DeFi shake-up: Lido cuts staff, Curve rethinks L2s

Two of the decentralized finance (DeFi) sector’s best known platforms, liquid staking protocol Lido and decentralized exchange Curve Finance, are considering slimming down.

Despite a recent resurgence in DeFi markets, Lido co-founder Vasiliy Shapovalov announced a 15% cut of contributors, and a fresh Curve governance proposal suggests cutting development on Layer Two (L2) networks.

Read more: DeFi is paying big to accumulate USDC

A drop in the ocean

Lido is the second largest DeFi protocol by total value locked (TVL) at $32 billion according to DeFiLlama, the sector’s leading data dashboard.

While it’s active on other chains, 99.9% of its TVL is held on Ethereum.

The sheer scale of staked ether (ETH) amassed by Lido, and the accompanying liquid wrapper allowing the locked tokens to be reused across DeFi, caused panic in May, when an emergency vote was raised to rotate a compromised oracle key.

On the cuts, Shapovalov recognizes that the decision may be “counterintuitive amid a market upswing” but that the DAO’s focus is on “sustainable growth, operational focus, and alignment with the priorities of LDO tokenholders.”

DeFiLlama data shows Lido core contributor salaries at just over $8 million, with a similar figure for operating expenses (though the figures are sourced from a 2022 report).

This year to date, Lido’s earnings have already surpassed $40 million.

L2 Curve-ball

The governance proposal made to Curve Finance’s DAO, on the other hand, suggests developers should cease work on L2 network integrations, which produce negligible protocol fees compared to Ethereum mainnet.

Curve is DeFi’s second largest decentralized exchange, judged by its TVL of $2.2 billion, and has processed over $7 billion of volume in the last month, 96% of which was on Ethereum.

When traders use the protocol’s pools to swap tokens, they pay a fee which is split between liquidity providers and the DAO.

DeFiLlama data shows that, apart from a brief period between in 2021 and 2022, when Curve’s non-mainnet deployments (mostly Polygon and Arbitrum) regularly produced over 10% of total fees, Curve’s mainnet pools have otherwise completely dominated trading activity.

Since the protocol’s launch in 2020, Ethereum pools have been responsible for 93% of all fees.

At the time of writing, the proposal has failed to generate much debate, with the only reply calling for more “background or context” in order to be able to properly discuss such a “radical” proposal.

Decentralized autonomous organizations, the standard way to run DeFi projects, are often synonymous with inefficiency, waste, and even accusations of teams looting treasuries.

A flat, non-hierarchical structure and culture of open contribution is often seen as a noble endeavor but, perhaps, not the best bang for one’s digital buck.