DeFi project CoW DAO’s core contributors have outlined a new framework for distributing value to COW token holders, centered on treasury token burns and a more flexible buyback strategy.
In a governance post published Friday, the team said the DAO is exploring mechanisms that could permanently remove between 60 million and 85 million COW from future supply while adjusting repurchases based on token price, ETH market conditions, and protocol profitability.
The proposals are intended to improve the token’s supply-demand dynamics without reducing the DAO’s ability to fund operations and growth.
Treasury burns could offset future emissions
The most significant proposal would require the DAO to burn one treasury-held COW token for every token distributed through solver rewards, grants, or team compensation.
The trial program would run through December 2026 and would draw tokens from the DAO Safe, which currently holds roughly 357 million COW. Of that amount, about 47 million tokens are already committed to vesting under CIP-83, leaving approximately 310 million unallocated.
Because these treasury holdings are excluded from circulating supply, burning them would not immediately reduce the number of tradable tokens. Instead, it would reduce the amount of COW available for future issuance, shrinking the token overhang that investors often monitor.
Flexible buybacks linked to revenue and market Conditions
CoW DAO also wants to move away from a fixed buyback model. Since April 2024, the protocol has repurchased 78.6 million COW, equivalent to 120% of solver emissions over the same period. Solver rewards totaled 66.6 million COW, resulting in net negative emissions of around 12 million tokens.
Under the proposed model, the core team would be authorized to increase buybacks, up to 100% of weekly protocol revenue, when several conditions are met:
- COW trades below $0.20
- ETH trades above $3,000
- Weekly gross margin exceeds $500,000 for four consecutive weeks
- Protocol fee rates remain above 5 basis points for four consecutive weeks
If at least three of those conditions are not met, buybacks could be reduced to as little as the equivalent of solver reward emissions.
Protocol revenue provides funding base
The recommendations come as CoW Protocol reports continued growth. According to the governance post, the protocol has processed more than $200 billion in trading volume across over 12 million transactions and generated $41.9 million in revenue since fee collection began in 2024.
However, solver incentives and development costs continue to consume much of that revenue, limiting the amount of free cash flow available for large-scale tokenholder distributions.
Tightening the definition of circulating supply
The team is also proposing a revised methodology for calculating circulating supply. Under the new definition, tokens held in treasury wallets, solver bonds, vesting contracts, and staking mechanisms would be excluded from circulation. This would align CoW DAO’s reporting more closely with common industry standards used by analytics platforms such as Token Terminal.
The DAO said a clearer supply definition would help the market better understand how many COW tokens are actually available for trading.
Solver rewards and the “HODL rule”
A third initiative would formalize the protocol’s requirement that solvers retain part of their rewards. Currently, solvers are expected to hold 25% of earned COW, but compliance is voluntary because all rewards are paid directly to their wallets.
The new proposal would lower the requirement to 20% and send those tokens directly to solver bonds, increasing collateral while reducing immediate selling pressure.
Other ideas set aside
The core team said it does not currently support several alternatives, including:
- Raising buybacks to cover all token emissions
- Allowing community members to lend COW to solvers as bond capital
- Paying solver rewards in ETH instead of COW
- Launching a revenue-sharing incentive program for traders
According to the post, these options either added complexity, introduced operational risk, or diverted capital away from growth initiatives.
Governance discussion underway
The core team emphasized that the recommendations are not final proposals. The governance post is intended to gather community feedback before a formal CoW Improvement Proposal is submitted. That future proposal is expected to incorporate further analysis from Aragon, which previously studied potential value distribution mechanisms for the DAO.
If adopted, the measures would represent one of CoW DAO’s most substantial tokenomic changes since the launch of its buyback program in 2024.
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