Lido: Shutting down multiple public chain services is not welcomed by the Ethereum ecosystem

Written by Chloe, PANews

The front foot was criticized by the Ethereum community for being too monopolistic and did not agree to sign a binding proposal with several pledge service providers to control the proportion of ETH pledge below 22%, but the back foot Lido cut off its own business, successively cutting Polkadot, Solana, Polygon and other blockchain businesses, Lido’s move, “what medicine is sold in the gourd”?

Polkadot and Solana all exited, and Lido let the outside world see the flowers

On October 17, Lido Finance community member Kentie posted a discussion proposal to shut down Lido’s service on Polygon with the goal of becoming a native ETH liquidity staking service provider and avoiding the risk of smaller total hedging value (TVL). The proposal to terminate the Lido service on Polygon also directly points out that the current situation is actually very worrying.

Although Lido’s total locked-up value (TVL) on Polygon is approximately $86 million, Lido DAO charges only $116,863 annually on Polygon. In addition, Lido awarded 450,000 LDOs to liquidity staking solution provider Shard Labs (Shard Labs introduced Lido to Polygon, allowing users to stake MATIC tokens in a decentralized manner) as compensation for achieving the milestone of staking MATIC market share of 3%.

And according to the Shard Labs team’s proposal for a high salary structure, another 150,000 LDO tokens

It will soon be released to Shard Labs to reach the milestone of 4% staking MATIC market share, with a total event cost of 600,000 coins.

Not only is there a cost problem, but for example, the vulnerability caused by Polygon’s recent technical upgrade on Lido will bring reputational risk to Lido. And as Polygon moves to newer tokens (Polygon Lab previously announced its new native token, POL, replacing the original native token, MATIC), and is undergoing several years of technical architecture innovation, there is still a greater scope of uncertainty in the chain.

And the pledge exit incident is not only Polygon this year.

Mixbytes, a smart contract audit firm that partnered with Lido in March, announced that Lido would no longer provide technology and development for Polkadot and its canary network, Kusama, as of August 1, and would not accept any new $DOT into the Lido protocol on March 15.

MixBytes is a DeFi app developer that helped Lido build liquidity staking services on Polkadot and Kusama. Kosta Zherebtsov, head of product at MixBytes, said in his proposal earlier this year that the decision was made due to several challenges, including market conditions, protocol growth, capacity constraints and changes in the company’s strategic priorities.

Six months later, Solana, on September 4, P2P Validator, the technical team responsible for Lido development on Solana, revealed the current operation status to the community, explained the current profit and loss situation and submitted a fundraising proposal to Lido DAO. The expectation of the initial cooperation is that the two sides will complement each other’s strengths and strengthen each other’s position in the cryptocurrency community. Unexpectedly, Solana invested more than $700,000 in Lido, mainly for development and maintenance, but to date, its revenue is only about $220,000, and the loss is $484,000.

The P2P Validator’s proposal also clearly gives the community two choices: first, Lido DAO will provide a total of $1.5 million in funding over the next year to cover development costs and establish partnerships; Second, phase out Lido services on Solana over the next 5 months, that is, start the sunset process on Lido on Solana, and follow the same path as Lido on Polkadot and Kusama. The proposal also states that P2P Validator hopes that with this funding, Lido will gain more than 1% of Solana’s staking market share, and it is expected to bring about $200,000 in stable revenue.

However, the community poll that ended on October 6 showed that a whopping 92.7% of participants voted in favor of stopping the protocol, and Lido on Solana gradually entered the shutdown process. On October 16, Lido announced that it would stop accepting new stakes on Solana, and its projects on Solana will be phased out in the coming months.

was also “boycotted” by the Arbitrum community, and Lido’s future is uncertain

! [Lido: Shutting down multiple public chain services, and the Ethereum ecosystem is not welcome] (https://img-cdn.gateio.im/webp-social/moments-40baef27dd-590a4fab8a-dd1a6f-69ad2a.webp)

As Ethereum transitioned over the past year to a fully proof-of-stake-operating blockchain, Lido’s astonishing rise is visible to everyone. For many users, this combination of Lido is more attractive than the cumbersome technology involved in setting up validators and locking ETH into the main blockchain.

The problem is that Lido has become so popular that it is approaching the 33% threshold for total ETH proof-of-stake, which could theoretically threaten the 67% majority demand. And now many crypto communities and Lido are showing signs of resistance.

Voting on Arbitrum’s short-term incentive plan ended last week, with 57 of the 97 proposals approved. The native project on Arbitrum received the most support, while Lido became the most controversial project in the vote, with more than 200 million ARB votes, but was ultimately and not passed the incentive proposal of 4 million ARBs requested. Opponents argue that Lido does not pay incentives corresponding to the 4 million ARBs on Arbitrum; For a non-Arbitrum project, 4 million ARBs is too much; There are also doubts that Lido poses a systemic risk to Ethereum.

However, Lido’s proponents also believe that the protocol simply takes full advantage of blockchain incentives and innovation, and that the real threat should come from more centralized players, such as large crypto exchanges. According to a report by Messari, Lido has always been regulated by the outside world (as their growth shows) and must act responsibly, but the outside world does not agree that the existence of Lido has more or less increased the decentralization of Ethereum.

It’s clear that the Lido community isn’t afraid to make big decisions about the product all the time, as exemplified by Solana and Polygon, who recently broke its arm.

But what Lido is facing now is the operational problem, based on the aforementioned Lido community believes that Polygon has no commercial value in this field, so community member Kentie will recommend that Polygon stop operating related services, to focus on making Lido a native ETH liquidity staking service provider, but is this strategy really feasible?

Lido can be said to have a good grasp of the timing of entering the market and meet the two core needs of capital for liquidity and income, so there is nothing too wrong with completely tying ETH to become its native pledge service provider, but once Lido chooses to bind ETH, Vitalik and some mainstream bigwigs or KOLs who frequently hype up Lido’s high market share on the Internet will endanger the Ethereum centralized mechanism, will definitely bite Lido to the first safety line of approaching 33% of the total pledge.

It is estimated that Lido may go in two directions, first, acknowledging that the Lido ceiling has reached and the growth numbers have stagnated, but this will add to the fact that Solana and Polygon have previously been cut off, resulting in no other revenue streams, ETH pledges have reached a balance and new funds cannot be brought in, and even the interest rate must be reduced to 3% due to the limit of the number of validators, which deepens the situation of Lido’s lack of optimism.

Second, ignoring community voices, breaking the 33% norm, or allowing ETH staking inflows and interest rates to return to a surge state, but not likely, CoinDesk exchange FalconX pointed out that since the merger of Ethereum in September 2022, the transition to proof-of-stake, and the Shapella upgrade, user interest in staking has surged, but that enthusiasm has been followed by a gradual cooling.

However, if you are optimistic about the supremacy of ETH and the on-chain transaction returns to the bull market, there will be a turnaround in this area, in short, there are still some community members who believe that the current situation is that the ETH ecology is supporting the operation of Lido, but on the other hand, Lido also has to face the uncertainty of ETH, especially the doubts and suppression of Lido centralization, and should think about multi-party deployment to other networks to increase resilience and reduce risks, but as far as the example of Solana and Polygon is concerned, There is still a long way to go to do multi-chain liquidity pledging.