Lido Finance has decided not to support the new Terra blockchain when it launches, after the sudden collapse of Terra’s current chain earlier this month.
The decentralized finance (DeFi) project’s decentralized autonomous organization (DAO) voted strongly against providing support for the new chain as of 6:20 a.m. ET on Wednesday, with 95% of the vote rejecting the idea. In total, 54 million LDO — Lido’s governance token – voted against, with only 3.1 million LDO for.
Lido Finance is a liquid staking protocol that unlocks the value of staked tokens, providing stakers with more liquidity. It’s currently the dominant liquid staking protocol on Ethereum. According to the proposal, Terra was its second-biggest platform after Ethereum, and it looked after $10 billion of value prior to its collapse.
Terra was a blockchain project focused on the creation of an algorithmic stablecoin known as TerraUSD (UST). This was supported by a second token, luna, and the relationship between the two was designed to keep the stablecoin pegged to the US dollar. Yet when there was large selling pressure, the connection between the two was unable to keep UST to its peg. This led to a death spiral for Luna in early May, as its token supply increased exponentially, while its price cratered toward zero.
Following that collapse, a vote to decide the Terra blockchain’s future is due to end in less than an hour. The main proposal is to relaunch the chain, airdropping tokens to different users that were affected by the previous network’s collapse. Many of the tokens are subject to vesting periods.
Crucially, the airdrop hands out tokens to projects that are committed to building on the new chain. This includes an emergency allocation to the biggest projects. If Lido Finance had decided to support the new Terra chain, it’s likely it would have been eligible to receive these funds. The proposal estimated that Lido Finance would see $19,250 in monthly revenue as a result of supporting the new chain.
Yet these incentives were not enough to convince token holders that Lido Finance should support the new network. Comments on the proposal say that it might be risky to support the new network when it’s first created — since it’s unclear whether it will gain traction in the same way the previous blockchain did.
“We can always join the reboot at a later time if the chain proves to be useful and well-run and has grassroots support. At this time there are too many questions around the reboot and committing poses potentially high downsides with little upside,” said one commentator.
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