The Rise and Fall of Saddle Finance: From Competitor to Curve to a Liquidation Endgame

Saddle Finance was once seen as a potential competitor to Curve, having raised $11.8 million in two rounds of financing in 2021, with investments from several well-known institutions. However, recently the Saddle community proposed a plan to cease operations and liquidate funds. Data shows that Saddle Finance's total locked value (TVL) is now only $3.68 million, and the market cap of its governance token $SDL is only $917,000. How did this once highly regarded project come to this point?

Top-notch support and highly anticipated start

One of the main differences between Saddle and Curve is that it uses the Solidity programming language instead of Vyper. This allows Saddle to avoid the recent vulnerability issues that have affected Curve.

In January 2021, Saddle announced that it had raised $4.3 million in seed funding. Before its official launch, the project also passed audits from several security agencies. Although Saddle did not initially issue governance tokens, the market generally anticipated that a token issuance would occur. These factors contributed to the high level of attention Saddle received upon its launch.

However, excessively high expectations have also brought problems. In the early stages of the launch, a large number of liquidity providers flooded in, leading to severe price imbalances in the asset pool. Some users suffered permanent losses as a result, while arbitrageurs profited from it.

In November 2021, Saddle announced the issuance of governance tokens and the launch of liquidity mining rewards, planning to airdrop 15% of the tokens to users. In addition, other related projects also provided additional rewards for Saddle's early liquidity providers. These initiatives further enhanced Saddle's popularity.

Security incidents and the beginning of decline

On April 30, 2022, Saddle's sUSDv2 pool was hacked. The attacker exploited a bug in the MetaSwapUtils library to profit by manipulating the LP token price. This incident resulted in Saddle losing $11 million, of which $3.8 million was returned by white hat hackers.

This security incident dealt a severe blow to Saddle. Its TVL plummeted from $280 million before the attack to $120 million. The subsequent collapse of UST further impacted Saddle, causing its TVL to drop to $70 million, and it has since been unable to recover.

Liquidation Proposal

Recently, the Saddle community proposed to dissolve the community and distribute the remaining assets. The main reasons include:

1. Core Contributor Program has stopped working
2. Potential Security Risks
3. The value of the protocol treasury exceeds the market value of the token
4. Long-term operations face management challenges

The proposal suggests that the remaining funds (, mainly 1.545 million $ARB), be distributed to users according to the proportion of $SDL and veSDL held. Each $SDL is expected to receive approximately $0.0026 worth of $ARB, slightly higher than the current market price of $SDL.

Although most community members support the liquidation, there are still differences in the specific execution details, such as the weight multiplier of veSDL and the choice of snapshot time.

This case demonstrates the entire process of a DeFi project going from highly anticipated to facing liquidation, reflecting the high risks and rapid changes characteristic of the cryptocurrency market.