Lido Finance, a protocol for decentralised finance (DeFi), has proposed ending liquid staking on the Polkadot and Kusama ecosystems, according to a proposal posted on Tuesday to Lido’s governance forum.
MixBytes, a developer of decentralised finance applications and a Lido partner, announced in the proposal that it would cease developing and providing technical support for the Polkadot and Kusama liquid staking protocols on August 1, 2023.
According to the proposal’s author, Kosta Zherebtsov, also the chief product officer of MixBytes, the decision was made because of several problems, such as market conditions, protocol growth, limited capacity, and the need to align priorities.
Lido has become the most extensive DeFi protocol in the world, and about $9 billion worth of digital assets are now safe on the platform. It has grown as investor demand for liquid staking has consistently increased.
Staking is a popular yield-earning strategy in the digital asset space, where crypto holders can seal up and delegate tokens like ether (ETH) to secure proof-of-stake blockchains in exchange for a reward. With liquid staking, investors can maintain the liquidity of their capital and use staked tokens as collateral by receiving derivatives.
The proposal may affect assets worth approximately $25 million. DefiLlama, a data aggregator, reveals that investors have wagered $22.3 million in DOT and $2.34 million in KSM, the native tokens of Polkadot and Kusama, respectively, on Lido.
Zherebtsov suggested a timeline in which new DOT and KSM for liquid staking would no longer be approved after March 15, and tokens would be automatically unstaked in June.
The proposal is currently in the preliminary discussion phase.