ZKX token plummets as Crypto.com-backed DEX shuts down amid challenges

The ZKX protocol, a decentralized exchange backed by Crypto.com, has been shut down due to financial challenges.

After the announcement, the ZKX token fell more than 50% in the last 24 hours.

ZKX Token Drops Over 50%

On July 30, co-founder Eduard Jubany Tur announced the discontinuation of the ZKX protocol. He lamented, stating that despite their best efforts, they could not find an economically viable path for the protocol.

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

Effective immediately, all ZKX Protocol markets have been delisted, positions closed and funds returned to each user’s trading account. Users can transfer these funds to their main escrow accounts, which are wallets on the Starknet blockchain.

Withdrawals can be made via the Starkway Bridge back to Tier 1 at any time. The protocol will also enter an expiration period that will last until the end of August, during which Tur encouraged users to withdraw their funds and claim outstanding STRK rewards. ZKX acquisition 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 was supported by 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 involvement and high costs

Tur’s statement outlined several reasons for the decision to stop 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 decrease 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 infrastructure, including cloud server expenses, salaries and other essential costs, far exceeded their income.

“We thoroughly evaluated the possibility of expanding cross-chain, but we realized that a significant part of the entire code base would have to be rewritten, tested and re-audited in Solidity, and this would be a significant cost. Having Given these challenges and the substantial investment required, we have made the difficult decision to terminate the platform.”

The announcement also mentions broader issues within the DeFi sector. The market undervaluation of tokens like ZKX and a general lack of demand have worsened the protocol’s financial difficulties.

Major token holders exercising their cashing rights have further reduced the value of the token. The steady exhaustion of the DeFi model over the past five years has also contributed to the overall decline of the sector.

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