Lido Token Holders Discuss Whether to Leave Polygon

A Lido community member proposed exiting Polygon due to lackluster ROI and roadmap uncertainy.

By: Camila Russo Loading...

person leaving through open door

Lido token holders are discussing whether to exit Polygon just days after they voted to leave Solana.

A Lido community member proposed exiting Polygon due to concerns over lackluster revenue, brand risk and Polygon's uncertain roadmap.

With Lido voting to leave Solana as projected revenue didn't offset development and marketing costs, an exit from Polygon would mean the largest liquid staking platform would operate solely on Ethereum.

"I am pushing for Lido to be a completely native ETH," said Kentie, the proposal's author, replying to a comment.

Lido is the largest liquid staking protocol with $13.9B in Total Value Locked, according to DeFiLlama. Lido tokenizes users’ staked funds into “st-token” assets, which are pegged to the underlying staked asset in a one-to-one basis. This makes the original staked funds indirectly liquid, to be used in a DeFi ecosystem.

Lackluster Revenue

Kentie argued that over the past 12 months, Lido has reportedly spent over 2.1 million LDO tokens (approximately $3.42 million) in incentives and compensation on its Polygon operations. In contrast, the platform's yearly revenue is estimated at just $166,863, resulting in a Return on Investment that appears unimpressive.

The proposal adds that the compensation structure for Shard Labs, the firm responsible for Lido on Polygon, is expensive. As per the post, each 1% of staked MATIC generates a yearly revenue of $41,991, whereas Shard Labs' one-time compensation is 150,000 LDO tokens, equivalent to around $240,000.

Also, following a recent technical upgrade for Lido on Polygon, a bug that stopped withdrawals for 25 days was discovered. Although the issue was resolved without any negative publicity, the situation highlighted the potential reputational risk the platform could face from similar incidents.

Polygon Roadmap Uncertainty

Polygon recently unveiled a roadmap that envisions the chain becoming a restaking layer and a base layer for new app chains. However, with increased competition such as EigenLayer seeing significant traction, broader uncertainty looms. In addition, Polygon is migrating to a new token and undertaking a technical architecture transformation that could span multiple years.

Lido on Polygon might need to make significant changes and bear the costs of audits. This could potentially introduce further brand risks for Lido, the proposal said.

Community Discussion

Despite the concerns raised, some community members noted that separating milestones and incentives is essential. Incentivization through LDO tokens was a way to distribute tokens among the community, while increasing staked assets' utilization.

To address the issue of expensive compensation, the community agreed the structure needs revision.

Additionally, addressing the bug that stopped withdrawals, it was emphasized that the issue was resolved without any user impact, and the coding had passed all external audits and internal reviews.

It remains unclear whether Lido will ultimately decide to sunset its operations on Polygon or find alternative solutions to address the concerns raised by its users.