DeFi protocol ZeroLend ceases operations after three years, citing dormant blockchains and security breaches.

The protocol is ceasing operations after three years, citing unfeasible economics, narrow margins, and escalating security risks.

DeFi protocol ZeroLend is discontinuing operations after three years. (planet_fox/Pixabay)

Key points:

• ZeroLend, a decentralized lending protocol functioning across various blockchains, is ceasing operations after three years, citing unfeasible economics, narrow margins, and increasing security threats.
• The team indicates that their primary focus is to allow users to securely withdraw their assets, particularly from low-liquidity chains such as Manta, Zircuit, and XLAYER.
• Individuals impacted by last year’s LBTC exploit on Base will receive partial refunds supported by ZeroLend’s LINEA token allocation.

The decentralized lending protocol ZeroLend is concluding its operations after three years, pointing to unfeasible economic conditions amid inactive blockchains and escalating security risks.

The protocol, which managed crypto lending markets across multiple blockchains, reported that ongoing efforts could not resolve issues such as price data providers ceasing support and diminishing liquidity on networks like Manta, Zircuit, and XLAYER. These factors, along with persistent hacking threats, have rendered the operation unsustainable.

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“Combined with the inherently narrow margins and high risk profile of lending protocols, this led to extended periods during which the protocol operated at a loss,” the team stated in an official announcement.

Lending markets like ZeroLend are blockchain platforms where users deposit their cryptocurrencies to accrue interest (similar to a savings account), while others borrow those assets by providing collateral. This operates as peer-to-pool lending without the involvement of banks.

Oracle providers deliver real-time price data to lending markets such as ZeroLend. When they withdraw support, it disrupts the lending markets, making them unreliable or unmanageable.

The shutdown highlights the harsh realities: transient liquidity, ongoing exploits, and a decline in investor interest in broader areas of the digital asset market continue to challenge DeFi protocols.

The ZeroLend team stated that their highest priority is ensuring “users can safely withdraw their assets” from the protocol.

For assets that are tied up on low-liquidity chains such as Manta, Zircuit, and XLAYER, the team will revise the smart contracts according to a predetermined schedule to liberate as many assets as possible. Users are urged to withdraw promptly, as most markets have been adjusted to a 0% loan-to-value ratio, prohibiting any borrowing.

Partial relief for LBTC holders on Base

Lombard Staked Bitcoin, or LBTC, a year-bearing variant of bitcoin used in DeFi lending on ZeroLend’s markets on Coinbase’s Layer 2 network Base, faced an exploit in February last year, where an attacker utilized forged LBTC as collateral to deplete liquidity.

Users who had deposited LBTC will receive partial refunds financed by the team’s LINEA drop allocation. The announcement encouraged affected users to reach out to moderators or submit support tickets for the refund process.

“We kindly request all impacted LBTC users to contact the moderators or submit a support ticket so we can maintain direct communication and coordinate the next steps. For token holders, this signifies the conclusion of the ZeroLend journey,” the team remarked.

“Please withdraw any remaining assets and contact us through official support channels if you require assistance. Thank you for being a part of ZeroLend,” they added.