On July 31, Eduard, the founder of ZKX, StarkNet’s leading derivative financial product, announced that he had chosen to shut down the platform because he could not find a feasible economic path, and all user funds would be returned to the trading account.
Since the shutdown was announced, the $ZKX token has dropped more than 50% and is now quoted at $0.01, according to CoinGecko data.
However, news of the closure of ZKX continues to ferment in the crypto community. The project just issued the token $ZKX a few weeks ago and announced that it has received $7.5 million in support from top institutions such as GCR, Amber Group, and Crypto.com. With a large amount of financing, it is surprising to choose to shut down at this time.
Investor @Ye Su posted on social media that when ZKX collapsed, as an investor, he did not receive any news in advance.
He added that the team claimed they were out of money and refused to provide any financial or spending details or communicate with us investors. Most projects will consider how to transform and actively communicate in difficult times. On the contrary, Edward took money from early supporters without any communication, showed no ethical standards, and lost the right to start a business in the industry in the future. .
The income cannot cover the market maker and server fees, so ZKX chooses to shut down the platform.
Why should the ZKX platform be shut down? Founder Eduard wrote in the announcement that currently, user participation on the ZKX platform is extremely low. Only a very small number of users participate in it to obtain $STRK and $ZKX incentives. The transaction volume has dropped significantly, and the daily income can no longer cover it. The cloud server expenses to maintain the normal operation of the website can only cover a small part of it, resulting in the inability to normally pay wages and other operating costs.
It emphasized that the monthly fees and rebates it needs to pay to market makers have also greatly exceeded its income, and it has been required to pay higher fees since August. However, the token $ZKX has not met expectations since its listing. As the main players cashed out, the price has been falling. The current value of the $ZKX token can no longer support the continued operation of the protocol.
Eduard's announcement of the shutdown of ZKX caused an uproar in the crypto community, with many expressing confusion because just a few weeks ago, $ZKX had just completed the token TGE and announced the completion of a new round of financing of $7.6 million.
On June 19, ZKX announced the official issuance of the token $ZKX, and simultaneously listed it on exchanges such as Gate.io, Bitget, and KuCoin. And on the same day, $ZKX announced that it had received a new round of strategic financing from major investors such as Flowdesk, GCR, and DeWhales, totaling US$7.6 million. The investment institution has a strong background.
In less than 40 days, the ZKX platform has been shut down. This has made users in the crypto community very puzzled: Why is there a lack of money if the $ZKX token was not launched only a few weeks ago? How did it blow through $7.6 million in funding in 40 days?
US$7.6 million in financing suspected of fraud, the real circulation of TGE tokens is greater than the official documents
Regarding the token TGE, the US$7.6 million in financing announced on the same day (June 19) was hidden in a "word game".
When responding to @ZachXBT’s question on the whereabouts of the US$7.6 million in financing, ZKX founder Eduard explained that the US$7.6 million in financing is actually the cumulative amount of funds raised from 2021 to 2024, and does not occur recently.
The funds have been used for nearly four years of team operations to support a team of 30 people to build a dedicated blockchain L3 for extended function perps. The costs include multiple token audits, token TGE listing costs, AWS fees, development-related expenses In promotional activities.
It said that the cost of cloud servers running the L3 network is extremely high, and in hindsight, it may be financially wiser to choose to run a fully on-chain smart contract protocol instead of L3 and other strategic decisions.
At this time, users realized that the $7.6 million in financing announced on the day ZKX was listed was a word game, making users mistakenly believe that the new round of financing was $7.6 million in financing. The real situation is that this US$7.6 million financing amount actually includes US$4.5 million in seed round financing in 2022. The real financing amount is only US$3.1 million, which does not necessarily occur in June. It is just to cooperate with the $ZKX token TGE. .
On-chain detective @ZachXBT said that Eduard’s behavior was to induce users to purchase tokens on TGE.
On August 1, Perlone Capital partner Jin Kang posted a post calling ZKX a scam.
Jin Kang pointed out three main problems with ZKX:
The team closed the project due to insufficient funds 6 weeks after TGE
Sudden changes to the token unlocking plan during TGE
At the time of TGE, the actual circulating tokens exceeded the official documentation, causing the price to plummet.
And said: "If this is not a scam, then what is it?"
He pointed out in the post that the $ZKX token TGE fell by more than 50% within 24 hours. The ZKX team blamed the error on the market maker, claiming that the market maker was unable to stabilize the price at $0.7. One of the market makers Caused by the token selling during TGE.
The real situation is that before TGE, there were more than 10 million $ZKX tokens in circulation, and the real circulation exceeded the official documents; and in the first 9 hours after TGE, the ZKX team blocked the transfer of $ZKX from Starknet , then transactions during this period were either from the team or market makers; and TGE changed the token economics at the last minute, increasing the market maker percentage from 4% to 8.5%.
He called on the $ZKX token market maker, StarkNet and online exchanges to reveal the truth and give the community fairness.
According to Coingecko data, since the launch of TGE on June 19, the price of $ZKX has been falling from a high of $0.62. As of August 1, the price of $ZKX has fallen to $0.01, a price that has shrunk by more than 98%.
ZKX community user Nono told ChainCatcher that ZKX’s bankruptcy crisis has actually emerged in the community. The Telegram community has been left unmanaged by the end of June. Exchanges such as BingX and BitMart have invited currency listings, and Binance Live AMA and other invitations. There was no reply from the administrator.
The ZKX shutdown caused the underlying network StarkNet to pay attention to ecological activity
The closure of ZKX has raised questions about the sustainability of DeFi projects and how to maintain user participation and generate stable income in a rapidly developing and competitive market. However, as the leading representative of derivative financial products on the StarkNet chain, the outage of ZKX also caused it to be deeply involved in public opinion and was accused of insufficient ecological activity.
Some community users believe that $ZKX was built on StarkNet, which led to the final result of shutting down the platform. Because the underlying language Cairo developed by StarkNet is too complex, development-related costs will be higher, such as developer salaries and program code. Audit costs, etc., if switched to other chains, the outcome may be different.
Developer Tom (pseudonym) explained to ChainCatcher that the key issues behind the shutdown of ZKX are low user participation and insufficient income. In fact, the essence reflects the low user activity of the StarkNet network, even if there are investments from top capital. Yes, if the underlying network cannot maintain normal operations.
Currently, compared with Layer 2 network data such as Arbitrum, zkSync, Optimism, Base, and Blast, the activity of the StarKNet network is relatively low, with only 10,000 daily active addresses and a daily trading volume of DEX of only 7.5 million US dollars. The transaction fee captured was only $1,000, and multiple data ranked last among Layer 2.
On-chain player Tutu said that the decline in user participation in Starknet after the airdrop is inevitable, and this is also a common feature of all Layer 2 networks. There are no popular or unique DApps on the Starknet chain, and it is still difficult for new users to enter.
Take the user's first entry wallet as an example. It takes too much time and energy to create a wallet on Starknet. Now the network application still needs to use wallets such as Braavos and Argent. This is a problem for those who are already used to switching between different EVM chains. For users, the experience is particularly bad, which has prevented some users from entering the ecosystem.
Today's users no longer care about the complexity of the technology behind the underlying network, but more about whether the user experience is smooth and simple. Starknet still has a long way to go in this regard.
[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.
This article is reprinted with permission from: "Foresight News"
Original author: Grapefruit, ChainCatcher