Decentralized lending protocol ZeroLend is closing down after three years, with the team citing fragile economics, declining on-chain activity and persistent security risks as key reasons for the decision.
In a public update, ZeroLend said operating conditions had deteriorated across several supported networks. Liquidity thinned and user activity slowed on chains such as Manta Network, Zircuit and X Layer, while some oracle providers withdrew price feed services essential to maintaining healthy lending markets.
“Combined with the inherently thin margins and high risk profile of lending protocols, this resulted in prolonged periods where the protocol operated at a loss,” the team said.
ZeroLend allowed users to deposit cryptocurrencies to earn interest and borrow assets by posting collateral, operating through pooled liquidity rather than traditional intermediaries. The model relies on accurate, real-time pricing data from oracles; without those feeds, lending markets can become unstable or cease functioning entirely.
The shutdown reflects broader pressures in parts of the decentralized finance ecosystem, where fleeting liquidity, recurring exploits and cooling investor participation have challenged sustainability.
The protocol’s immediate focus is facilitating safe withdrawals. Most markets have been adjusted to a 0% loan-to-value ratio, effectively disabling new borrowing and prompting users to withdraw remaining funds as soon as possible.
For assets held on lower-liquidity chains like Manta, Zircuit and X Layer, the team plans to roll out scheduled smart contract updates designed to release as much locked capital as possible.
Relief for LBTC depositors on Base
Users who deposited Lombard Staked Bitcoin (LBTC) into ZeroLend markets on Base — the layer-2 blockchain developed by Coinbase — will receive partial reimbursements related to a prior exploit.
In February last year, an attacker allegedly used forged LBTC as collateral to drain liquidity from the platform. The team said affected depositors will be partially compensated using its LINEA token allocation.
ZeroLend has asked impacted users to contact moderators or submit support tickets to coordinate refunds and complete withdrawals, marking what it described as the end of the project’s journey.
