ZKX protocol shuts down citing lack of user engagement and dwindling token prices

Decentralized trading platform ZKX Protocol is shutting down operations due to economic challenges. The announcement comes just a month after it completed a strategic funding round.

Founder Eduard Jubany Tur took to X to announce the shutdown on July 31, adding that the project doesn’t see an “economically viable path” to continue operations.

ZKX faces Economic challenges

The decision was fuelled by “minimal” user engagement, which resulted in a significant drop in trading volumes. According to Tur, only a few individuals had been mining STRK and ZKX rewards.

As of July 30, the project has closed all positions and markets on the platform. All user funds have been returned to the user’s trading account and will be available for transfer to the protocol’s main self-custodial account until the end of August.

With the dwindling revenue, the firm has been unable to sustain operational costs. Tur added that the entire revenue could only cover a “fraction” of the project’s cloud computing costs. 

As such, it was “impossible” to keep up with other expenses such as salaries and essential operational costs.

In such scenarios, projects often liquidate their token holdings to stay afloat.

However, for the defi protocol, that’s not possible, as its native token, ZKX has been declining steadily over the past months. At the time of writing, the token was down over 53% over the past 24 hours.

The poor performance of ZKX has been amplified as the token’s major holders have been cashing out.

Tur added that ZKX’s token generation event that happened on July 19 “didn’t meet expectations.” The token is down more than 97% from its all-time high reached a day after the TGE.

According to Tur, the defi market was “undervaluing” projects like the ZKX protocol, adding that there’s a “noticeable lack of demand.”

Further, Tur pointed out that there’s a “broader exhaustion” in the decentralized finance sector, which he believes has been a challenge for all active projects. 

The project has also considered moving to different networks, but the significant costs of rewriting its codebase don’t make this option viable.

There has also been a rise in “persistent hacking and scam attempts” on the project, according to Tur, further amplifying the challenges.

The decision to close came just a month after the project managed to raise $7.6 million in a June 19 funding round. Investors included GCR, Flowdesk, and DeWhales.

Defi projects face security issues

Over the past years, there have been several notable attacks in the defi space. In May, the Bitcoin layer 2 protocol Alex Labs was attacked.

According to on-chain sleuth ZachXBT, North Korea’s Lazarus group was behind the attack.

During the same month, defi lending protocol UwU suffered an exploit. The attacker managed to get away with $19.4 million.

A June 2024 report from security firm Crystal Intelligence highlighted that over the past years, defi platforms had been subjected to significantly more attacks than their centralised counterparts. 

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