Polygon Labs CEO Marc Boiron is advocating for a radical change in the management of liquidity by decentralized finance (DeFi) protocols. He described the ongoing liquidity crisis in the sector as “self-inflicted”. In a recent exclusive interview, Boiron presented Polygon’s blueprint for a sustainable DeFi future, highlighting the importance of chain-owned liquidity and transparent economic models.
Boiron critiqued DeFi protocols for creating a cycle of “mercenary capital” by promising exceptionally high annual percentage yields (APYs) through token emissions. “This is merely hiring liquidity, it doesn’t breed true loyalty,” he told Cointelegraph. He pointed out that such strategies result in transient liquidity that disappears as soon as yields fall or token prices waver. This dependence on short-lived hype, he contended, undermines the sector’s stability and impedes institutional adoption.
Boiron urged protocols to focus on fundamentals rather than lucrative returns to break this cycle. He explained that “sustainable DeFi needs models where liquidity is present for the right reasons,” citing Polygon’s POL token as a model for achieving this.
“Protocols can leverage their treasury to generate yield instead of devaluing token value. This strategy strengthens the treasury over time rather than simply compensating temporary liquidity providers,” Boiron added.
Polygon’s strategy is centered on chain-owned liquidity, where protocols build treasuries to directly own liquidity positions instead of depending 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.
However, time is the only trade-off, according to Boiron. He revealed that building a treasury through captured fees, bond mechanisms or limited emissions necessitates patience and disciplined management.
Furthermore, for traditional finance to fully adopt DeFi, liquidity stability and predictability are essential. He emphasized that Polygon’s solutions — sustainable treasury management, owned liquidity, and transparent models — apply to all protocols, rejecting claims that Polygon’s strategy is too narrow to solve DeFi’s wider issues.
Despite the challenges, Boiron remains hopeful about gaining support from frameworks like Europe’s Markets in Crypto-Assets Regulation and evolving US guidance. Boiron concluded by emphasizing that “sustainable economics always prevail in the long run.” He encouraged the ecosystem to adopt models that prioritize long-term growth over temporary buzz.
