ZKX Protocol Shuts Down After Raising Millions

According to a statement released by co-founder Eduard Jubany Tur on Wednesday, the decentralized finance trading platform ZKX Protocol has ceased operations due to insurmountable economic challenges.

Tur pointed out that maintaining and attracting a token-incentivized DeFi community has become increasingly challenging. “In recent months, the number of threats and abuses has surged, with persistent hacking and scams,” he added.

“We deeply regret announcing the shutdown of the ZKX Protocol. Despite our best efforts, we could not find an economically viable path forward for the protocol,” Tur said.

Effective immediately, all markets on ZKX have been delisted, positions have been closed, and funds have been returned to users' trading accounts. Users can transfer their funds from trading accounts to self-custody accounts on Starknet.

According to the statement, users can withdraw funds via the Starkway Bridge. The protocol's sunset period will continue until the end of August, with vesting and distribution continuing after September 1.

The decision was made following a period of declining user engagement and trading volume, which severely impacted ZKX's revenue streams. Tur stated, “Our user engagement was very low, with only a few people mining STRK and ZKX rewards. Consequently, trading volume plummeted, and daily revenue barely covered a small portion of our cloud server costs.”

Despite numerous efforts by market makers, costs exceeded revenues, necessitating the closure.

As a result of this news, the price of the ZKX token dropped by 50.6% within 24 hours, and since the TGE, the price of $ZKX has fallen by over 90%.

Founded in 2021, ZKX was a decentralized exchange built on StarkNet. It had previously received support from StarkWare, Amber Group, Huobi, Crypto.com, as well as individual investors such as Polygon co-founder Sandeep Nailwal and DragonFly Capital General Partner Ashwin Ramachandran.

Just a month ago, ZKX Protocol had secured $7.6 million in a strategic round of funding.

Tur acknowledged that the Token Generation Event (TGE) did not meet expectations, resulting in financial losses. The cashing out by major token holders further exacerbated the decline in token value.

ZKX Protocol is not alone in this situation; many projects have seen a sharp decline in user activity post-token issuance. Additionally, due to the nature of the ecosystem, Layer2 projects have also experienced a drop in on-chain activity following TGE announcements. This has led to a significant decrease in user numbers and protocol revenue for many projects built on the Layer2 ecosystem.

Converting users attracted by airdrop expectations into long-term users is a challenge faced by project teams.