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

Saddle Finance was once viewed as a potential competitor to Curve, having raised $11.8 million in two rounds of funding in 2021, with investments from several well-known institutions.

However, recently the Saddle community proposed to shut down operations and liquidate funds. Data shows that Saddle Finance's total locked value (TVL) is only 3.68 million USD, and the market value of its governance token $SDL is also only 917,000 USD. How did this once highly regarded project come to this point?

Initial Development and Airdrop Plan

One major difference between Saddle and Curve lies in the programming languages used. Saddle uses Solidity, which helps it avoid the recent vulnerability issues that have affected Curve.

Saddle raised $4.3 million in seed funding from several well-known investment firms when it launched in January 2021. Before going live, Saddle also underwent audits by several security agencies.

Although Saddle did not initially issue a governance token, the market generally expects a token issuance. For decentralized exchanges, liquidity is crucial, and issuing a governance token is an important means to attract liquidity providers. The involvement of top investors, multiple security audits, and airdrop expectations have led to high attention on Saddle since its launch.

However, high expectations also brought about problems. In the early stages of the launch, a large number of liquidity providers flooded in, leading to an imbalance in the proportion and price of assets in the fund pool, resulting in some users' losses.

In November 2021, Saddle announced the issuance of governance tokens and the launch of liquidity mining rewards, planning to airdrop 15% of the total token supply to users. By mid-2022, the $SDL token began circulating. In addition to the $SDL airdrop, some other related projects also provided rewards to Saddle's early liquidity providers. These factors brought high popularity to Saddle during its initial launch and airdrop period.

fell into decline after being attacked by hackers

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 properly calculate the value of LP tokens during transactions. The hacker used a flash loan to carry out a series of operations, manipulating the price of LP tokens and thereby obtaining a large amount of funds.

This attack caused Saddle to lose 11 million dollars, of which 3.8 million dollars were returned by white-hat hackers. However, some statements made by Saddle officials during the handling of the incident have caused dissatisfaction among users.

The TVL data shows that Saddle's locked value sharply decreased from $280 million before the attack to $120 million. In May 2022, following the collapse of UST, Saddle's locked value further dropped to $70 million and has remained sluggish since.

liquidation plan

Recently, the Saddle community proposed to dissolve the community and allocate the remaining assets. The main reasons given for the proposal include:

• Many core contributors plan to stop working by the end of September 2023.
• The recent hacker attack on Curve has highlighted potential security risks.
• The value of the protocol treasury has exceeded the circulating market value of the tokens.
• Continuing operations face management and coordination difficulties.

Currently, the treasury mainly holds 1.545 million $ARB tokens. The proposal suggests liquidating all remaining funds into $ARB and distributing them to users based on their holdings of $SDL and veSDL.

According to the proposal, each $SDL can receive an airdrop of about $0.0026 worth of $ARB. As of August 10, the market price of $SDL was $0.00209, below the expected airdrop value.

In cases where the project's usage rate is low but there are still surplus funds in the treasury, liquidation seems to be a feasible way to conclude. Most people in the community agree with liquidation, but there are still some questions about the specific execution details, such as the weight ratio of $SDL and veSDL, and the choice of snapshot time.