Lido Abandons Polygon, Aave Threatens to Exit Amid Disruptive Community Proposal

Lido, the leading protocol in the liquid staking sector, has initiated the gradual phase-out of its staking services for the Polygon PoS network. The tough decision came after the DAO community gathered and voted in favor of stopping operations for the chain in question.

Major liquid staking protocol Lido has announced that it will be winding down its operations on the Polygon network.

After a vote by the DAO community, the chain will be gradually phased out, with Lido services on Polygon set to conclude on June 16, 2025.

Users will have until this date to withdraw their funds from Lido, which were deposited via Polygon PoS. The protocol’s focus will now shift to Ethereum and its L2s.

Here are all the details about Lido winding down its Polygon services.

Lido to wind down services on Polygon network

Lido, the leading protocol in the liquid staking sector, has begun to gradually phase out its staking services for the Polygon PoS network.

The decision comes after the DAO community gathered to discuss the matter and voted in favor of winding down operations for the chain.

The move marks the end of an era, as Lido was initially deployed on Polygon in 2021, following a proposal by Shard Labs to introduce liquid staking of MATIC tokens.

The protocol halted its Polygon staking service yesterday and notified users that the service will conclude on June 16, 2025.

After this date, users will only be able to withdraw from Lido using the appropriate explorer tools, according to the official announcement.

As mentioned above, staking on the Polygon network via Lido has been suspended since December 16, with the user interface no longer accepting new requests.

A transition period of around 6 months will follow, during which users will be required to take steps to withdraw their funds via the dApp interface.

The protocol will undergo a temporary suspension of services between January 15 and 22, 2025, during which withdrawals will not be processed.

Finally, frontend support will conclude on June 16, 2025, and withdrawals will only be possible using browser tools (directly from the contract).

The Lido team advises users to complete the unstake of stMATIC before the established date to streamline the user experience.

It’s worth noting that a 9-day unlock time is required to unstake the asset.

Reasons behind Lido’s Polygon exit

The decision to cease its operations on the Polygon PoS blockchain follows extensive discussions by the Lido community on the DAO forum.

According to the participants in the protocol’s governance, user adoption of Lido services on Polygon was lower than expected.

Moreover, the rewards generated were lower than the costs of maintaining support and did not justify its continuation.

It’s also important to highlight the lack of scalability on the chain, which led Lido to reassess its multichain trajectory.

Now, the largest DeFi application by TVL will focus more on Ethereum and its associated networks, such as layer-2s and rollups.

Here is how the Lido community verbatim stated the combination of factors that led to the decision to end support for Polygon:

“Lido on Polygon has faced significant challenges in achieving the expected impact,” reads the Monday announcement. “Several factors have contributed to this situation: limited user adoption, insufficient rewards, high-resource-intensive maintenance requirements, and evolving ecosystem dynamics.”

Polygon PoS is currently the 5th network by capital locked in Lido, behind BNB Chain, Base, Arbitrum, and Ethereum.

The increase in wstETH holdings on Polygon, which doubled its TVL last year, was not enough to ensure the continuation of the service.

The chain has failed to keep up with the strong growth of blockchain competitors such as Mantle, Linea, Scroll, Op Mainnet, ZKsync, and others.

Last year, Lido abandoned the Solana blockchain for similar reasons, as its losses of $484,000 exceeded its revenue of $220,000.

Aave steps up to threaten exit from Polygon over potentially disastrous community proposal

The Lido winddown comes at a sensitive time for Polygon, as market lender Aave has received a proposal to withdraw its services from the chain.

A group of collaborators on Aave, which is also the dApp on Polygon with the highest TVL, cited strong concerns over a DAO proposal that aims to use the chain’s bridged stablecoins for yield generation.

A few days ago, some members of the Polygon DAO presented an idea to aggressively leverage the chain’s idle liquidity.

The move, which would see the participation of the Yearn, Morpho, and Allez protocols, could generate an annual yield of $70 million.

While this is a strong incentive for the Polygon ecosystem and its users, it’s undeniable that the use of bridge reserves could lead to serious security gaps.

Using $1.3 billion in bridged stablecoin collateral risks jeopardizing not only the funds of the Polygon community but those in the entire DeFi landscape.

In turn, Polygon would become increasingly dependent on third parties, introducing a systemic risk of exploitation.

Aave, sensing the potentially disastrous effects of