The Rise and Fall of Saddle Finance: From Being in the Spotlight to Liquidation Closure

Saddle Finance was once regarded as a strong competitor to a well-known DEX. In two rounds of financing in 2021, the project secured a total investment of $11.8 million from several well-known investment institutions.

Recently, the Saddle community proposed to cease operations and liquidate funds. According to statistics from the data platform, the total locked value of Saddle Finance is (TVL), which has only 3.68 million USD left, and the market value of its governance token $SDL has dropped to 917,000 USD. So, how did Saddle Finance find itself in this situation step by step?

project launch and airdrop attract follow

One important difference between Saddle and a well-known DEX lies in its code implementation language. Saddle uses Solidity, which helps it avoid the impact of recent hacking attacks on a certain DEX.

In January 2021, Saddle announced the completion of a $4.3 million seed round of financing, with investment from several top venture capital firms. Before the official launch, Saddle also passed inspections from multiple security audit agencies.

Although Saddle did not issue governance tokens at launch, the market generally expects that the project will issue tokens in the future. For decentralized exchanges, liquidity is crucial, and other similar projects have also provided substantial token rewards to liquidity providers when issuing governance tokens. The support of top investment institutions, multiple security audits, and airdrop expectations have greatly increased attention on Saddle's launch.

However, excessively high expectations have also triggered some issues. In the early stages of the launch, a large number of liquidity providers flocked in, leading to an imbalance in the asset ratio and prices in the fund pool, resulting in losses for some users.

In November 2021, Saddle announced the issuance of governance tokens and the launch of liquidity mining rewards, airdropping a total of 15% of the tokens to users. By mid-2022, the $SDL token began circulating. In addition to $SDL, several other projects also distributed rewards to early liquidity providers of Saddle. These factors brought high follow to Saddle during its early launch and airdrop period.

suffered a hacker attack, and the project began to decline.

On April 30, 2022, the sUSDv2 liquidity pool of Saddle was hacked. It was reported that this was due to a bug in the old version of the MetaSwapUtils library, which did not use "virtual prices" to calculate the value of LP tokens during transactions. The hacker performed a series of operations using flash loans to manipulate the price of LP tokens, thereby obtaining a large amount of funds.

In this incident, Saddle lost 11 million dollars, of which 3.8 million dollars were returned by the security team. After this attack, the liquidity in Saddle dropped straight from 280 million dollars to 120 million dollars.

In May 2022, with the crash of a well-known algorithmic stablecoin, the liquidity in Saddle again plummeted to $70 million and has since struggled to recover.

project liquidation plan

Recently, the Saddle community proposed to dissolve the community and distribute the remaining assets, citing reasons such as:

• The basic goals of the project have been achieved, and the core team plans to cease operations by the end of September 2023.
• Recent hacking incidents in the industry indicate that protocols may face potential security risks.
• The value of the protocol treasury has exceeded the circulating market value of the tokens, it is recommended to distribute the received token airdrop to the token holders.
• Continuing operations requires long-term coordination and management, which is quite difficult.

Currently, Saddle's main asset is the received 1.545 million $ARB tokens. The proposal suggests converting all remaining funds into $ARB and distributing them to community members according to the holding ratio of $SDL and veSDL.

According to the proposal, each $SDL can obtain an $ARB value of approximately $0.0026, slightly higher than the current market price of $SDL.

In cases where the project has low utilization but there are still surplus funds in the treasury, liquidation has become a feasible way to conclude. Most community members support liquidation, but there are still some controversies regarding the specific execution details, such as the weight ratio of $SDL to veSDL and the choice of snapshot time, which need further discussion.