The Rise and Fall of Saddle Finance: From DeFi Star Project to Final Liquidation

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

However, the Saddle community recently proposed to cease operations and liquidate funds. According to statistics from a certain data platform, Saddle Finance's total locked value (TVL) is only 3.68 million USD, and the market value of its governance token $SDL has fallen to 917,000 USD. How did this once highly regarded project end up in this situation?

Project Launch and Early Development

One important difference between Saddle and Curve lies in their underlying code. Saddle chooses to use the Solidity language, rather than the Vyper used by Curve. This choice allows Saddle to avoid the recent attacks that Curve suffered due to vulnerabilities in Vyper.

In January 2021, Saddle officially launched. Prior to this, the project had completed a $4.3 million seed funding round, attracting participation from several top venture capital firms. To ensure security, Saddle also underwent audits by multiple security auditing firms.

Although Saddle did not issue governance tokens at launch, the market generally expects that it will issue tokens. This expectation, combined with endorsements from top investors, led to widespread attention for Saddle upon its release.

However, overly high expectations have also brought some problems. In the early stages of the launch, the influx of a large number of liquidity providers led to an imbalance in the asset pool, causing some users to suffer significant losses.

In November 2021, Saddle announced the issuance of governance tokens and the launch of liquidity mining rewards. In addition to the airdrop of the $SDL token, other related projects also provided additional rewards for early users of Saddle, further increasing the project's popularity.

encountered a major security incident

On April 30, 2022, the sUSDv2 liquidity pool of Saddle was hacked. The attack exploited a vulnerability in an old version of the MetaSwapUtils library, resulting in losses of approximately 11 million dollars for Saddle. Although 3.8 million dollars were returned by white-hat hackers, this incident severely undermined user confidence.

From the TVL data, it can be seen that Saddle's locked amount plummeted from 280 million USD before the attack to 120 million USD. The subsequent UST collapse event further exacerbated the capital outflow, causing Saddle's TVL to drop to 70 million USD and continue to decline.

Clearing Proposal

In August this year, the Saddle community proposed a dissolution agreement and a proposal for distributing the remaining value. The main reasons given for the proposal include:

1. The basic vision of the project has been realized, and the core team plans to resign by the end of September.
2. Recent security incidents in the DeFi sector have highlighted potential risks.
3. The value of the protocol treasury has exceeded the market value of the tokens, and it is recommended to distribute the acquired $ARB airdrop to token holders.
4. Continuing operations faces long-term management and coordination difficulties.

The proposal suggests liquidating the remaining funds (, mainly 1.545 million $ARB), and distributing them according to the holding ratio of $SDL and veSDL. Each $SDL is expected to receive about $0.0026 worth of $ARB, slightly higher than the current market price of $SDL.

Although most community members support the liquidation, there are still some controversies regarding specific execution details, such as the weight multiplier of veSDL and the choice of snapshot time. These issues still require further discussion and negotiation.