Lido, a leading liquid staking protocol, has confirmed its decision to phase out operations on Polygon over the forthcoming months. This move follows a comprehensive dialogue within its decentralized autonomous organization (DAO) and a subsequent community vote that saw LDO token holders endorsing the end of Lido's presence on Polygon.
Launched in 2021 by Shard Labs, Lido on Polygon struggled with limited adoption, insufficient rewards, and demanding resource upkeep, as highlighted in their official blog. The decentralized finance (DeFi) landscape's evolution, notably the rise of zkEVM solutions, diminished the necessity for liquid staking on Polygon’s proof-of-stake (PoS) network. Consequently, Lido could no longer serve as a foundational DeFi layer in this environment. These challenges, coupled with Lido's strategic emphasis on Ethereum through the GOOSE and reGOOSE governance initiatives, prompted a reevaluation and the eventual decision to discontinue Lido on Polygon.
The winding down of operations involves several critical considerations for stMATIC holders. During the transition, reward distributions will cease, and operations will be temporarily paused between January 15-22, 2025, preventing any withdrawals during this period. Users are strongly advised to unstake their MATIC tokens through Lido on the Polygon front-end by June 16, 2025. Post-deadline, front-end support will end, restricting withdrawals to blockchain explorer tools only.
The timeline initiates on December 16, 2024, prohibiting new staking activities. A subsequent six-month window, concluding on June 16, 2025, will enable users to transition smoothly.
This isn't the first time Lido has ceased operations; a previous halting on Solana occurred last year. A community vote highlighted financial sustainability and low fees as key issues, leading to that decision. Lido initially debuted on Solana on September 8, 2021.
Lido's exit from Polygon adds to the challenges faced by the network. Recently, the lending protocol Aave proposed halting its operations on Polygon. Aave's founder, Marc Zeller, presented this proposal on December 13, reacting to a governance request about a new bridging mechanism that raised asset risk concerns. Concurrently, the liquid restaking protocol Swell announced its migration to the Optimism Superchain from the Polygon Chain Development Kit (CDK) as part of their transition strategy in October.
These developments highlight the shifting dynamics within the Polygon ecosystem, potentially reshaping its strategic orientation as various projects reassess their positions.