Lido, the prominent liquid staking protocol, has announced the discontinuation of its liquid staking protocol on Polygon, marking the end of its operations over the coming months. Following extensive discussions on the DAO forum and a community vote, LDO token holders officially approved the decision to phase out Lido on Polygon.

The process is set to begin shortly.

Lidos Exit from Polygon

Initially launched in 2021 through a proposal by Shard Labs, Lido on Polygon faced challenges such as limited user adoption, insufficient rewards, and high resource maintenance demands, according to the official blog post. Additionally, the evolving DeFi space specifically the growing focus on zkEVM solutions has reduced the demand for liquid staking on Polygon PoS, which hindered Lidos ability to serve as a foundational DeFi layer.

These factors, combined with Lidos strategic focus on Ethereum, as outlined in the GOOSE and reGOOSE governance initiatives, led to the reevaluation and eventual discontinuation of Lido on Polygon.

The phase-out process carries several key implications for stMATIC holders. As such, rewards will be discontinued during the transition, and a temporary pause in operations is scheduled between January 15-22, 2025, during which no withdrawals will be processed.

Users are encouraged to unstake their MATIC tokens through the Lido on the Polygon front-end before June 16, 2025. After this deadline, front-end support will cease, and withdrawals will only be accessible through blockchain explorer tools.

The timeline begins on December 16, 2024, when new staking will no longer be accepted. A six-month withdrawal period will follow, spanning December 16, 2024, to June 16, 2025, to facilitate a smooth transition for users.

Lido has previously halted its operations on Solana last year. This decision came after a community vote, citing financial sustainability concerns and low fees as key issues. Lido was initially launched on Solana on September 8, 2021.

Setbacks for Polygon Ecosystem

Lidos current decision to wind down on Polygon comes after lending protocol Aave proposed discontinuing its operations. The proposal was made by Aaves founder, Marc Zeller, on December 13 in response to Polygons governance request regarding a new bridging mechanism, which raised concerns about the risk profile of bridged assets.

In a related development, liquid restaking protocol Swell announced that its Layer 2 is migrating to the Optimism Superchain, moving away from the Polygon Chain Development Kit (CDK) as part of this transition in October.