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ZKX Token Crashes as Crypto.com-Backed DEX Shuts Down Amid Challenges
ZKX Protocol, a decentralized exchange backed by Crypto.com, has shut down due to financial difficulties.
Following the announcement, the ZKX token has plunged by more than 50% in the last 24 hours.
ZKX Token Crashes Over 50%
On July 30, co-founder Eduard Jubany Tur announced the discontinuation of the ZKX protocol. He expressed regret, stating that despite their efforts, they were unable to find an economically sustainable path for the protocol.
Second data According to CoinGecko, the ZKX token is currently trading at $0.01253, seeing a 52.5% drop in its value over the last 24 hours.
Effective immediately, all markets on the ZKX protocol have been cleared, positions closed, and funds returned to each user’s trading account. Users can transfer these funds to their self-custodial master accounts, which are wallets on the Starknet blockchain.
Withdrawals can be made via the Starkway Bridge back 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 has encouraged users to withdraw their funds and claim any pending STRK rewards. ZKX vesting and distribution will continue after sunset, starting September 1st.
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 of DragonFly Capital.
Low user engagement and high costs
Tur’s statement outlined several reasons for the decision to halt operations. The platform suffered from minimal user engagement, with only a handful of individuals mining STRK and ZKX rewards.
This lack of participation has led to a drastic decline in trading volumes, making it difficult for the protocol to generate enough revenue to cover its operating costs. Despite the efforts of market makers, the financial burden of maintaining the platform’s infrastructure, including cloud server fees, salaries, and other essential costs, has far exceeded its revenues.
“We carefully considered the possibility of expanding cross-chain, but realized that a significant portion of the entire code base would need to be rewritten, tested, and re-tested in Solidity, which would come at a significant cost. Given these challenges and the significant investment required, we have made the difficult decision to shut down the platform.”
The announcement also touches on broader issues within the DeFi sector. The market’s undervaluation of tokens like ZKX and a general lack of demand have worsened the protocol’s financial woes.
Major token holders exercising their cash-out rights have further reduced the value of the token. The ongoing exhaustion of the DeFi model over the past five years has also contributed to the overall decline of the sector.