How Do Protocol Treasuries Actually Create Value for Token Holders?

[nihalsari]

Most crypto protocols today hold massive treasuries — often in the billions — but not all of them benefit token holders directly. Here’s how the advanced mechanics work:

Real Yield vs. Inflated Yield

Protocols that simply hand out tokens (liquidity mining, farming) dilute value.

“Real yield” = profits in ETH, USDC, or stables flowing to the treasury and distributed to stakers.

Example: GMX distributes fees from perp trades in ETH/AVAX. That’s sustainable value, not dilution.

Treasury Management as a Growth Engine

Diversification: swapping governance tokens for stables or ETH secures runway.

Partnerships: protocols often do treasury swaps with others (e.g., Curve <> Frax) to bootstrap ecosystems.

Buybacks: revenue can fund token buybacks, directly rewarding holders.

️ Governance Power & Influence

Treasuries act as vote weight in ecosystems like Curve Wars or governance meta-games.

Controlling liquidity via ve-tokens or gauges translates into long-term moat for protocols.

Case Studies

MakerDAO: turned its treasury into an RWA (real-world asset) giant with billions in T-Bills. Dai is now partially backed by U.S. Treasuries.

Uniswap: sits on a massive treasury but hasn’t deployed it aggressively — hence ongoing debates about “dead capital.”

Lido: uses treasury to incentivize stETH liquidity, strengthening peg and adoption.

Bottom line: Treasuries create value when they generate sustainable yield, support ecosystems, and reduce dilution — not when they just sit idle or endlessly subsidize farming.

[Nahid10]

Great breakdown! The point about “real yield” vs. inflated yield hits hard. Protocols like GMX prove that distributing ETH/AVAX fees is far more sustainable than endless token emissions. If more treasuries focused on real yield + strategic swaps, token holders would finally see consistent value instead of dilution.

[jacson4]

Solid analysis. I’d add that governance is where many protocols underestimate their treasury’s power. Maker’s RWA pivot shows how treasuries can redefine stability and adoption, while Uniswap’s “dead capital” issue highlights the cost of inaction. The real winners will be those who treat their treasury like a growth engine, not a piggy bank.