The Lido staking protocol announced it would end operations on the Polygon network due to limited user adoption, changing ecosystem dynamics, and a strategy refocusing on Ethereum.
According to a blog post on December 16, the Lido Finance team stated that this decision was made following requests from Lido DAO (LDO) token holders, 'extensive discussions in the DAO forum,' and a community vote where 99% supported this proposal.
Two proposals were considered in the November vote, one to move away from Polygon and one to 'reassess the economics of middleware.'
According to the team, Lido has faced significant challenges on Polygon, such as resource-intensive maintenance requirements, insufficient rewards, and a changing DeFi landscape, especially with 'increased focus on zkEVM solutions.'
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'This transition has led to a decreased demand for liquid staking solutions on Polygon POS, affecting Lido's potential on Polygon as a foundational building block of DeFi,' said the Lido team.
Additionally, alternative liquid staking solutions have been built in a smaller ecosystem than initially expected.
During the discussion phase before the vote, Shard Labs, the entity that proposed bringing staking services to Polygon in 2021, stated that due to the 'push towards zkEVM in DeFi,' the demand for proof-of-stake (PoS) and liquid staking on Polygon has 'lost its foothold as a fundamental building block.'
As of December 16, Lido staking requests on Polygon are no longer available. However, users can still withdraw staked MATIC through the Lido interface on Polygon until June 16, 2025. All rewards have also been halted.
The protocol will also temporarily suspend all withdrawals from January 15 to January 22 next year.
As of June 16, the Lido team announced that user interface support would end, and withdrawals could only be processed through web browsing tools.
Lido Finance has a total value locked (TVL) of $38 billion as of December 16. According to DefiLlama data, this is the largest liquid staking protocol in the DeFi market.
According to Dune, Lido has $45 million in staked tokens on Polygon. DefiLlama data shows that the Polygon network has over $1.2 billion in TVL.
Last year, Lido announced it would cease operations on the Solana blockchain following a community vote and concerns about unsustainable finances and low fees. The protocol was deployed on Solana on September 8, 2021.
Aave, one of the most prominent lending protocols on the Polygon network, has also proposed to halt operations on Polygon due to concerns about reassessing the risk profile of assets transferred on the network.
The founder of the Aave protocol, Marc Zeller, made a proposal on December 13, stating that it was in response to a governance request from Polygon to use over $1 billion in stablecoin reserves to farm on other protocols.
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