optimism ecosystem and the goals of OP Governance + how to use the OP token as a coordination mechanism, I imagine this has been a goal from the very start. Congratulations and best wishes.

Disclaimer: these are my personal views only.

If the Superchain can’t support onchain buys, that may indicate a product improvement opportunity

I’d encourage the Foundation to move to an onchain strategy quickly, if only because this seems to be a solvable product deficiency in the Superchain. I imagine OTC is also expensive relative to pure onchain execution, antic. slippage excluded.

I can imagine there are some very specific requirements for legal and other reasons; however, it does seem possible to execute onchain via TWAP. Other have suggested ideas. In addition, perhaps you could write an onchain router for execution and ask one of the Superchain’s sequencers to post cron-like triggers as part of block data. Or, you could drip ETH out of a smart contract, claimable by searchers upon sending XX OP to a specified address, akin to the Uniswap Firepit. Something along that general surface seems like it would still be automated/smart contract/non-custodial, and there’s a big community that I’m sure would be happy to help. To the extent that there is not currently sufficient AMM liquidity on OP Mainnet or another Superchain chain, even on a very granular TWAP, the announcement of intent to buy will incentivize new LPs to enter the market.. likely the very firms who are trying to sell you OTC services!

An updated vision for Superchain rev/exp would guide the community away from inaccurate or outdated thinking

After discussing with my good friend Paper Imperium of GoFiXourself Labs, I do agree that it would be helpful for OP Labs/OP Foundation to provide an updated target for the revenue and expenses of the Collective. I read Jing’s reflection/vision from last year, but it’d be good to supplement such a post with a simple calculator that shows how much net OP supply (i.e., Collective income statement) a bear/base/bull case of execution could drive.

Lastly, I think it’d be appropriate to reevaluate spending on outdated programs while the OP Collective transitions, as Ryan suggested. I look forward to the update mentioned in replies! I would support locking much, much more than burning.

Feeling Optimistic!

Disclaimer: these are my personal views only.

[system]

Splitting the proposals is something we previously considered and were hoping to receive community feedback on, so thank you for the comments, @Gonna.eth. We initially combined the proposals to reduce governance overhead, and since allocating 50% of revenue naturally raises the question of what is done with the remaining 50%, we thought it reasonable to combine. However, we understand the perspective in the feedback provided and will split this proposals into two, so each portion can be voted on individually.

cc @joanbp who expressed similar feedback

[system]

Hi @wildmolasses, glad to see your feedback here! The ultimate goal is absolutely for this mechanism to be execute entirely onchain. In fact, upcoming Protocol Upgrade 18 includes improvements that automate large portions of the Superchain’s revenue collection logic, which is the first step in this process.

Consistent with our experimental approach, we’re initially proposing OTC execution as the simplest path to shipping the buyback and evaluating impact before solidifying the program onchain. The Foundation is actively drafting a proposal to establish a legal structure (possibly a DUNA), in part to transfer specific assets and governance powers to this structure onchain, as mentioned in the Season 9 blog post. This legal structure may enable meaningful changes to token flows, treasury control, and governance of capital allocation. Waiting to implement onchain execution until such a structure exists, will allow execution to be designed in a way that addresses relevant legal and and tax questions while transferring more ownership over onchain infrastructure to governance.

We considered several of the alternatives mentioned in this thread (DEX execution, dutch auction, and tip jar claims), which I’ll let @ryan weigh in on in detail shortly. If the community feels strongly that OTC is not a sufficient starting point, we may consider alternatives, but those are likely to come with higher execution costs, more complexity in implementing a legal structure, and / or delays.

[system]

Hi @Michael, thanks for your feedback. We addressed the reasoning for starting with OTC execution in above responses but wanted to specifically address the concerns you raise about transparency, as we agree this is important.

All OTC trades would be reported publicly, either via stats.optimism.io or via the governance forum. The program is not designed to have any interaction whatsoever with existing private or employed OP holders: providers are being selected based on who can fill the Foundation’s operational, financial, and legal requirements.

As mentioned above, we’ll have @ryan weigh in on the tradeoffs that come with various alternatives shortly, so those may be weighed against the considerations relevant to OTC execution.

[system]

We understand your feedback about the buyback program in the context of the overall emissions schedule. The main point of the buyback program is to link the OP token to the growth of the Superchain and demonstrate a meaningful shift in the role of the token. We still have a large OP and ETH treasury to use to incentivize growth for many years to come; this buyback does not come at the expense of ecosystem growth, but instead links demand for blockspace to the OP token. This is an important part of the OP token narrative and something prominent tokenholders have expressed is important to them. We are also taking additional steps to slow the rate of emissions, for example, by pausing the Retro Funding program (~775M OP allocated; more here.)

We agree that building a sustainable business is the most important thing for Optimism to focus on right now. You can expect comms on 2026 goals and objectives in the next few weeks. This proposal is a small part of a bigger plan for the coming year, and the focus continues to be on building the best platform for enterprises to come onchain.

OTC vs. onchain execution won’t be repeated here as it’s covered in above responses.

[system]

On OTC execution: We appreciate the community’s feedback and the thoughtful alternatives suggested. For the first iteration of buybacks, we recommend starting with OTC execution primarily for operational simplicity and reliability, allowing us to execute swaps cleanly without introducing additional smart contract risk or other complex dynamics during early rollout. OTC also enables better price discovery by accessing deeper liquidity than currently exists on OP Mainnet, while improving Optimism Mainnet liquidity is a core long-term goal. This helps reduce the impact of slippage that would ultimately reduce value to the ecosystem. We agree that onchain mechanisms such as DEX execution, Dutch auctions and Tip Jar claims offer strong transparency guarantees. In the meantime, all OTC trades will be reported publicly, either via stats.optimism.io or via the governance forum. The program is not designed to have any interaction whatsoever with existing private or employed OP holders: providers are being selected based on who can fill the Foundation’s operational, financial, and legal requirements. In short, starting with OTC gives us a pragmatic baseline while we work toward onchain execution and exploring the alternatives mentioned is very much part of that path. We’re happy to discuss any of the above in more detail on the upcoming community call on January 20nd.