ZKX Protocol, a derivatives protocol on Ethereum Layer 2 scaling solution StarkNet, has made the tough decision to suspend its operations. The protocol founder Eduard Jubany Tur acknowledged the lack of economic viability as the reason behind the latest development.
Eduard announced the unfortunate situation on X, citing that a lot of effort has gone into preventing this eventuality. He stated that user engagement on the protocol is not impressive as only a few people mine STRK and ZKX rewards. In return, this relegated trading volume and daily revenue to the downside. It is so bad that the daily revenue hardly covers the cloud server expenses, how much more salaries, and other operational costs.
Important Statement 30.07.24
With much regret, we have to announce the discontinuation of the ZKX protocol. Despite our best efforts, we have been unable to find an economically viable path for the protocol.
(1) All markets have been delisted, positions have been closed and all…
— Eduard (@0xEduard) July 30, 2024
“Tokens are being undervalued and there is a noticeable lack of demand. There’s a broader exhaustion of the DeFi paradigm as we have seen over the past five years and is affecting the entire sector.” ZKX protocol founder explained.
As a result of the discontinuation of ZKX protocol operation, the protocol went ahead to delist all markets, close all positions and returned all funds to each user’s trading account. However, users are still allowed to transfer the funds from their trading accounts to the main self-custodial account.
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The transition is designed to go gradually and will come to an end on August 31. However, ZKX vesting and distribution is allowed to continue until September 1 when it would also cease. Hence, users are encouraged to carry out all necessary actions including withdraw their funds before the sunset period.
Apart from low participation and user engagement, Eduard also noted that the StarkNet protocol suffered a few hacks and scam attempts during its time of operation. Unfortunately, this hack attempts are fast becoming a trend in the Web3 and crypto ecosystem.
In light of this, another Ethereum Layer 2 network Metis suffered a breach on its Discord account recently. Some blockchain security firms and users flagged the incident immediately they noticed suspicious activity. Like with ZKX, such attacks end up impacting the operations of these protocols.
Quitting is bad optics for the Layer 2 ecosystem. Notably, outfits like ZKX and Metis contributes to Ethereum staking. However, any form of destabilization might impact on future performances of the parent chain moving forward.
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