Lido Finance Discontinues Solana Staking After DAO Vote

Contents

After a vote by Lido’s LDO holders, Lido Finance has decided to stop offering Solana (SOL) staking on its platform. This decision was made following a vote in which over 10,000 members of the DAO participated. The results showed that 92% of voters preferred to discontinue Solana staking, while 7% voted to continue.

Lido Finance developers have now confirmed that the SOL staking service will be phased out gradually in the coming months. In an official statement, they expressed that although it was a challenging decision due to their strong ties within the Solana ecosystem, they believe it is necessary for the broader success of the protocol.

The choice to discontinue Solana staking is driven by several factors, including low earnings from staking SOL, the volatile nature of SOL’s price, and scalability problems within the Solana network.

Lido Finance is known for its liquid staking platform that enables users to stake cryptocurrencies without locking up their funds. It offered a similar solution for SOL, allowing users to stake their SOL tokens and receive rewards without the need for locking up their funds.

Lido Finance’s withdrawal from Solana represents a setback for the Solana network. This is significant because Lido Finance played a prominent role as a SOL staking service provider, and its departure may lead to a decrease in user engagement with the Solana network.

Starting on February 4, 2024, Lido Finance will cease offering SOL staking. Users who had previously staked SOL through Lido Finance will have the opportunity to withdraw their funds until that date. Lido Finance will, however, continue to provide staking services for other cryptocurrencies, including $ETH, UST, and $TRX.

As of October 17, data from DeFiLlama indicated that the total value locked (TVL) of SOL on Lido was approximately $55.8 million, representing only 0.39% of Lido’s total TVL. This marked a substantial decrease from the peak of $440 million observed in April of the previous year.

Lido Finance’s exit from Solana serves as a reminder of the challenges the Solana network has been facing, primarily related to recent scalability issues leading to a decrease in user engagement.

It’s worth noting that Lido joined Solana in 2021 during the bullish phase of the cryptocurrency market when SOL was trading at nearly $200. However, since then, the price of SOL has plummeted by over 80%, currently resting at around $25.03. This drop has also had an impact on staking rewards within the Solana network.

Lido Finance on Solana

Lido Finance primarily focused on Ethereum staking services after its launch in December 2020. However, the platform expanded its support to include staking protocols on other blockchains. Notably, Lido DAO introduced Solana staking in September 2021.

Staking is a way to encourage validators to secure Solana’s network by utilizing the protocol’s inflation rate. In the early stages, platforms like Solana needed to promote staking to boost adoption. This means that during its initial phase, Solana (SOL) experienced more inflation compared to more established networks like Bitcoin, Ethereum, or Avalanche, which have lower inflation rates.

With the Lido liquid staking protocol users are provided with synthetic tokens. For example, when users stake Ethereum (ETH), they receive staked ETH (stETH) tokens. Similarly, staking native LUNA tokens on Terra provides users with bLUNA, and staking SOL on Solana gives users stSOL.

These synthetic tokens can be used within the Lido Finance ecosystem, including popular decentralized finance (DeFi) platforms such as Yearn, Curve, and Maker to generate additional income while your original tokens remain staked. This means users have equivalent tokens to use during the staking period.

Notwithstanding Lido, Is Solana Set for a Rally?

Despite the end of SOL staking on Lido, there’s a chance that the token might be gearing up for a new rally.

An X user Ronin added a tweet stating

“Like all time pressure on the best Solana
I am actually a real Solana lover and after the FTX scam, almost nothing can stop this token from pumping, because they build real innovations.
New integrations help with that too.”

According to another X user, Olszewicz, SOL is showing signs of forming an inverse head and shoulders pattern, typically indicating an upcoming rally. Furthermore, the analyst predicts that SOL could reach $33.85 or $38.82 in the near future.

$SOL iHS alert
chart is the chart, love it or hate
looks a helluva lot better than spot $ETH that’s for sure pic.twitter.com/BEh7z2bUbO
— Josh Olszewicz (@CarpeNoctom) October 17, 2023

Lido is shutting down stSOL due to high development costs.
Lido DAO asked for $1.5M to fund 12 months of operations, but the DAO decided to sunset stSOL altogether.
They had previously invested $700K, but with revenues of just $220K, they faced a loss.
That’s good news for… pic.twitter.com/5F6uQuMf38
— Ignas | DeFi Research (@DefiIgnas) October 16, 2023

He also added that

“I like the 80/20 rule, or Pareto Principle: 80% of outcomes often come from 20% of causes. Lido strength is on Ethereum so perhaps that’s where they should focus on.”

Nevertheless, SOL has been one of the top-performing cryptocurrencies this year, with its value increasing. SOL’s impressive performance is notable, especially considering it was heavily affected by the collapse of FTX in November 2022.

In Conclusion,

Lido Finance’s decision to leave the Solana blockchain after a community vote could affect Solana negatively.
However, it is crucial to remember that past performance doesn’t predict future results, especially on Solana. These markets are dynamic, so be cautious and well-informed to reduce risks and increase your chances of success.
Stay alert and monitor market trends, news, technical and fundamental analyses, and insights from crypto experts. These factors can help guide your investment and trading decisions.

Disclaimer: This piece is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence.

If you would like to read more market analysis articles like this, visit DeFi Planet and follow us on Twitter, LinkedIn, Facebook, Instagram, and CoinMarketCap Community.