Shutting down after just one month? Starknet derivative platform ZKX token plunges over 96% despite raising tens of millions in funding
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…
Derivatives trading platform ZKX on Starknet, with a funding background of tens of millions of dollars, announced its closure due to low user participation and severe revenue shortfall. Protocol founder Eduard Jubany Tur urged users to withdraw funds by the end of August. Following the news, the ZKX token plummeted by over 34.8% within a day.
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ZKX with Strong Financing Background
As the first derivatives trading platform with self-custody and community governance on Ethereum L2 Starknet, ZKX aims to provide perpetual futures and other derivatives to users on StarkNet and Ethereum through decentralized nodes and excellent trading experience.
It is reported that the protocol raised two rounds of funding in July 2022 and June this year, amounting to $4.5 million and $7.6 million respectively, with investors including Flowdesk, GCR, DeWhales, Hashkey, Amber Group, Crypto.com, and StarkWare, boasting a strong background.
On June 19th, ZKX token was released on exchanges KuCoin, Gate.io, and Bitget with the launch of airdrop and staking features, rewarding early participants in the ecosystem. Users can also earn a portion of the platform's income by staking ZKX tokens, incentivizing a stable and loyal user base.
Founder's Statement: Facing Insufficient Revenue
However, ZKX founder Eduard Jubany Tur admitted in a tweet last night on the 30th that due to poor user engagement and other factors, the protocol is facing financial difficulties, leading to the immediate closure of the ZKX trading market and the cessation of operations and updates.
Despite our best efforts, we have been unable to find a financially viable path forward.
Tur listed the following reasons:
- Lack of user engagement: Only a small number of users participated in the mining reward programs for STRK and ZKX
- Significant decrease in revenue: Declining trading volume and daily revenue barely covering the cost of cloud servers
- Ineffectiveness of token issuance: Tokens were undervalued, holders cashed out, and insufficient demand led to the inability of token value to support protocol operations
He emphasized that the lack of funds prevented the team from paying employee salaries and other basic operational costs:
Despite the efforts of market makers, our high monthly expenses and amounts paid to market makers have long exceeded our income; and starting in August, we will need to pay even more.
Users Must Withdraw Funds by End of August
As a result, Tur had to take action to close all trading markets and positions, with all funds on the market being delisted and closed. All funds on the markets have been returned to users' trading accounts, and users are required to transfer their funds back to their self-custody wallets by the end of August:
We thoroughly evaluated the possibility of cross-chain expansion, but we realized that a significant portion of the entire code needed to be rewritten, tested, and re-audited, which would incur significant costs. Given these challenges and the enormous investment required, we made the difficult decision to end the platform's operations.
Token Price Plummets, Resembling a RugPull Scenario
With the news of the cessation of operations, CoinGecko data shows that the ZKX token price experienced a nearly 34.8% drop within a day, almost halving. Since hitting a historical high of $0.62 the day after its launch, it has plummeted by 96.4%, resembling a RugPull scenario.