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Lido Solana at Risk of Collapse, Calls on Community for $1.5 Million

Last Updated September 6, 2023 12:59 PM
James Morales
Last Updated September 6, 2023 12:59 PM
Key Takeaways
  • Lido managing team on Solana has requested $1.5 million from the Lido DAO.
  • Money will be used to support the project’s continued operation.
  • Despite dominating the Ethereum staking market, Lido has failed to make inroads into other blockchains.
  • Without additional funding, Lido on Solana will be wound down.
  • It may follows in the footsteps of Lido on Polkadot and Kusama.

Lido liquid staking protocol accounts for nearly a third of all staked ETH. But in the parallel market for Solana staking, Lido is a small fish in a big pond.

Struggling to stay afloat in such a competitive market, the team behind Lido on Solana has requested $1.5 million from the Lido DAO to fund its continued operation.

After Polkadot Retreat, Lido May Abandon Solana

On Monday, September 4, Yuri Mediakov, who heads up a team of blockchain developers that manage Lido on Solana, presented a funding proposal  to the Lido DAO. 

As outlined in the proposal, Lido on Solana has been operated by P2P Validator  since March 2022, when the company took over from Chorus One .

During that period, P2P significantly boosted the protocol’s total value locked (TVL) by 330% and facilitated new DeFi integrations and partnerships. Regrettably, the firm incurred a $484,000 loss on its Solana-based Lido project in the 2022-2023 fiscal year.

To keep Lido operational, Mediakov has requested $1.5 million from the Lido DAO Treasury. If the DAO votes to refuse the request, Lido on Solana will be retired, following in the footsteps of Lido on Polkadot and Kusama, which proved to be similarly unviable. 

Solana Experiment Falls Short of Lido’s Success on Ethereum

Lido’s uncertain future on Solana stands in stark contrast to its success on Ethereum, where, over 8.5 million ETH has been staked via the protocol.

With a 32.4%  market share, Lido is the largest single Ethereum staker and accounts for nearly four times more staked ETH than its nearest rival—Coinbase.

Moreover, it has pioneered a dramatic shift in Ethereum staking, which has seen the role of centralized exchanges increasingly sidelined by the growing popularity of liquid staking.

At present, centralized exchanges account for just 19.1% of all staked ETH. In contrast, liquid staking makes up 37.5% of the total.

Lido Struggles to Secure Multichain Foothold

Looking to replicate its liquid staking solution on other blockchains, Lido was launched on Solana in 2021. The next year, equivalent attempts were made to crack the market for staking on Polkadot, Kusama and Polygon

Without additional community support, only Polygon staking will remain, leaving the project’s multichain goals unfulfilled. What caused this initiative to falter, especially when Lido is thriving on Ethereum?

Lido’s original Ethereum version had a first-mover advantage, simplifying ETH staking while preserving liquidity in 2020. However, as Lido expanded to other chains, competitors had already embraced the concept and advanced it.

For example, Marinade Finance  launched the first liquid staking protocol on Solana in August 2021. Building on the staking mechanism pioneered by Lido, Marinade offers users a host of additional features to help them optimize returns on their staked crypto.

By the time Lido made the jump to Solana, Marinade had already secured a healthy lead. Today, the total amount of SOL staked through Marinade is more than twice  what is staked with Lido.

Should P2P be granted its funding request, the team promises  to “develop and implement new features, making the product more competitive.” But even that might be too little too late.

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