Lido Finance’s community members released a proposal on Tuesday (17th) to discuss the closure of Lido’s services on Polygon in order to become a native ETH liquidity staking service provider and avoid the risks associated with a smaller Total Value Locked (TVL).
Community member kentie proposed the closure for the following reasons:
Poor revenue: Currently, Lido’s TVL on Polygon is approximately 151 million MATIC (approximately $76 million at current prices), with Lido DAO earning 314,000 MATIC in fees annually on Polygon. Over the past 12 months, Lido has spent at least 2,138,000 LDO (over $3 million) to achieve this level of income, leading kentie to believe that the return on investment is poor.
Brand risk: Using the recent example of a vulnerability in Lido on Polygon due to a technical upgrade, kentie believes that technical issues on Polygon could pose a reputational risk to Lido.
Expensive compensation structure: The compensation structure proposed by liquidity staking solution provider Shard Labs for Lido on Polygon is considered too expensive and impractical in the current macroeconomic conditions.
Uncertainty in Polygon’s roadmap: With Polygon moving to updated tokens and undergoing a multi-year technical architecture overhaul, there is greater uncertainty on the chain. This would require significant changes and audit costs for Lido on Polygon, potentially leading to brand risk.
Lack of competition: Apart from Stader Labs, there are almost no other liquidity staking providers on Polygon.
Prior to the proposal, the Lido community had recently voted to stop providing services on Solana at the beginning of this month, citing unsustainable financial conditions and lower costs on Solana. Lido has ceased accepting new stakes on Solana as of Monday (16th), with the team stating that stSOL holders can unstake through Solana’s frontend interface by February 4, 2024.