The ZKX Protocol, a Crypto.com-backed decentralized exchange, has shut down due to economic challenges. Following the announcement, the ZKX token plunged by over 50% in the last 24 hours.

Crypto.com-backed decentralized exchange ZKX Protocol has shut down its operations due to economic challenges. Following the announcement, the ZKX token plunged by over 50% in the last 24 hours.

Announced by co-founder Eduard Jubany Tur on July 30, the ZKX protocol will be discontinued. In a statement, Tur expressed regret, stating that despite their best efforts, they were unable to find an economically viable path for the protocol.

According to data from CoinGecko, the ZKX token is currently trading at $0.01253, indicating a 52.5% decrease in value over the past 24 hours.

All markets on the ZKX Protocol have been delisted effective immediately, with positions closed and funds returned to each user’s trading account. Users can transfer these funds to their main self-custodial accounts, which are wallets on the Starknet blockchain.

Withdrawals can be made through the Starkway bridge back to Layer 1 at any time. The protocol will also enter a sunset period lasting until the end of August, during which Tur encourages users to withdraw their funds and claim any pending STRK rewards. ZKX vesting and distribution will continue post-sunset, starting September 1.

Launched in 2021, ZKX aimed to create a scalable decentralized exchange for perpetual trading. The project received backing from several notable investors, including StarkWare, Amber Group, Huobi, Crypto.com, and individual investors like Sandeep Nailwal (Co-Founder of Polygon) and Ashwin Ramachandran (General Partner at DragonFly Capital).

Tur’s statement outlined several reasons for the decision to stop operations, including low user engagement. The platform had only a handful of users mining STRK and ZKX rewards, with minimal participation from the broader community.

This lack of engagement led to a drastic decrease in trading volumes, making it challenging for the protocol to generate sufficient revenue to cover its operational costs. Despite the efforts of market-makers, the financial burden of maintaining the platform’s infrastructure, including cloud server expenses, salaries, and other essential costs, far exceeded its income.

“We thoroughly evaluated the possibility of expanding cross-chain but we realized a significant portion of the entire codebase would have to be rewritten, tested, and re-audited in Solidity, and that would carry a significant cost. Given these challenges and the substantial investment required, we have made the difficult decision to wind down the platform.”

The announcement also touched upon broader issues within the decentralized finance (DeFi) sector. The market's undervaluation of tokens like ZKX and a general lack of demand worsened the protocol's financial difficulties.

According to Tur, major token holders exercising their rights to cash out and a lack of interest from new users further drove down the token's value. The announcement also highlighted the ongoing exhaustion of the DeFi model over the past five years.

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