Lido, one of the largest liquid staking protocols, has announced it will shut down its staking services on Polygon due to low adoption, competitive pressures, and shifting DeFi dynamics. The decision follows months of community discussions and governance votes within Lido DAO.

The phased shutdown process will begin on December 16, 2024, marking the official end of Lido’s Polygon operations. Users will have until June 16, 2025, to withdraw their staked MATIC tokens through the Lido UI.

Why Lido Is Shutting Down Polygon Staking

Lido’s launch on the Polygon Proof-of-Stake (PoS) network in 2021 came with high expectations. However, the protocol struggled to achieve meaningful adoption. Lido cited the following factors in its decision to sunset the service:

1. Limited User Adoption
   Despite Polygon’s prominence as a Layer 2 scaling solution, demand for liquid staking services on the network remained low, falling short of initial goals.
2. Competition from zkEVM Solutions
   The emergence of zkEVM-based solutions has redirected DeFi activity away from Polygon PoS, reducing the demand for Lido’s offerings.
3. Resource-Intensive Maintenance
   Maintaining support for Polygon’s staking protocol has proven unsustainable. Lido DAO’s recent initiatives, such as GOOSE and reGOOSE, have prioritized Ethereum staking, where Lido maintains dominance.
4. Competitive Landscape
   Alternative liquid staking providers, including protocols like EigenLayer, have created a competitive environment that further limited Lido’s impact on Polygon.

Lido DAO noted in its blog:

“While initial expectations were high, Lido on Polygon has faced significant challenges. Combined with evolving DeFi trends and the DAO’s strategic focus, this has prompted a thorough reevaluation of the protocol.”

Phased Shutdown Timeline

Lido has outlined a detailed timeline for the shutdown to ensure a smooth transition for users holding stMATIC (Lido’s liquid staking token for Polygon):

1. December 16, 2024:
   • Staking services will officially stop.
   • New stakes will no longer be accepted through the Lido UI.
2. January 15-22, 2025:
   • Temporary maintenance pause. Withdrawals will be unavailable during this period.
3. June 16, 2025:
   • Deadline for withdrawals via the Lido UI.
   • Post-June, withdrawals will only be accessible through blockchain explorer tools.

Lido has urged stMATIC holders to withdraw early to avoid disruptions, as the absence of front-end support beyond June 2025 could pose technical challenges for less-experienced users.

Lido’s Strategic Focus on Ethereum

Lido’s decision to exit Polygon underscores its strategic realignment toward Ethereum, where it remains the leading liquid staking provider. With Ethereum staking surpassing 30 million ETH locked, Lido has chosen to prioritize its resources on consolidating its dominance in the Ethereum ecosystem.

This move highlights the broader challenges of expanding liquid staking services across multiple networks amid rapidly shifting DeFi trends. Maintaining multi-chain support has proven costly, particularly in ecosystems with limited traction.

Impact on Polygon and DeFi

For Polygon, Lido’s departure leaves a potential gap in its staking ecosystem, particularly as focus shifts toward zkEVM-based solutions. While other staking protocols remain active, Lido’s exit raises questions about long-term growth and competition within Polygon’s DeFi space.

In response to the announcement, Polygon’s POL token saw a brief price dip but has since shown signs of recovery, in line with broader market trends.

Conclusion

Lido’s decision to sunset its Polygon staking services reflects the protocol’s strategic pivot toward its core focus on Ethereum. While the move highlights challenges in expanding beyond primary networks, it also signals the growing influence of zkEVM solutions in reshaping DeFi activity. For stMATIC holders, early withdrawals are encouraged to avoid disruptions as Lido prepares to phase out support.