Reasons Behind Lido’s Decision to Exit Polygon
The decision to cease operations on the Polygon network follows a vote in November that considered two options: transitioning away from Polygon or reevaluating the economics of the middleware. The key reasons for the wind-down include:
- Resource-Intensive Maintenance: Lido faced challenges in maintaining its services on Polygon, which required significant resources without sufficient rewards.
- DeFi Landscape Shift: The increasing focus on zkEVM (zero-knowledge Ethereum Virtual Machine) solutions has contributed to reduced demand for Polygon’s proof-of-stake (PoS) network and liquid staking solutions.
- Smaller Ecosystem: Alternative liquid staking solutions built within the Polygon ecosystem have failed to gain traction, impacting Lido’s potential as a foundational DeFi component.
Shard Labs, the entity that originally proposed bringing the staking service to Polygon in 2021, has acknowledged that the DeFi migration toward zkEVM has decreased the demand for Polygon’s PoS and liquid staking as essential parts of other protocols.
Key Dates for Polygon Users
As of December 16, 2024, Lido has officially discontinued staking on Polygon. However, users will still be able to withdraw their staked MATIC through the Lido interface on Polygon until June 16, 2025. Below are the key dates for stMATIC holders:
- December 16, 2024: Staking on Lido for Polygon officially discontinued.
- December 16, 2024 – June 16, 2025: Transition period for withdrawals via the Lido on Polygon user interface (UI).
- January 15-22, 2025: Temporary suspension of withdrawals during this period.
By June 16, 2025, Lido’s front-end support for Polygon will end, and users will only be able to process withdrawals via browser tools.
Current State of Lido Finance and Polygon
As of December 16, 2024, Lido Finance holds a total value locked (TVL) of $38 billion, making it the largest liquid staking protocol in DeFi. According to Dune Analytics, Lido has $45 million in staked tokens on Polygon, while the Polygon network’s total TVL stands at over $1.2 billion.
Lido’s Past Exit from Solana and the DeFi Migration Trend
This move by Lido is not the first of its kind. In 2023, Lido discontinued its services on the Solana blockchain following a community vote. The decision was driven by concerns over unsustainable financials and low fees on the network. Lido initially launched on Solana on September 8, 2021, but similar challenges led to the protocol’s exit.
Similar Trends in the DeFi Space: Aave’s Polygon Exit
Lido’s decision to wind down operations on Polygon follows a similar move by Aave, a leading lending protocol on the network. On December 13, 2024, Aave founder Marc Zeller proposed ceasing operations on Polygon due to concerns over a forthcoming review of the risk profile of bridged assets. This proposal was in response to Polygon’s governance request to implement a specific bridging mechanism, which Aave believed posed potential risks to its protocol.
Conclusion: Lido’s Strategic Refocus on Ethereum
Lido Finance’s decision to wind down operations on Polygon represents a strategic shift towards Ethereum, driven by changing market dynamics and the rise of zkEVM solutions. As the DeFi ecosystem continues to evolve, it will be interesting to see how Lido’s refocus on Ethereum impacts its future growth. Users holding staked MATIC should take note of the upcoming withdrawal timelines to ensure they don’t miss important deadlines.
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