Lido Exits Solana Staking: Unsustainable Finances Force Closure – What’s Next for stSOL Holders?

Big news in the crypto staking world! Lido Finance, a major player in liquid staking, is pulling the plug on its Solana operations. If you’re invested in Solana staking, particularly with stSOL, this is crucial information you need to know. Let’s dive into why Lido is leaving Solana and what it means for you.

Why is Lido Sunsetting Solana Staking?

The core reason boils down to simple economics: unsustainable financials and meager fees. Lido’s team has stated that running their Solana staking service just wasn’t profitable enough. This wasn’t a sudden decision; it followed a community vote within Lido’s Decentralized Autonomous Organization (DAO), indicating a consensus on this strategic shift.

Here’s a quick rundown of the timeline:

• September 5th: Lido’s P2P team proposed sunsetting Solana operations.
• September 29th – October 6th: Community voting took place.
• October 6th: The proposal to sunset Lido on Solana was approved.
• October 16th: Lido officially announced the sunset and stopped accepting new staking requests.

Lido itself confirmed in an official statement:

“After extensive DAO forum discussions and a community vote, the approval for sunsetting the Lido on Solana protocol was granted by Lido token holders, and the process is set to commence shortly.”

So, it’s official. Lido is exiting the Solana staking scene.

The Timeline for Lido’s Solana Exit: Key Dates for stSOL Holders

If you’re holding stSOL or using Lido for Solana staking, mark these dates in your calendar:

• October 16th: Staking Requests Halted: Lido stopped accepting new SOL staking deposits.
• November 17th: Node Operator Off-boarding Begins: Voluntary off-boarding for node operators starts.
• February 4th: Frontend Unstaking Deadline: Users must unstake their SOL via Lido’s Solana frontend by this date.

Important Note: After February 4th, unstaking won’t be possible through the user-friendly frontend. You’ll need to use the Command Line Interface (CLI) to unstake your SOL. This might be a bit more technical, so plan to unstake before the deadline to avoid any complications.

Decoding the Financials: Why Was Lido on Solana Unsustainable?

Let’s break down the numbers to understand why Lido deemed their Solana venture unsustainable.

Lido’s P2P team, who took over the Solana project in March 2022, invested a significant amount – around $700,000. However, the revenue generated from Lido on Solana was considerably lower, at only $220,000. This resulted in a substantial net loss of approximately $484,000.

To keep the Solana operation going during the sunsetting phase, Lido requested $20,000 per month for five months from the Lido DAO to cover technical maintenance. Essentially, even winding down operations required further investment while the service wasn’t profitable.

An alternative proposal was considered – to allocate more funding to Solana from the Lido DAO to try and turn things around. However, the community vote clearly favored sunsetting. A whopping 92.7% of the 70.1 million LDO tokens voted were in favor of closing down Solana operations. This decisive vote, conducted on the Snapshot platform, underscores the strong community sentiment behind this decision.

Community Speaks: The DAO Vote and Future Strategy

Lido acknowledged the difficulty of this decision, emphasizing its necessity for the broader Lido ecosystem’s health. They stated:

“While challenging, this choice was deemed necessary for the continued success of the broader Lido protocol ecosystem, despite our strong relationships across the Solana ecosystem.”

Despite the exit from Solana, Lido assures stSOL holders that they will continue to receive network rewards throughout the sunsetting process. This is a positive aspect for those currently staked.

Lido’s Focus: Ethereum and Polygon Remain Strongholds

Where is Lido focusing its energy now? Currently, Lido’s staking services are concentrated on:

• Ethereum: A massive $14 billion is staked through Lido on Ethereum.
• Polygon: A more modest but still significant $80 million is staked on Polygon.

These figures, sourced from Lido’s official website, highlight where Lido sees its core strengths and profitable opportunities.

Solana’s Resilience: Price Surge Amidst Lido Exit

Lido launched on Solana back on September 8, 2021, when SOL was trading around $189. Fast forward to today, and Solana’s price is around $24 (according to CoinGecko). That’s an 87% drop from its launch price during Lido’s entry! This price decline likely contributed to the challenges Lido faced in generating sufficient revenue from Solana staking.

Interestingly, despite the news of Lido’s departure, Solana (SOL) has shown remarkable resilience. In the 24 hours following the announcement, SOL actually experienced an 8.6% price increase. This could indicate underlying strength in the Solana ecosystem and investor confidence beyond Lido’s presence.

Key Takeaways: What Does Lido’s Solana Exit Mean for You and the Staking Business?

Let’s summarize the key takeaways from this significant development:

• Financial Unsustainability is Key: Lido’s exit is primarily driven by the lack of profitability in their Solana staking operations. Low fees and high operational costs made it unsustainable.
• Community Governance Matters: The DAO vote clearly demonstrated the community’s agreement on this strategic direction for Lido.
• stSOL Holders Need to Unstake: If you hold stSOL, ensure you unstake your SOL before the February 4th frontend deadline to avoid using the CLI.
• Focus on Core Strengths: Lido is doubling down on Ethereum and Polygon, where they see greater success and profitability.
• Solana Ecosystem Shows Resilience: Despite Lido’s exit, Solana’s price has surprisingly increased, suggesting underlying strength in the network.
• Staking Business Realities: This situation highlights the challenges and financial realities of running a successful staking business, especially in a competitive and fluctuating crypto market.

In Conclusion: A Strategic Shift for Lido and a Lesson for the Staking World

Lido’s decision to sunset Solana staking, while significant, appears to be a pragmatic and financially driven move. It underscores the importance of sustainable business models in the DeFi space and the crucial role of DAO governance in making strategic decisions. For stSOL holders, the message is clear: unstake your assets in a timely manner. As for the broader staking landscape, Lido’s exit serves as a reminder that even prominent projects must adapt to market conditions and prioritize financial viability to ensure long-term success.