On July 30th, a well-known derivative exchange on Starknet, ZKX (zkx.fi), published an announcement on its official Twitter account.

In the announcement, the project team pointed out that due to various reasons, the project would have to be shut down, and reminded all users to withdraw their assets from the exchange as soon as possible.

The project team made this difficult decision mainly due to the following factors:

• Low user engagement;
• Sharp decrease in trading volume;
• Difficulty in supporting operations due to insufficient revenue.

Additionally, the project team candidly admitted that the token issuance process did not meet expectations, and the main token holders have been continuously cashing out, leading to a continuous decline in token prices.

According to the project's self-description, it was launched in 2021 and has been running for 3 years. During this period, the project team has been striving to develop its own features and has received support from funds and the ecosystem. On the project's official website, a large number of well-known venture capitalists (including HashKey, Amber, etc.) and institutions (Starkware) can be seen.

Nevertheless, the project still cannot continue to operate.

I have heard about this project, but because I do not engage in derivative trading operations, I have not participated in the project's interactions and cannot share my experience with the project.

However, from this public information, I guess the project has persevered through hardships to reach where it is today.

In my impression, this may be the first relatively well-known DeFi project to publicly announce its closure since the beginning of this bear market.

Unlike other projects that are barely surviving and waiting for death or quietly disappearing, this project's choice to publicly expose itself only tears off the veil shrouding the current predicament of the DeFi ecosystem.

Since the DeFi boom in 2020, the ecosystem has been around for 4 years. However, in my opinion, the vast majority of innovative applications in the ecosystem are still stuck in 2020 and 2021.

Do users really need so many DeFi applications?

Do users really need so many DeFi tokens?

Although it is regrettable that ZKX is closing, it is not surprising. I believe that more DeFi projects are irreversibly heading towards death, being eliminated by the market, and only a few giants will remain in the end.

ZKX's public reminder to users is a conscientious move, giving users time to withdraw their assets, which is already very considerate compared to some projects that suddenly run away.

For us ordinary users, this should be a warning. From now on, quickly withdraw assets from those unknown small applications, and if you want to participate, try to only engage with well-known leading applications.

If we think further, will the problems only be with applications? Could some second-layer extensions also face similar situations?

In yesterday's article, I mentioned that compared to USDT and USDC on Ethereum, the security of assets issued on second-layer extensions is not as high. Because if there is a problem with the second-layer extension, all assets on the extension will be at risk.

Thinking about ZKX being deployed on Starknet, and considering the security issues of second-layer extensions, I checked the TVL of various second-layer extensions on https://defillama.com/chains.

The situation of Starknet is really worrying.

The TVL of the 5th-ranked ARB is $3.15 billion, second only to the four major public chains (Ethereum, Tron, Solana, BSC), while Starknet's TVL is only $289 million, less than one-tenth of ARB's, ranking only 25th.

In addition, I also took a look at another issued zkSync, and it is equally dismal, with a TVL of only $96 million, even less than the Bitcoin ecosystem's Matic Network.

If these two second-layer extension ecosystems do not step up their efforts, they will probably only slowly die out.

I am currently withdrawing all key assets from the Starknet and zkSync ecosystems and putting them on Ethereum, leaving only some native assets on the second layer for future observation.

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