Author: Ignas
Compiled by: Chopper, Foresight News
Over the past two months, at least 10 crypto protocols have announced their closure. Not rug pulls, but due to no users, no money, or both.
Not to mention mining companies like BlockFills and lending platforms freezing withdrawals. Just yesterday, Angle also announced (https://x.com/AngleProtocol/status/2029161525580112263) the gradual shutdown of its EURA and USDA stablecoins, despite having reached a Total Value Locked (TVL) of $250 million and having strong business partnerships.
Angle stated bluntly in the announcement, "The decentralized stablecoin landscape has completely changed. Yield-bearing stablecoins today are essentially just branded wrappers over existing vaults and lending protocols; there's no longer a need to maintain a separate, independent infrastructure."
These shuttered projects almost all had functional products:
- Polynomial processed a cumulative trading volume of $4 billion across 70 markets
- MilkyWay's TVL once reached $250 million
- Step Finance had a peak of 300,000 monthly active users
I've used, or at least tried, these products. The technology wasn't the issue, but no one was willing to pay the fees needed for the projects to survive.
MilkyWay is a typical example: four pivots in less than two years. Starting with Celestia liquid staking, then moving to restaking, RWA tokenization, and crypto debit cards for rent payments... each pivot chased the hype of the moment.
Their description of the restaking pivot is poignant: "We identified the restaking opportunity early, designed the system, TVL to $250M, completed security audits, and were ready to launch. But the market moved on from restaking faster than anyone anticipated."
In the end, they had to admit the funding wouldn't last long enough to find product-market fit.
The Polynomial team was brutally honest about the reason for failure, offering a lesson for all perpetual contract projects: "In derivatives, good tech is useless. We improved execution speed, optimized UX, built innovative infrastructure, but none of it mattered. Traders go where the liquidity is. We didn't have it. Everything else is just a nice-to-have feature."
The conclusion is even harsher: "Liquidity is the only moat in derivatives. You can't beat liquidity with innovation, you can't beat it with marketing, you can't beat it with development."
ZeroLend's shutdown sounds a warning bell for dApps trying to launch on multiple blockchains. They bet on supporting projects on niche chains like Manta, Zircuit, and Xlayer, but when the market turned bearish, liquidity on these chains dried up, and oracle providers stopped their services.
Ultimately, operating at a long-term loss was unsustainable.
Aave recently also voted to shut down services on several chains, citing the same reason of unprofitable operation.
Then there's Parsec, once a legendary tool in the circle used to track Terra, 3AC, and the stETH depeg. But the team admitted, "After the FTX collapse, DeFi spot trading, lending, and leverage never returned to their former state. The market changed, on-chain behavior changed, and we didn't truly understand it."
Simply put, the market moved on, and we were left behind. The market is cruel.
Slingshot was acquired and completely shut down. Eden cut 80% of its unprofitable products, keeping only the core business.
As they said, "The 80/20 rule became a reality; the products that cost us 80% of our expenses brought in only 20% of the revenue."
Finally, Step Finance's case is more unique: it was hacked for $26 million on January 31st, which was a death sentence. "We tried fundraising, acquisition, nothing worked."
What's the common thread among these deceased projects? They failed to adapt to the ever-changing market and lacked sufficient capital to pivot again.
Each team bet on a particular ecosystem experiencing explosive growth, but the growth either wasn't fast enough or didn't happen at all. Celestia DeFi never truly took off, on-chain derivatives struggled to compete with Hyperliquid, and even established platforms like dYdX and GMX are having a hard time.
And expanding into new chains and narrative areas is costly.
For players like me, moving funds from one platform to another is effortless and cheap. But applications need to invest significant time and financial resources to prepare for potential new user bases.
The good news is, these were all "dignified deaths." All projects gave users time to withdraw funds; the teams didn't run away or issue tokens to cash out. Compared to the outright rug pulls of 2022, the industry has indeed learned to die responsibly.
