TLDR
- ZKX Protocol, a derivatives trading platform on Starknet, is shutting down due to lack of user engagement and falling revenues.
- The protocol had raised $7.6 million in funding just a month ago from various investors.
- ZKX has delisted all markets, closed positions, and returned funds to users’ trading accounts.
- The protocol’s ZKX token has fallen 96.4% from its all-time high shortly after launch in June.
- Founder Eduard Jubany Tur cited minimal user engagement, decreased trading volumes, and broader exhaustion in the DeFi sector as reasons for closure.
ZKX Protocol, a social derivatives trading platform built on the Ethereum Layer-2 network Starknet, has announced its closure. The decision comes just weeks after raising significant funding, highlighting the volatile nature of the decentralized finance (DeFi) sector.
Eduard Jubany Tur, the founder of ZKX, announced the shutdown on July 31, 2024. In a post on social media platform X, Tur explained that the protocol could no longer find an “economically viable path” forward. The closure comes as a surprise to many, considering ZKX had secured $7.6 million in a strategic funding round just last month.
Important Statement 30.07.24
With much regret, we have to announce the discontinuation of the ZKX protocol. Despite our best efforts, we have been unable to find an economically viable path for the protocol.
(1) All markets have been delisted, positions have been closed and all…
— Eduard (@0xEduard) July 30, 2024
The protocol, which aimed to create a scalable decentralized exchange for perpetual trading, faced several challenges that led to its demise. Tur cited minimal user engagement as a primary factor, noting that only a few individuals were participating in the protocol’s rewards program. Additionally, trading volumes had “significantly decreased,” with daily revenue barely covering a fraction of the cloud server expenses.
In response to these challenges, ZKX has taken immediate action. The protocol has delisted all markets, closed all positions, and returned funds to each user’s trading account. Users have until the end of August to transfer their funds from their trading wallets to the protocol’s main self-custodial account on Starknet.
The ZKX token, launched in June 2024, has experienced a dramatic decline in value.
According to data from CoinGecko, the token fell 37.8% in the 24 hours following the shutdown announcement. More strikingly, it has lost 96.4% of its value since reaching an all-time high of $0.62 a day after its launch on June 20.
Tur acknowledged that the token generation event (TGE) “didn’t meet expectations,” contributing to the protocol’s current situation. As major token holders exercised their right to cash out, the token’s value continued to decline, making it impossible to “sustainably support” the protocol.
The closure of ZKX reflects broader challenges in the DeFi sector. Tur pointed to “broader exhaustion” in the industry, suggesting that the market is undervaluing the work done and infrastructure built by blockchain applications and ecosystems like ZKX.
Despite these setbacks, ZKX had previously garnered support from notable investors in the crypto space. The protocol had received backing from companies such as StarkWare, Amber Group, Huobi, and Crypto.com. Individual investors included Sandeep Nailwal, Co-Founder of Polygon, and Ashwin Ramachandran, General Partner at DragonFly Capital.
Tur expressed gratitude for the support received from the Starkware team and the Starknet Foundation throughout the development process. He also acknowledged the ZKX community, which he described as both a source of support and pressure.
The shutdown of ZKX raises questions about the sustainability of DeFi projects, even those with significant funding and industry support. It highlights the challenges of maintaining user engagement and generating consistent revenue in a rapidly evolving and competitive market.
As the protocol winds down operations, the team has implemented a sunset period lasting until the end of August. Vesting and distribution will continue after September 1, 2024. Users can make withdrawals through the Starkway Bridge.
