DeFi
Crypto.com-backed ZKX protocol to shut down due to economic difficulties
Decentralized financial trading platform ZKX Protocol is set to cease operations, citing insurmountable economic challenges, according to a press release. statement by co-founder Eduard Jubany Tur on Wednesday.
Tur cited the growing challenges of maintaining and engaging a DeFi community driven by token incentives. “In recent months, the volume of threats and abuse has increased, alongside persistent hacking and scam attempts,” he added.
“It is with great regret that we have to announce the discontinuation of the ZKX protocol. Despite our best efforts, we have not been able to find an economically viable solution for the protocol,” Tur said.
Effective immediately, all markets on ZKX have been delisted and positions closed with funds returned to users’ trading accounts. Users can transfer their funds from their trading accounts to their self-custodial accounts on Starknet.
Withdrawals can be made via the Starkway Bridge, the statement said. The protocol’s sunset period will last until the end of August, with vesting and distribution continuing after September 1.
This decision follows a period of declining user engagement and transaction volumes, which had a significant impact on ZKX’s revenue streams.
“Our user engagement has been minimal, with only a few individuals mining STRK and ZKX rewards. As a result, trading volumes have significantly decreased and daily revenue can barely cover a fraction of our cloud server expenses,” Tur said.
Despite the efforts of market makers, costs exceeded revenues, necessitating closure.
ZKX’s economic woes are compounded by the poor performance of its token, exacerbated by withdrawals from large token holders, leading to a decline in the token’s value.
“The market underestimates the work being done and the infrastructure being built by appchains and dApps coming from ecosystems like ours,” Tur noted.
Founded in 2021, ZKX aimed to create a scalable decentralized exchange for perpetual trading. ZKX has already received backing from StarkWare, Amber Group, Huobi, Crypto.com, and individual investors such as Sandeep Nailwal, co-founder of Polygon, and Ashwin Ramachandran, general partner at DragonFly Capital.
Despite proving the viability of its model and building a robust infrastructure on Starknet, the exhaustion of the broader DeFi market has hampered its success.
“We started this journey with the desire to create a new generation of perverse application chains that could scale as much as a CEX but offer the benefits of a DEX,” Tur said.
He acknowledged the support of the Starkware team and the Starknet Foundation, highlighting their contributions throughout the development process.
The ZKX community has also been a source of both support and pressure, Tur said.