The decentralized liquid staking protocol Lido is considering a major strategic shift, as a recent governance proposal suggests the potential discontinuation of its services on Polkadot and Kusama networks. This move, driven by technical and operational challenges, could reshape how users interact with staked assets across these ecosystems.
Background: Lido’s Expansion into Polkadot and Kusama
Lido, best known for its Ethereum-based liquid staking solution that allows users to stake ETH while maintaining liquidity through stETH tokens, extended its reach to Polkadot (DOT) and Kusama (KSM) in previous years. Through a collaboration with MixBytes, a DeFi development firm, Lido launched liquid staking offerings on both networks, enabling token holders to earn staking rewards without locking up their assets.
This expansion was seen as a step toward broader interoperability and multi-chain dominance in the liquid staking space. However, recent developments indicate that this chapter may soon come to an end.
The Proposal: Sunsetting Lido on Polkadot and Kusama
On Lido’s governance forum, MixBytes officially submitted a proposal titled “Sunsetting of Lido on Polkadot and Kusama”, outlining plans to cease development and technical support for Lido’s implementations on these two networks starting August 1, 2023.
According to Kosta Zherebtsov, Product Lead at MixBytes, the decision stems from a combination of factors:
"Making this decision was not easy, but we are facing several challenges including market conditions, protocol growth, limited capacity, and shifts in strategic priorities."
The proposed timeline includes:
- March 15: Stop accepting new DOT and KSM deposits for liquid staking.
- June 22: Automatic undelegation and withdrawal of all staked tokens.
This gradual phase-out aims to give users ample time to react and reallocate their assets before full service termination.
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Impact on Staked Assets and Users
At the time of writing, approximately $22.3 million worth of DOT** and **$2.34 million in KSM are staked via Lido, according to data from DefiLlama. These figures represent a significant amount of capital currently relying on Lido’s infrastructure for yield generation and liquidity.
While the proposal does not suggest any risk to principal funds—users are expected to fully recover their staked tokens upon undelegation—it raises concerns about continuity of yield, convenience, and user experience. Without Lido’s liquid staking wrapper (such as stDOT or stKSM), users will lose the ability to trade or use their staked positions in other DeFi protocols.
For many investors, especially those engaged in cross-chain strategies or leveraged yield farming, this change could disrupt existing portfolios and force reevaluation of risk-return profiles on Polkadot and Kusama.
Why Is This Happening Now?
Several underlying reasons contribute to this strategic retreat:
1. Resource Constraints
MixBytes has finite engineering bandwidth. Maintaining secure, upgradable smart contracts across multiple chains requires continuous investment. With shifting priorities, focusing on higher-adoption chains like Ethereum and emerging layer-1 ecosystems may offer better returns.
2. Slower-than-Expected Adoption
Despite Polkadot’s strong technical foundation, Lido’s adoption on DOT and KSM has remained relatively modest compared to its success on Ethereum. Lower demand translates into reduced incentive for ongoing maintenance.
3. Evolving Market Conditions
The broader crypto market has undergone significant contraction since 2022. Funding for experimental or low-volume projects has dried up, pushing teams to consolidate efforts around core products.
4. Governance Complexity
Operating across heterogeneous blockchain environments introduces additional layers of governance, security audits, and compliance overhead—especially when dealing with Polkadot’s unique nomination process and parachain architecture.
What Comes Next for Polkadot and Kusama Stakers?
With Lido potentially exiting the scene, users must consider alternative options:
- Native Staking: Directly stake DOT or KSM through official wallets like Polkadot.js or Talisman. This method offers security but sacrifices liquidity.
- Other Liquid Staking Providers: Projects like Bifrost Finance and Parallel Finance already offer liquid staking solutions with vTokens (e.g., vDOT) that can be used across various DeFi applications.
- Cross-Chain Liquidity Protocols: Some platforms enable synthetic representations of staked assets on other chains, though often with added complexity and counterparty risk.
Developers within the Polkadot ecosystem may also view this as an opportunity to enhance native liquidity solutions or incentivize new entrants in the liquid staking space.
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Frequently Asked Questions (FAQ)
Will I lose my staked DOT or KSM if Lido shuts down?
No. The proposal includes a full undelegation process. All staked tokens will be returned to users’ wallets by June 22, assuming the plan is approved and executed as scheduled.
What happens to my staking rewards after March 15?
Rewards will continue accruing until the automatic undelegation date (June 22). After that point, no further rewards will be generated through Lido.
Can I still use stDOT or stKSM tokens after the shutdown?
Once the protocol sunsets, stDOT and stKSM will no longer be supported or redeemable through Lido’s system. It is strongly advised to withdraw funds before the cutoff dates.
Is this decision final?
Not yet. The proposal is currently in the discussion phase within Lido’s governance forum. Community feedback and voting will determine the final outcome.
Are there risks during the undelegation period?
The primary risk is timing. Undelegation on Polkadot involves a bonding period (typically 28 days), so early initiation is crucial to avoid delays in fund retrieval.
Could Lido return to Polkadot in the future?
While nothing is ruled out permanently, any future relaunch would depend on renewed developer interest, improved market conditions, and community demand.
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Core Keywords Integration
Throughout this analysis, key terms such as Lido, Polkadot, Kusama, liquid staking, DOT, KSM, MixBytes, and DeFi have been naturally integrated to reflect user search intent and enhance SEO visibility. These keywords capture central themes around blockchain upgrades, asset management, and decentralized finance trends.
Final Thoughts
The potential sunset of Lido’s services on Polkadot and Kusama marks a pivotal moment for both the protocol and its users. While driven by practical constraints rather than failure, it underscores the volatility and resource sensitivity inherent in decentralized projects.
For investors and developers alike, this serves as a reminder: participation in emerging blockchain ecosystems requires vigilance, adaptability, and a proactive approach to managing digital assets. As the DeFi landscape continues to mature, consolidation around sustainable models will likely become more common—making informed decisions more critical than ever.
As discussions unfold in Lido’s governance channels, stakeholders should monitor updates closely and prepare contingency plans to safeguard yield strategies and capital efficiency across chains.