ZeroLend Latest DeFi Platform to Shut Down Amid Liquidity, Revenue Pressures

Decentralized finance lending platform ZeroLend said it plans to shut down after three years of operations, citing mounting operational challenges and an unsustainable business model.

“We have made the difficult decision to wind down operations. Despite the team’s continued efforts, it has become clear that the protocol is no longer sustainable in its current form,” co-founder and CEO “Ryker” wrote in a message on Discord that was later reshared on X with comments turned off.

The project’s native token, ZERO, fell 45% over the past 24 hours to $0.06696, according to CoinGecko data. The token has been in prolonged decline, dropping 91% over the past month and 99.4% over the past year.

ZeroLend is a multi-chain, non-custodial lending platform focused on Layer 2 scaling solutions. It offered products tied to liquid restaking tokens, real-world assets, BTCFi and meme coins, positioning itself as a capital-efficient lending marketplace across multiple networks. The project raised $3 million in a 2024 seed round at a reported $25 million valuation and counted Consensys, Polygon Ventures and Morningstar Ventures among its backers.

The closure makes ZeroLend the latest DeFi platform to wind down amid prolonged market pressures. Last May, yield farm Alpaca Finance shuttered after acknowledging it had operated at a loss for more than two years. More recently, derivatives platform Polynomial said it would close “instead of launching a token for a dying product.”

Ryker attributed ZeroLend’s shutdown to a combination of declining on-chain activity, infrastructure challenges and rising security risks.

“Over time, several chains that ZeroLend supported in its early stages have become inactive or significantly less liquid,” he wrote. “In some cases, oracle providers have discontinued support, which has made it increasingly difficult to operate in markets reliably or generate sustainable revenue.”

He added that the protocol’s growth brought increased attention from “malicious actors, including hackers and scammers,” exacerbating already thin margins common in lending markets.

“Combined with the inherently thin margins and high risk profile of lending protocols, this resulted in prolonged periods where the protocol operated at a loss,” Ryker said.

The team said it will focus on an “orderly and transparent wind down process” and urged users to withdraw any remaining funds from the platform.

Fellow shuttering DeFi platform Polynomial attributed its shutdown last week to liquidity issues. “Solid tech doesn’t win in derivatives. We built faster execution. Better UX. Innovative infrastructure. None of it mattered,” the project tweeted.

“Traders went where the liquidity was. We didn’t have it. Everything else was just features.”

Fragmented liquidity

Deigo Martin, CEO of Yellow Capital, told Decrypt that amid growing crypto adoption, companies with tokens that lack utility are shutting down. “The key challenge is fragmented liquidity. Crypto trading and custody is fragmented across many exchanges, custodians and blockchains,” he said.

“This leads to unstable pricing and short-term liquidity gaps when demand increases. For merchants, it creates uncertainty around settlement and pricing. For consumers, this makes crypto a less predictable and appealing option to pay with.”

He added that for adoption to last, liquidity needs to be more connected. “Unified liquidity and reliable clearing are essential for institutional participation and merchant confidence. Without this foundation, increased usage risks creating friction instead of efficiency,” he added.

“The most effective way is to create an efficient and trustless infrastructure that connects liquidity venues. This is far safer than risky, bridge-style applications, which are vulnerable to attacks.”