Polygon Labs Chief Executive Officer Marc Boiron advocated for a substantial transformation in the manner decentralized finance (DeFi) protocols regulate liquidity, characterizing the industry’s persistent liquidity predicament as “self-inflicted.”
In a unique interview, Boiron delineated Polygon’s perspective on enduring DeFi, highlighting chain-owned liquidity and open economic frameworks as the way forward.
Boiron condemned DeFi protocols for perpetuating a cycle of “mercenary capital” by providing exorbitant annual percentage yields (APYs) via token emissions. “It’s merely renting liquidity; it’s not true loyalty,” he told Cointelegraph, pointing out that such tactics result in ephemeral liquidity that dissipates when yields decrease or token values falter. He asserted that this dependence on short-lived excitement compromises the sector’s stability and hinders institutional acceptance.
Pursuing DeFi stability over excitement
To dismantle that cycle, Boiron urged protocols to emphasize fundamentals rather than ostentatious returns. “Enduring DeFi necessitates models where liquidity remains for legitimate reasons,” he stated, referring to Polygon’s POL token as a paradigm for achieving this.
“Protocols can utilize their treasury to generate yield instead of eroding token value. Over time, this fortifies the treasury rather than merely compensating temporary liquidity providers.”
Polygon’s strategy focuses on chain-owned liquidity, where protocols establish treasuries to directly control liquidity positions as opposed to depending on outside providers. Unlike token emissions, which Boiron asserted attract liquidity rapidly but diminish token worth, owned liquidity ensures long-term stability and capital efficiency.
The only trade-off in the strategy, according to Boiron, is time. He elucidated that constructing a treasury through captured fees, bond mechanisms, or restricted emissions demands patience and prudent management.
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For traditional finance (TradFi), liquidity stability and predictability are prerequisites for comprehensive DeFi adoption:
“Traditional finance operates on models that require steady, dependable market access. If a DeFi protocol abruptly experiences liquidity loss or slippage surges, it creates a risk level that most institutions will not accept.”
Nonetheless, Boiron stated that Polygon’s solutions — sustainable treasury management, owned liquidity, and transparent frameworks — are not exclusively meant for institutions. “These are sound financial fundamentals that benefit any protocol,” he remarked, dismissing claims that Polygon’s approach is too narrow to tackle DeFi’s wider challenges.
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Crafting a scalable model for chain-owned liquidity
As Polygon advocates for a DeFi reset, Boiron remains hopeful about garnering support from frameworks such as Europe’s Markets in Crypto-Assets Regulation and evolving US guidelines. “We’re 12–18 months away from observing significantly more institutional involvement,” he predicted.
Looking towards 2026, Boiron envisions a more stable DeFi landscape characterized by reduced volatility, enhanced community governance, and advanced financial products linking TradFi and real-world assets. He expressed that Polygon (POL) could diminish reliance on mercenary capital, nurturing genuine decentralization.
He emphasized that POL serves as the cornerstone for long-term development, as it encourages protocols to concentrate on crafting superior products and maintaining user interest, rather than merely addressing liquidity shortages or diluting tokens for survival:
“POL doesn’t resolve everything on its own, but it grants protocols the space to tackle larger issues like user retention and capital flows in a proper manner.”
Boiron’s essential message to DeFi protocols is unequivocal: “Sustainable economics always triumphs over the long haul.” While market pressures create a temptation to pursue elevated APYs, he highlighted that surviving protocols from previous cycles illustrate the significance of sustainability. “More teams are beginning to understand this,” he mentioned, prompting the ecosystem to embrace models that prioritize enduring growth over temporary excitement.
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