ZKX, a Starknet decentralized exchange, faced investor backlash following its abrupt operational halt.
The founder of the project, Eduard Jubany Tur, explained that financial struggles and security concerns led to the decision to pause operations. It's not uncommon for startups to falter; indeed, many businesses don't survive beyond a few years.
Eduard Jubany Tur, ZKX's founder, made an announcement on X (also known as Twitter) revealing that the ZKX protocol would shut down by the end of August, primarily driven by economic hurdles. He highlighted the project's inability to sustain financial viability. cover operational costs .
Another One Bites The Dust
Tur mentioned that despite offering compelling incentives, the engagement numbers remained disappointing.
After an initial spike, trading volumes took a nosedive, severely affecting daily income. By the time the closure was announced, ZKX had only 200 active users daily, with trading volumes dwindling to a fraction of the over $30 million seen in March 2024.
The unexpected closure followed a June announcement where ZKX raised $7.6 million from strategic partners including Flowdesk, GCR, and DeWhales, with notable support from industry leaders such as Amber Group, StarkWare, Huobi, and Crypto.com.
In reaction to Tur’s announcement, investors including Amber Group, ArkStream Capital, and HashKey Capital voiced their disapproval over the lack of anticipation and transparency.
Amber Group, a crucial market maker for ZKX, who contributed liquidity, held 3 million ZKX tokens initially obtained through a loan and later through trading activities. Despite the declining value, they maintained liquidity via token purchases.
Amber Group expressed dissatisfaction about ZKX's poor communication and the sudden closure without warning, which affected both investors and the market at large. They urged ZKX to enact steps to improve transparency and handle the matter responsibly.
Hashkey Capital mirrored similar sentiments, critiquing ZKX for the lack of communication and unsatisfactory management by the founder. They warned that failing to take responsibility could damage the founder's reputation and future prospects.
Hashkey Capital remarked, 'We hope founders realize that a good reputation is essential for future funding. Without accountability, regaining industry trust and opportunities will be challenging.'
Ye Su from ArkStream Capital voiced severe disappointment over the ZKX team's handling of the closure, noting a lack of communication and refusal to disclose financial or expenditure data.
A Rug Pull?
ZKX's closure has brought to light vulnerabilities within the Starknet DeFi ecosystem, as Starknet fell short in pulling in users after a controversial airdrop. Criticisms were aimed at the project after developer Abdel labeled a community segment 'e-beggers' for airdrop farming.
Following backlash, Abdel retracted his statements and issued apologies, yet Starknet has struggled to keep its user base engaged.
Data from Dune Analytics shows a significant drop in Starknet's daily active users from a peak of around 16,500 in August last year, raising concerns about the durability of DeFi projects built on Starknet.
Some community members, like the investigative on-chain user ZachXBT, suspect that ZKX's sudden halt could resemble a 'rug pull,' especially as it followed closely after a token generation event (TGE).
In many rug pull scenarios, there is often a lack of financial transparency or detailed reasoning for actions. The dismissive manner towards investors and refusal to provide details are hallmarks commonly seen in such cases.
Since announcing its shutdown, the value of the ZKX token has plummeted by 98%. CoinGecko reports the current trading value to be approximately $0.003.
