DeFi
ZKX Token Crashes as Crypto.com-Backed DEX Shuts Down Due to Difficulties
ZKX Protocol, a decentralized exchange backed by Crypto.com, has shut down due to economic difficulties.
Following the announcement, the ZKX token dropped by more than 50% in the last 24 hours.
ZKX token drops more than 50%
On July 30, co-founder Eduard Jubany Tur announcement the termination of the ZKX protocol. He expressed regret, stating that despite all their efforts, they were unable to find an economically viable path forward for the protocol.
According to data According to CoinGecko, the ZKX token is currently trading at $0.01253, a 52.5% drop in value over the past 24 hours.
Effective immediately, all markets on the ZKX protocol have been delisted, positions closed, and funds returned to each user’s trading account. Users can transfer these funds to their primary self-custodial accounts, which are wallets on the Starknet blockchain.
Withdrawals can be made via the Starkway bridge to Layer 1 at any time. The protocol will also enter a sunset period that will last until the end of August, during which Tur encouraged users to withdraw their funds and claim any pending STRK rewards. ZKX acquisition and distribution will continue after sunset, starting on September 1.
Founded in 2021, ZKX aimed to create a scalable decentralized exchange for perpetual trading. The project has received backing from notable investors including 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.
Low user engagement and high costs
Tur’s statement outlined various reasons why it decided to shut down its operations. The platform suffered from minimal user engagement, with only a handful of individuals mining STRK and ZKX rewards.
This lack of participation led to a drastic drop in trading volumes, making it difficult for the protocol to generate enough revenue to cover its operational costs. Despite the efforts of market makers, the financial burden of maintaining the platform’s infrastructure, including expenses for cloud servers, salaries, and other essential costs, far exceeded its revenue.
“We carefully evaluated the possibility of extending the platform to multiple chains, but realized that a significant portion of the code base would need to be rewritten, tested, and re-audited in Solidity, which would incur a significant cost. Given these challenges and the substantial investment required, we have made the difficult decision to shut down the platform.”
The announcement also speaks to broader issues within the DeFi sector. The market’s undervaluation of tokens like ZKX and a general lack of demand have compounded the protocol’s financial woes.
Major token holders exercising their withdrawal rights further pushed the token’s value down. The continued exhaustion of the DeFi model over the past five years has also contributed to the overall decline of the sector.