Lido Governance considers ending Lido project on Polygon

The Lido community has released a proposal to terminate the Lido project on Polygon, citing various reasons and challenges faced by the project in recent times. 

This proposal sparked discussions within the Lido Governance community, illuminating key aspects of the project’s future.

Lido is a decentralized autonomous organization (DAO) that oversees a liquid staking service built for the Ethereum ecosystem. 

It allows users to stake their Ethereum (ETH) tokens transparently, without the need for custody, reinforcing the stability of the broader Ethereum landscape. 

Polygon, formerly known as Matic Network, is a layer 2 scaling solution that aims to provide multiple tools to improve the scalability of the Ethereum network.

According to the proposal, the Lido community are worried about the revenue generated by Lido on Polygon. 

It pointed out that Total Value Locked (TVL) on Polygon is around $151 million MATIC, with the Lido DAO making approximately $166,863 annually. 

However, it raises questions about the sustainability and profitability of the project, considering the incentives provided and the ROI.

This is coming after a recent technical upgrade of Lido on Polygon introduced a bug that stopped withdrawals for 25 days. 

While no major issues arose during this period, the proposal raises the question of brand risk and the potential impact on a protocol with substantial assets.

Other issues raised are the compensation structure, particularly the high costs involved in maintaining Lido on Polygon; and the lack of competition on the new Polygon stack (Polygon 2.0) where Stader Labs is the sole liquid staking provider. Responses have triggered discussions on the future of Lido on the new Polygon infrastructure.

The proposal suggests that in light of these challenges, it might be more beneficial to consider sunsetting Lido on Polygon and focus on becoming a native Ethereum liquid staking provider. 

Read also; Lido Finance presents Lido V2