Lido Finance has made a significant announcement that is sending ripples through the crypto community: it is winding down operations on the Polygon network. This decision comes in the wake of limited user adoption, changing ecosystem dynamics, and a strategic pivot towards Ethereum. The move received overwhelming support, with *99% of Lido DAO voters* favoring the proposal during a community vote held in November. Two main proposals were considered: a complete exit from Polygon and a reassessment of the middleware’s economic model.
Lido’s leadership indicated that maintaining a presence on Polygon required substantial resources while yielding limited rewards. As interest in liquid staking solutions dwindled, particularly in the wake of growing attention on zkEVM solutions, Lido determined it was time to move on. Shard Labs, the group responsible for implementing Lido’s staking service on Polygon back in 2021, acknowledged that the shift towards zkEVM weakened Polygon’s proof-of-stake (PoS) network’s foundational role in the broader DeFi landscape.
As of December 16, Lido ceased accepting new staking requests on Polygon. Users can still withdraw their staked MATIC until June 16, 2025, but rewards have been suspended and withdrawals will be temporarily halted from January 15 to January 22, 2025. By mid-2025, front-end support will be completely phased out, leaving withdrawals accessible only through browser tools.
This exit mirrors Lido’s similar withdrawal from Solana last year, which was prompted by unsustainable financial conditions and low fees. Lido launched operations on Solana in September 2021 but struggled to maintain profitability there. Currently, Lido holds about $45* million in staked tokens* on Polygon, while Polygon itself boasts over $1.2* billion in total value locked (TVL), according to *DefiLlama data. Across all supported networks, Lido retains its status as the largest liquid staking protocol.
As Lido steps back, Aave is also contemplating a similar exit from the Polygon network. Concerns over the risk profile of bridged assets have sparked discussions within the community. On December 13, Aave chain founder Marc Zeller proposed revising risk parameters for Aave v2 and v3 on Polygon due to these concerns. Discussions were fueled by a governance plan suggesting the deployment of over $1* billion in stablecoin reserves* for yield farming on platforms like Morpho and Yearn.
Zeller’s proposal aims to set loan-to-value (LTV) ratios to *0%*, thereby preventing users from utilizing bridged assets as collateral, ultimately reducing the risk of cascading liquidations from bridge vulnerabilities. The discussion began alongside a separate proposal from Allez Labs, the Morpho Association, and Yearn.finance to invest idle stablecoins into Ethereum vaults, potentially generating a 7% annual yield and unlocking about $81 million in revenue for the Polygon ecosystem. While some welcome this approach, many in the community are raising flags over the new risks introduced without adequate rewards.
The risks associated with blockchain bridges cannot be understated; they have become a primary target for DeFi exploits, contributing to over half of on-chain attacks between 2021 and 2022.
In more promising news, Eliza Labs has partnered with Stanford University to delve into the role of AI agents in Web3* systems. This partnership joins the Future of Digital Currency Initiative to explore how AI can foster trust and enhance decision-making in decentralized networks. The research is set to kick off in *2025 and aims to develop frameworks for AI agents in economic systems.
Eliza Labs, known for its decentralized autonomous organization (DAO) ai16z, uses an open-source AI framework to investigate trust dynamics in digital currencies. The project has sparked intrigue in the crypto community, with Eliza already powering numerous projects and drawing parallels to established DeFi protocols like Aave.
As the crypto landscape shifts and matures, the decisions made by these influential protocols highlight the complexities and considerations involved in navigating the space. While Lido’s departure from Polygon may be seen as a setback, it underscores the importance of adaptability and focus on profitable ventures in the evolving world of decentralized finance. More content in ZCrypto.
