Recently, many DeFi protocols have shut down, and they all have a common characteristic.

Written by: Ignas

Translated by: Chopper, Foresight News

In the past two months, at least 10 crypto protocols have announced shutdowns. Not because they ran away, but due to lack of users, lack of funds, or both.

Not to mention mining companies like BlockFills and lending platforms freezing withdrawals. Just yesterday, Angle also announced (EUR and USDA stablecoins, despite having a total locked value (TVL) of $250 million and good business partnerships.

In their announcement, Angle straightforwardly said, “The decentralized stablecoin race has completely changed. Now, yield-bearing stablecoins are essentially just branding layers on existing vaults and lending protocols, with no need to maintain separate infrastructure.”

Almost all of these shutdown projects had functioning products:

Polynomial has a total trading volume of $4 billion, covering over 70 markets

MilkyWay once had a TVL of $250 million

Step Finance peaked at 300,000 monthly active users

I’ve used or at least experienced these products. The technology was sound, but no one was willing to pay to keep them alive.

MilkyWay is a typical example: less than two years, four transformations. Initially focused on Celestia liquidity staking, then shifted to re-staking, RWA tokenization, and crypto debit cards for paying rent… Each pivot chased the hot trend at the time.

Their description of re-staking is quite painful: “We saw the re-staking opportunity early, designed the system, reached a TVL of $250 million, completed security audits, and prepared to launch. But the market abandoned re-staking faster than anyone expected.”

In the end, they had to admit they couldn’t sustain until they found product-market fit.

Polynomial’s team was very blunt about why they failed, offering a lesson for all perpetual contract projects: “In derivatives, technical prowess is useless. We improved execution speed, optimized user experience, built innovative infrastructure, but none of it mattered. Traders only go where there’s liquidity, and we had none. All the fancy features are just window dressing.”

The conclusion is even harsher: “Liquidity is the only moat for derivatives. You can’t beat liquidity with innovation, marketing, or development.”

The shutdown of ZeroLend serves as a warning to those trying to launch decentralized applications across multiple blockchains. They bet on niche chains like Manta, Zircuit, and Xlayer, but when the market turned bearish, these chains lost liquidity, and oracle services also stopped.

Eventually, long-term losses made it unsustainable.

Aave recently voted to shut down services on several chains, citing operational losses.

There’s also Parsec, once a legendary tool in the community for tracking Terra, 3AC, and stETH depegging. But the team admitted, “After the FTX crash, DeFi spot trading, lending, and leverage never returned to how they were. The market has changed, on-chain behavior has changed, and we didn’t truly understand it.”

Simply put, the market shifted, but we stayed in place. The industry is brutal.

After Slingshot was acquired, it was completely shut down. Eden cut 80% of unprofitable products, leaving only core services.

As they said, “The 80/20 rule has become a reality: products that cost 80% of our resources only generate 20% of our revenue.”

Finally, Step Finance is somewhat unique: on January 31, it was hacked for $26 million and declared dead. “We tried fundraising, was acquired, but none worked out.”

What do these failed projects have in common? They failed to adapt to the ever-changing market and lacked the funds to pivot again.

Each team bet on a certain ecosystem exploding, but the growth either wasn’t fast enough or didn’t happen at all. Celestia DeFi never truly took off, and on-chain derivatives struggled to compete with Hyperliquid, even veteran platforms like dydx and GMX faced difficulties.

Expanding into new chains and narratives is costly.

For players like me, transferring funds from one platform to another is easy and inexpensive. But applications require more time and financial investment to prepare for potential new user bases.

The good news is, these are all “decent deaths.” All projects allowed users to withdraw funds, teams didn’t run away or recklessly dump tokens. Compared to 2022’s outright exit scams, the industry has indeed learned to die responsibly.