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

Saddle Finance was once seen as a strong competitor to Curve, gaining $11.8 million in investment through two rounds of financing in 2021, attracting the attention of several well-known investment firms. However, recently, the Saddle community proposed a plan to shut down operations and liquidate funds. According to data platforms, the current total locked value of Saddle Finance is (TVL), which is only $3.68 million, and the market capitalization of its governance token $SDL has fallen to $917,000. So, how did Saddle Finance go from being a highly regarded project to the situation it is in today?

An important difference between Saddle and Curve lies in their underlying code implementation. Saddle chooses to use the Solidity language, whereas Curve uses Vyper. This choice has allowed Saddle to fortunately avoid the recent attacks that Curve suffered due to vulnerabilities in Vyper.

In January 2021, Saddle officially announced that it had secured $4.3 million in seed funding at its launch. Before going live, several well-known security agencies conducted audits on Saddle. Although Saddle initially did not issue governance tokens, the market widely expected it to follow the example of other DEX projects and offer substantial token rewards to liquidity providers in the future. These factors collectively contributed to the high level of attention Saddle received at the time of its launch.

However, excessively high expectations have also brought about some issues. During the initial launch phase, a large number of liquidity providers flocked in, resulting in an imbalance in the proportion and price of assets in the liquidity pool. Some users suffered significant slippage losses, and some arbitrageurs took the opportunity to profit.

In November 2021, Saddle announced the issuance of governance tokens and the launch of a liquidity mining reward program, committing to airdrop 15% of the total tokens to users. By mid-2022, the $SDL token began circulating. In addition to the $SDL airdrop, several other related projects also provided additional rewards to early supporters of Saddle. These initiatives brought significant attention to Saddle during the initial launch and airdrop period.

However, on April 30, 2022, Saddle suffered a major blow. Its sUSDv2 pool was hacked, resulting in a total loss of 11 million dollars. Although 3.8 million dollars were returned by white hat hackers, this incident severely impacted user confidence. Data shows that Saddle's TVL plummeted from 280 million dollars before the attack to 120 million dollars.

Subsequently, the UST collapse event in May 2022 further hit Saddle, causing its TVL to drop again to $70 million, and it has not been able to recover since.

In the face of a continuous decline, the Saddle community proposed on August 8 to dissolve the community and liquidate its assets. The proposal pointed out that the original intention of Saddle has been basically achieved, and many core contributors plan to stop working by the end of September 2023. Meanwhile, the recent Curve hacking incident has also highlighted potential security risks. In addition, the value of the protocol treasury has exceeded the circulating market value of the tokens, and community members suggested allocating the Arbitrum airdrop received by the DAO to token holders.

According to the proposal, Saddle plans to convert all remaining DAO funds into $ARB and distribute them to all holders according to the holding ratio of $SDL and veSDL. Currently, the airdrop value of each $SDL corresponds to approximately $0.0026 in $ARB, which is slightly higher than the current market price of $SDL.

There are still some disputes within the community regarding specific liquidation plans, such as the weight ratio between $SDL and veSDL, and the choice of snapshot time. Nevertheless, in the case where the project's utilization rate is sluggish but there are still surplus funds in the treasury, most community members agree that liquidation is a reasonable choice.