The Rise and Fall of Saddle Finance: From Unlimited Potential to Liquidation Endgame

Saddle Finance was once regarded as a strong competitor to the stablecoin trading protocol Curve. In 2021, the project raised $11.8 million in two rounds of financing, attracting interest from many well-known investment institutions.

However, the Saddle community recently proposed a plan to shut down operations and liquidate funds. According to data platform statistics, Saddle Finance's total locked value (TVL) is only $3.68 million, and the market value of its governance token $SDL has dropped to just $917,000. How did this once highly anticipated project come to this point?

Initial Phase: Top-Level Support and Airdrop Expectations

One major difference between Saddle and Curve lies in their underlying code. Saddle is written in Solidity, which allows it to avoid the recent code vulnerability issues that have affected Curve.

In January 2021, Saddle announced the completion of a $4.3 million seed round financing, receiving support from several top investment institutions. Before its official launch, the project also passed audits from multiple security auditing agencies.

Although Saddle did not issue governance tokens at the beginning, the market generally expects a token airdrop. Liquidity is crucial for decentralized exchanges. A strong investment background, rigorous security audits, and expectations of an airdrop have made Saddle a focus of attention since its launch.

However, excessively high expectations have also brought some problems. In the early stages of the launch, a large number of liquidity providers flocked in, leading to an imbalance in the asset ratio within the liquidity pool. Some users suffered severe slippage losses, while some arbitrageurs profited from it.

In November 2021, Saddle officially announced the issuance of governance tokens and the launch of liquidity mining rewards, planning to airdrop a total of 15% of the tokens to users. By mid-2022, the $SDL token began circulation. In addition, some related projects also provided additional rewards for early supporters of Saddle. These factors collectively drove the popularity of Saddle during its initial launch and airdrop phase.

Suffering Heavy Losses: Hacker Attacks and Market Turmoil

On April 30, 2022, the sUSDv2 liquidity pool of Saddle was attacked by hackers. The attackers exploited a vulnerability in the MetaSwapUtils library to manipulate the LP token price through a flash loan, ultimately stealing approximately 11 million dollars.

Although 3.8 million dollars were returned by white hat hackers, this incident still dealt a serious blow to Saddle. The platform's total locked value plummeted from 280 million dollars before the attack to 120 million dollars.

Subsequently, the market turmoil triggered by the collapse of UST in May 2022 further impacted Saddle. The platform's locked assets fell again to $70 million and never recovered.

The Road to the End: Liquidation Proposal

On August 8th, the Saddle community proposed a plan to cease operations and liquidate funds. The main reasons given for the proposal include:

1. The core team plans to stop working by the end of September 2023.
2. The recent hacking attack on Curve highlights potential security risks.
3. The value of the protocol treasury has exceeded the market value of the tokens, and it is recommended to allocate the received Arbitrum airdrop to the token holders.
4. Continuing operations face long-term coordination and management difficulties.

The proposal suggests converting all remaining DAO funds into $ARB tokens and distributing them according to the holding ratio of $SDL and veSDL. According to the plan, each $SDL can receive approximately $0.0026 worth of $ARB, slightly higher than the current market price of $SDL.

For a project with low usage but still has remaining funds, liquidation is indeed a reasonable choice. Most community members also expressed support for this decision. However, there are still some disputes regarding the specific execution details, such as the weight multiplier of veSDL and the choice of snapshot time.

This project, once regarded as a strong competitor to Curve, may ultimately end with liquidation, becoming another reflection of the ups and downs of the crypto market.