The Rise and Fall of Saddle Finance: From Potential New Star to Liquidation Finale

In the decentralized finance (DeFi) space, Saddle Finance was once seen as a strong competitor to Curve. The project raised $11.8 million through two rounds of financing in 2021, with investments from several well-known venture capital firms.

However, the Saddle community recently proposed to shut down operations and liquidate funds. Data shows that the total locked value (TVL) of Saddle Finance is only $3.68 million, and the market value of its governance token $SDL has fallen to just $917,000. This dramatic shift has sparked interest in its development history.

A highly anticipated beginning

A major difference between Saddle and Curve lies in their underlying code. Saddle chose to use the Solidity language, which helps it avoid the recent vulnerability issues that have affected Curve.

In January 2021, Saddle announced that it had secured $4.3 million in seed funding. Before its official launch, the project had already passed audits from several well-known security firms. Although governance tokens were not issued initially, the market widely anticipated that Saddle would conduct a token issuance, which greatly stimulated user participation enthusiasm.

However, excessively high expectations also brought challenges. In the early stages of launch, the influx of a large number of liquidity providers led to an imbalance in the asset pool, causing some users to incur losses.

In November 2021, Saddle officially announced the issuance of governance tokens and launched a liquidity mining reward program, airdropping 15% of the total token supply to users. Additionally, other related projects provided extra rewards to early supporters of Saddle, further enhancing the project's appeal.

Security Incidents and Decline

In April 2022, Saddle suffered a major blow. Its sUSDv2 pool was hacked, resulting in a loss of up to $11 million. Although $3.8 million was later returned, this incident severely undermined user confidence. As can be seen from the TVL data, Saddle's locked assets plummeted from $280 million before the attack to $120 million.

Immediately afterwards, the UST crash event in May 2022 further exacerbated Saddle's predicament, with its TVL continuing to decline to $70 million and failing to recover since then.

liquidation proposal

In the face of the ongoing sluggish market performance, the Saddle community has recently proposed a plan for dissolution and liquidation. The main reasons for the proposal include:

1. The basic goals of the project have been achieved, and the core contributors plan to stop working by the end of September 2023.
2. Recent security incidents in the DeFi space have highlighted potential risks.
3. The value of the protocol treasury has exceeded the market value of the tokens, and it is recommended to allocate the airdrops obtained by the DAO to the token holders.
4. Continuing operations face challenges in management and coordination.

The proposal suggests liquidating all remaining DAO funds (mainly 1.545 million $ARB) and distributing them to community members according to the holding ratios of $SDL and veSDL.

According to preliminary calculations, each $SDL may receive approximately $0.0026 worth of $ARB, slightly higher than the current market price of $SDL.

Although most community members support the liquidation plan, there are still disputes over specific implementation details, such as the selection of the weight multiplier for veSDL and the snapshot timing, which require further discussion.

This case once again highlights the challenges faced by DeFi projects and provides valuable lessons for the industry.