The Lido community plans to end its involvement in the Polygon network due to financial struggles and uncertainties, refocusing on Ethereum.
- Lido community proposes to terminate involvement in Polygon due to financial concerns.
- Halt on Solana staking follows a majority vote by Lido’s LDO token holders.
- Financial performance on Polygon deemed lackluster with low revenue and high expenses.
- Rapidly evolving Polygon landscape and competition drive Lido’s decision.
The Lido community has recently put forward a proposal to discontinue its participation in the Polygon network, citing a series of challenges and uncertainties. This decision reflects a growing trend among crypto projects reassessing their positions in the ever-evolving blockchain landscape.
This move comes on the heels of Lido Finance, a decentralized liquid staking leader, announcing the suspension of new staking requests for Solana (SOL) tokens. The decision was made following a significant majority vote by Lido’s LDO token holders, indicating a change in strategy.
Why Lido Aims To Discontinue Its Services On Polygon?
New users will no longer be able to stake SOL on Lido, and by February 2024, the platform’s front end will discontinue the ability to unstake existing tokens.
The Lido community cited concerns about the lackluster financial performance of its presence on Polygon as a primary reason for the decision. Despite a total value locked (TVL) of approximately 151 million MATIC or $86 million, the revenue generated was deemed insufficient.
Calculations revealed that Lido DAO collected only $166,863 in fees annually, overshadowed by the substantial incentives offered to Shard Labs to meet staking market goals. This resulted in an unsatisfactory return on investment, with Lido spending over 2.1 million LDO, equivalent to $3.4 million, over the past year to achieve this meager revenue.
Lido community proposes to terminate its project on Polygon amid financial struggles and other hovering uncertainties on the network. pic.twitter.com/cP8Pvvmg2i
— DG Crypto News (@dgcryptonews) October 19, 2023
Furthermore, a technical upgrade on Lido’s Polygon platform inadvertently introduced a bug that prevented withdrawals for 25 days. While no major issues arose during this period, it raised concerns about the protocol’s reputation, given its management of assets totaling $15 billion.
The rapidly evolving nature of Polygon’s roadmap also contributed to the decision. Polygon’s plans to become a restaking layer and a base layer for new app chains created uncertainty, particularly with the emergence of competitors like Eigenlayer. Additionally, Polygon’s migration to a new token and a multi-year technical architecture overhaul added complexity and potential risks.
In light of these challenges and uncertainties, the proposal to discontinue Lido’s presence on Polygon and refocus as a native Ethereum liquid staking provider has gained momentum. The community aims to mitigate risks and explore more promising avenues for growth in the ever-evolving crypto landscape.
Lido’s decision to exit Polygon reflects the increasingly competitive and dynamic nature of the crypto space. As projects assess their strategies, the need to adapt to changing circumstances becomes paramount. While this move may have caused a decline in Lido DAO’s price, it also signifies the project’s commitment to making informed choices in the best interest of its community and long-term sustainability. It will be interesting to see how Lido’s pivot towards Ethereum liquid staking unfolds and whether it can navigate the challenges and opportunities in this new direction.