December 17, 202417:00 GMT+3
Lido, one of the largest liquid staking protocols, has announced that it will discontinue staking services on the Polygon Network.
The decision, revealed in a recent blog post, comes after extensive community discussions and a governance vote by Lido DAO token holders (LDOUSD).
Ledo justifies Polygon's suspension
According to the blog, the shutdown will begin in the coming months. It marks the end of Lido’s efforts to establish itself as a primary liquid staking solution on the Polygon proof-of-stake (PoS) network.
“Due to the end of development and technical support for Ledo on Polygon, as of December 16, 2024, the staking function is no longer available. Please unstake your funds via the UI before June 16, 2025,” Ledo said.
Lido launched on Polygon in 2021 with high expectations following a proposal from Shard Labs. However, the protocol failed to achieve its goals, eventually leading to the decision to shut down its operations on Polygon.
The blog cites challenges such as limited user adoption, insufficient staking rewards, and intensive resource maintenance. According to Lido, the changing dynamics of the DeFi ecosystem contributed to this outcome.
One of the main challenges was the emergence of zkEVM-based solutions, which shifted DeFi activity away from Polygon PoS. This led to a decline in demand for liquid storage solutions on the network, undermining Lido’s position as a core building block of DeFi on Polygon.
Additionally, alternative liquid storage services like EigenLayer have emerged in a smaller-than-expected ecosystem. This has increased competition, further limiting Lido’s impact.
Lido DAO governance decisions also played a major role. Recent initiatives, such as GOOSE and reGOOSE, have prioritized a strategic focus on Ethereum. This has led to a re-evaluation of Lido’s presence on other networks, including Polygon.
“While initial expectations were high, Lido on Polygon has faced significant challenges. Combined with evolving DeFi trends and the DAO’s strategic focus, this has prompted a comprehensive re-evaluation of the protocol,” the blog post noted.
However, the decision to discontinue Lido on Polygon reflects the DAO’s strategic alignment with its core focus. This includes Ethereum-based staking solutions, where Lido continues to dominate while remaining among the top DeFi protocols.
Accordingly, the move highlights the challenges protocols face in expanding beyond their core network amidst the shifting alliances in DeFi. Lido’s decision also reflects the challenges in maintaining multi-chain support.
For Polygon, the shutdown points to a potential gap in its staking ecosystem as it adjusts to the increased focus on zkEVM solutions. While other liquid staking solutions remain active on the network, Lido’s departure raises questions about the long-term growth and competitiveness of Polygon’s DeFi space.
Specifically, Polygon’s adoption of liquid staking has not met expectations, prompting Lido to prioritize its resources elsewhere. This is despite Polygon’s status as a prominent solution for layer 2 scaling.
At the same time, the deprecation brings significant changes for users holding stMATIC, the liquid staking token for Lido on Polygon. The protocol deprecation will occur in stages, with key dates and actions set for users to withdraw their staked MATIC. Important details and dates for stMATIC holders include:
Rewards Stop: stMATIC holders will not earn staking rewards during the transition.
Pause before shutdown: The protocol will pause operations between January 15 and 22, 2025. During this time, withdrawals cannot be processed.
Withdrawal Process: Users will be able to staking their MATIC tokens via the Lido frontend on Polygon until June 16, 2025.
Access after the shutdown: After June 16, withdrawals will only be possible via blockchain explorers, as front-end support will end.
December 16, 2024: Polygon Lido staking services will officially stop. No new bets will be accepted via the UI.
January 15-22, 2025: Operations will be paused for protocol maintenance. Withdrawals will not be available during this period.
June 16, 2025: Final date for withdrawals via the Lido interface. After that, users will have to rely on exploration tools to access their tokens.
With this, Lido has asked stMATIC holders to start the withdrawal process early to avoid disruptions. While withdrawals will still be available after June 2025 via exploration tools, the lack of front-end support may create technical hurdles for less experienced users.
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In the immediate aftermath of the release of this report, which was first shared on Monday, Polygon Bull plunged. However, the coin is trying to recover in line with the broader market trend on Tuesday.
