DeFi must ditch hype for sustainable liquidity

Polygon Labs CEO Marc Boiron called for a fundamental shift in how decentralized finance (DeFi) protocols manage liquidity, labeling the sector’s ongoing liquidity crisis as “self-inflicted.”

In an exclusive interview, Boiron outlined Polygon’s vision for sustainable DeFi, emphasizing chain-owned liquidity and transparent economic models as the path forward.

Boiron criticized DeFi protocols for fueling a cycle of “mercenary capital” by offering sky-high annual percentage yields (APYs) through token emissions. “It’s just renting liquidity; it’s not real loyalty,” he told Cointelegraph, noting that such strategies lead to fleeting liquidity that vanishes when yields drop or token prices falter. This reliance on short-term hype, he argued, undermines the sector’s stability and deters institutional adoption.

Chasing DeFi stability over hype

To break that cycle, Boiron urged protocols to prioritize fundamentals over flashy returns. “Sustainable DeFi needs models where liquidity sticks around for the right reasons,” he said, pointing to Polygon’s POL token as a blueprint for achieving this.

“Protocols can put their treasury to work, earning yield instead of diluting token value. Over time, this strengthens the treasury rather than just paying off temporary liquidity providers.”

Polygon’s approach centers on chain-owned liquidity, where protocols build treasuries to directly own liquidity positions rather than relying on external providers. Unlike token emissions, which Boiron said attract liquidity quickly but dilute token value, owned liquidity offers long-term stability and capital efficiency.

The only trade-off in the plan, according to Boiron, is time. He explained that building a treasury through captured fees, bond mechanisms or limited emissions requires patience and disciplined management.

Polygon prepares to onboard traditional finance in crypto

For traditional finance (TradFi), liquidity stability and predictability are prerequisites for full DeFi adoption:

“Traditional finance runs on models that need stable, reliable market access. If a DeFi protocol suddenly loses liquidity or slippage spikes, it creates a level of risk most institutions just won’t take.”

However, Boiron said that Polygon’s solutions — sustainable treasury management, owned liquidity and transparent models — are not just for institutions. “These are good financial fundamentals that work for any protocol,” he said, dismissing suggestions that Polygon’s strategy is too narrow to address DeFi’s broader issues.

Building a scalable blueprint for chain-owned liquidity

As Polygon pushes for a DeFi reset, Boiron remains optimistic about getting support from frameworks like Europe’s Markets in Crypto-Assets Regulation and evolving US guidance. “We’re 12–18 months away from seeing a lot more institutional involvement,” he predicted.

Looking to 2026, Boiron envisions a more stable DeFi ecosystem with less volatility, stronger community governance and sophisticated financial products bridging TradFi and real-world assets. He said Polygon (POL) could reduce reliance on mercenary capital, fostering true decentralization.

He added that POL is the foundation for long-term growth, as it helps protocols focus on building better products and keeping users engaged, instead of plugging liquidity gaps or diluting tokens to stay afloat:

“POL doesn’t solve everything on its own, but it gives protocols the breathing room to tackle bigger challenges like user retention and capital inflows the right way.”

Boiron’s core message to DeFi protocols is clear: “Sustainable economics always win in the long run.” While market pressures make it tempting to chase high APYs, he noted that surviving protocols from past cycles prove the value of sustainability. “More teams are starting to get it,” he said, urging the ecosystem to adopt models that prioritize long-term growth over fleeting buzz.

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