As a seasoned analyst with years of experience navigating the complex world of cryptocurrencies and blockchain technology, I find myself both intrigued and disheartened by the sudden closure of ZKX. The abrupt termination without prior warning is a red flag that raises serious concerns about transparency and communication – two essential pillars for any project seeking to gain and maintain investor trust.
The decentralized exchange ZKX unexpectedly halted its activities due to financial impracticality, causing a strong reaction from investors who were disappointed by the absence of clear updates and openness regarding their decisions.
Sudden Closure Announcement
On July 30, unexpectedly, the social derivatives trading platform operating within the Starknet layer-2 network halted its operations, causing a wave of discontent among investors and market participants. This sudden shutdown occurred without any previous notice, taking stakeholders by surprise.
Eduard Jubany Tur, the creator of ZKX, explained that the closure was due to financial impracticality. On the platform X.com, Tur voiced his disappointment with this choice, explaining it as a necessary step.
“I’m sorry to inform you that we must sadly announce the termination of the ZKX protocol. Regrettably, we haven’t found a financially sustainable way forward for this protocol, despite our diligent attempts.”
In a post on X.com by Tur, it was disclosed that all markets had been removed, positions were terminated, and funds were transferred back to users’ trading account balances. Users were then guided to move their funds from their trading accounts into self-managed wallets on Starknet, offering the flexibility to withdraw funds via the Starkway bridge directly to L1 whenever desired.
Investor Criticism – Amber Group
Critics, such as well-known investors like Amber Group, ArkStream Capital, and HashKey Capital, have voiced concerns over insufficient communication and transparency regarding the decision to close.
1. Essentially, Amber Group, acting as a crucial intermediary for ZKX tokens, owned approximately 3 million units of ZKX. They bolstered the platform by continuously buying tokens to ensure liquidity was readily available. However, an unexpected halt in operations, without giving any warning, had detrimental consequences on investors and the wider market.
Amber Group advised ZKX to “take appropriate steps, acknowledging their responsibility, to increase clarity and handle the matter in a proactive manner.”
Reputation Concerns And Rug-Pull Allegations
HashKey Capital expressed similar thoughts, pointing out that the way the ZKX founder managed the situation was less than ideal. They underscored the significance of taking responsibility to preserve a founder’s standing and prospects within the industry, asserting that accountability is crucial for maintaining a good reputation and future success.
From my own experiences in the startup world, I can confidently say that a strong reputation is indispensable when it comes to securing future funding. I have seen too many founders learn this lesson the hard way – by squandering their reputation through questionable actions or lack of accountability. Once trust is lost, regaining it can be an uphill battle, and opportunities within the industry may become scarce. Founders must understand that their reputation serves as a valuable asset, and maintaining it requires diligence and responsibility.
Some community members, among them ZachXBT who is an on-chain investigator, have hypothesized that the abrupt ending might have been a ‘rug pull’. This suspicion arises due to its close timing with the project’s Token Generation Event (TGE).
Operational Challenges
In simpler terms, Tur conveyed that due to a lack of user interaction and trades, the income generated each day wasn’t enough to cover our regular expenses like cloud service fees and employee wages.
He elaborated,
“Upon careful examination, we found that expanding our cross-chain capabilities necessitates a major overhaul of our current codebase, which includes rewriting, testing, and re-auditing in Solidity. This process would be costly. Considering the obstacles we face and the substantial resources needed, we regretfully decided to close down the platform.”
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2024-08-07 17:10