Polygon Labs CEO Advocates for Chain-Owned Liquidity to Tackle DeFi's Self-Inflicted Liquidity Crisis

Marc Boiron’s Call for a Shift in DeFi Liquidity Management

Marc Boiron, the CEO of Polygon Labs, has issued a call for a radical change in the way decentralized finance (DeFi) protocols handle liquidity. According to him, the ongoing liquidity crisis in the sector, which Boiron refers to as self-inflicted, requires an urgent shift towards sustainable DeFi. In an exclusive interview, he detailed Polygon’s vision with an emphasis on chain-owned liquidity and transparent economic models.

Challenge of Mercenary Capital and Fleeting Liquidity

Boiron took issue with DeFi protocols for steering a cycle of what he terms mercenary capital. This cycle is created by offering high annual percentage yields (APYs) via token emissions. Boiron however, views this as merely renting liquidity as opposed to building true loyalty. He notes that such strategies often lead to temporary liquidity that evaporates when yields fall or token prices experience a dip. In his opinion, depending on short-term hype undermines the sector’s stability and discourages institutional adoption. Boiron suggests that protocols should focus on fundamentals rather than attention-grabbing returns. According to him, sustainable DeFi demands models where liquidity is maintained for the right reasons.

Polygon’s Approach towards Chain-Owned Liquidity

Polygon’s strategy revolves around chain-owned liquidity, where protocols establish treasuries to directly control liquidity positions instead of depending on external suppliers. Boiron contends that, unlike token emissions which attract liquidity quickly but dilute token value, owned liquidity offers long-term stability and capital efficiency. However, Boiron accepts that the one trade-off in the plan is time. Building a treasury through captured fees, bond mechanisms or limited emissions requires patience and discipline to manage.

Adoption of DeFi into Traditional Finance

For traditional finance (TradFi), the prerequisites for complete DeFi adoption include liquidity stability and predictability. Nevertheless, Boiron asserts that Polygon’s solutions which include sustainable treasury management, owned liquidity and transparent models, aren’t merely for institutions. He believes these are sound financial fundamentals that work for any protocol, dismissing ideas that Polygon’s strategy is too limited to address broader DeFi issues.

Expectations for Institutional Involvement and Future Stability

Boiron remains positive about obtaining support from frameworks such as Europe’s Markets in Crypto-Assets Regulation and evolving US guidance. He predicts a significant increase in institutional involvement within the next one to two years. Looking to the future, Boiron projects a more stable DeFi ecosystem by 2026 with less volatility, stronger community governance, and advanced financial products bridging TradFi and real world assets. He believes Polygon could reduce dependence on mercenary capital, promoting genuine decentralization.

Long-Term Growth and Sustainability

Boiron reiterated that POL (Polygon’s token) forms the foundation for sustainable growth. The POL helps protocols concentrate on enhancing products and retaining user engagement, rather than trying to fill liquidity gaps or diluting tokens merely to remain solvent. His core message to DeFi protocols is unequivocal: Sustainable economics always win in the long run. While market pressures make it tempting to chase high APYs, he observes that protocols that have survived past cycles underline the value of long-term sustainability. “More and more teams are beginning to understand,” he said, encouraging the ecosystem to choose models that prioritize longevity and growth over fleeting hype.