On Tuesday (17th), members of the Lido Finance community released a proposal to discuss the closure of Lido’s services on Polygon in order to become the native ETH liquidity staking service provider and avoid the risks associated with a smaller Total Value Locked (TVL).
A community member named kentie proposed the closure for the following reasons:
1. Poor revenue: Currently, Lido’s TVL on Polygon is approximately 151 million MATIC (equivalent to around 76 million USD at the current price), and Lido DAO earns around 314,000 MATIC in fees annually on Polygon. To achieve this level of revenue, Lido has spent at least 2,138,000 LDO (over 3 million USD) in the past 12 months, which kentie considers to be a poor return on investment.
2. Brand risk: Citing the recent vulnerability that occurred during a technical upgrade on Lido on Polygon, kentie believes that technical issues on Polygon could pose reputation risks for Lido.
3. Expensive compensation structure: kentie believes that the compensation structure proposed by Shard Labs, the liquidity staking solution provider for Lido on Polygon, is too expensive and unfeasible given the current macroeconomic conditions.
4. Uncertainty in Polygon’s roadmap: With Polygon migrating to updated tokens and undergoing a multi-year technological architecture revamp, the chain carries broader uncertainties. This would require significant changes and audit costs for Lido on Polygon, potentially leading to brand risks.
5. Lack of competition: Apart from Stader Labs, there are hardly any other liquidity staking providers on Polygon.
Prior to the release of this proposal, the Lido community recently voted in favor of ceasing services on Solana at the beginning of this month. The main reasons for this decision were unsustainable financial conditions and lower costs incurred on Solana. Lido has already stopped accepting new staking on Solana as of Monday (16th), and the team has stated that stSOL holders can withdraw their deposits through Solana’s frontend page until February 4, 2024.
