Lido has officially begun phasing out its staking services on the Polygon Proof-of-Stake (PoS) chain following a community-approved vote in November. The decision marks a major shift for the protocol’s operations, which previously allowed users to earn Polygon’s MATIC tokens in exchange for liquid staking tokens called staking.
According to a blog post from defi, the shutdown began on Monday. Lido informed users that they have until June 16, 2025 to withdraw their funds. The protocol stated that after this deadline, withdrawals will only be available through explorer tools.
Additionally, from January 15 to January 22, 2025, Lido operations on Polygon will be temporarily suspended, meaning users will not be able to withdraw their staked assets during this window.
Lido Community Support and Governance Decision
Lido’s decision to phase out its services on the Polygon PoS network comes after extensive discussions and community votes within the Lido DAO. In a blog post, the Lido Finance team explained that the move was driven by overwhelming support from LDO token holders, with 99% of voters in favor of the proposal.
The vote considered two main proposals: one to discontinue Polygon's staking service and the other to re-evaluate the protocol's middleware economic model.
Sunset has begun at Lido on Polygon. https://t.co/icgidJsbqF
See below for an overview of upcoming timelines and requirements 📆📜
— Lido (@LidoFinance) December 16, 2024
The team said several factors led to Lido’s decision to end its Polygon staking offering. The announcement cited limited user adoption, insufficient rewards, and the resource-intensive nature of maintaining the service as major challenges.
The announcement also highlighted the changing dynamics of the ecosystem, noting that demand for liquid storage solutions on the Polygon PoS network has waned. This decline in demand ultimately impacted Lido’s ability to position itself as a defi building block on the network.
The blog post also pointed to the development of alternative liquid staking solutions within the Polygon ecosystem as a contributing factor in the decision. These alternative solutions, coupled with lower-than-expected growth of the Polygon PoS ecosystem, reduced the viability of the Lido service on-chain.
The development team has acknowledged that Lido’s focus has increasingly shifted towards Ethereum. The DAO recently approved a new initiative to launch a “community staking module” designed to facilitate access to individual staking on Ethereum.
Lido’s departure from Polygon is not the first instance of a protocol retreating from the blockchain. LDO’s DAO agreed to discontinue Solana after the protocol suffered losses of $484,000, significantly outpacing its $220,000 in revenue from Solana.
The decision to exit Solana reflects similar challenges in user adoption and resource allocation, as well as the evolving dynamics in the blockchain and defi space.
Aave, one of Polygon’s largest lending protocols, has also proposed halting operations on the network due to concerns about an upcoming review of the risk profile of pooled assets.
On December 13, Aave’s Mark Zeller submitted the proposal, in response to Polygon’s governance request to use over $1 billion in stablecoin reserves to farm assets on other protocols. The proposal highlighted the unease among defis about the evolution of governance and risk factors within the Polygon ecosystem.
At press time, LDO remains the largest liquidity holding protocol on Ethereum, with nearly $39.7 billion in TVL, according to data from DefiLlama. The protocol continues to dominate Ethereum, outpacing the likes of Ether.fi and Rocketpool.
