Lido Finance to Sunset Operations on Polygon: Details
- A proposal has been introduced by a community member to sunset Lido on Polygon.
- The author states that the ROI “is a sheer waste of LDO/stETH incentives.”
- They said that Solana and Polygon TVLs “follow a strikingly similar pattern since Oct 2022.”
- Continuing operations on Polygon exposes the protocol to brand risks as well.
Lido Finance, a leading decentralized finance (DeFi) protocol, has introduced a proposal to sunset operations on Ethereum scaling solution Polygon (MATIC). It is crucial to note that the protocol recently ended operations on the Solana (SOL) blockchain, and according to the author of the post, the return on investment is not as high as expected on Polygon.
As per the proposal, the current TVL of Lido Finance on the Polygon blockchain is around 151,000,000 MATIC ($86M), while the current revenue that the protocol generates from the blockchain each year is around 314,835 MATIC, or roughly $166,863.
The author also noted that over the last 12 months, Lido spent at least 2,138,000 LDO ($3,421,600) to get to a state of making $166,683 a year. The author said, “I am not an active DAO member, but simply a bag holder, and this ROI is a sheer waste of LDO/stETH incentives.”
“Lido DAO has awarded 450,000 LDO tokens in the past 12 months to Shard Labs as compensation for reaching the 3% staking market goal. Another 150,000 LDO tokens will soon be doled out to Shard Labs to meet the 4% staking market goal. The incentives Lido has spent on Polygon for the past year (from Oct 22 to May 23) were 1,538,500 LDO,” reads the proposal.
The author also stated that in the past few months, Lido Finance on Polygon underwent a technical upgrade “that seems to have introduced a bug that stopped withdrawals for 25 days.” The proposal noted that “this seems to pose a reputational risk to a protocol with $15B in assets.”
Additionally, the proposal states that each 1% of staked matic gets to LDO is $41,991 while the one-time compensation that Shard Labs makes is 150K LDO, or $240,000. “This is poor ROI, especially under the current market conditions,” noted the author. The newer compensation structure under different macroeconomic conditions by Shard Labs “now seems expensive and impractical.”
“There is broader uncertainty with Polygon migrating to a newer token and is undertaking a multi-year-long technical architecture overhaul,” the author said while adding:
“Overall, Polygon has struggled to retain DeFi TVL compared to other L2s. Both Solana and Polygon TVLs follow a strikingly similar pattern since Oct 2022.”