DeFi Protocol ZeroLend to Wind Down Amid Liquidity Crash and Hacks Woes

Multi-chain DeFi lending protocol ZeroLend announced that it will gradually cease operations after approximately three years of activity.

The team said the decision was difficult but necessary due to ongoing unsustainable conditions across its supported networks. Most lending markets now offer a 0% loan-to-value ratio, meaning users can withdraw funds but cannot borrow.

The ZeroLend team urged users on its official X account to quickly retrieve their assets through the official application. The move to shut down highlights the growing challenges in certain areas of decentralized finance, especially those related to layer-2 solutions and bitcoin finance.

Reasons Behind the Shut Down

ZeroLend attributed its decision to wind down primarily to a significant drop in activity and sharp declines in liquidity across many of the supported chains, which gradually eroded the protocol’s operational viability. Key oracle providers pulled their support for several markets, eliminating crucial price data feeds needed for secure lending functions. 

The platform also faced repeated security incidents, including hacks and exploits, which inflicted ongoing financial setbacks and diverted essential resources. Additionally, the thin profit margins typical of decentralized lending further complicated matters, leading to sustained operational losses that became impossible to overcome. 

At its peak, ZeroLend boasted a total value locked of nearly $359 million, but it now holds roughly $6.6 million, highlighting a drastic reduction in both user engagement and capital. The incident is just one of many experienced in the crypto space. For instance, similar protocols such as zkLend ceased operations around June 2025, signaling a period of consolidation in the DeFi lending space. 

User Impact and Next Steps

Following the recent decision, ZeroLend has implemented measures across most markets to halt new loans, enabling lenders and borrowers to concentrate on repayment and withdrawal processes to protect remaining funds. Currently, assets on highly illiquid or inactive chains such as Manta and Zircuit are subject to temporary restrictions. 

However, the team is planning smart contract upgrades and timelock mechanisms to facilitate the eventual recovery and redistribution of these assets. In addition, holders affected by the recent LBTC market incident on Base Network will receive partial compensation sourced from a designated allocation of the Linea airdrop, with detailed instructions provided for submitting support requests. 

Meanwhile, it is worth noting that no compensation will be available to general token holders beyond these targeted measures. The team expressed gratitude for the community’s support and urged caution against phishing attempts that often follow high-profile DeFi shutdowns.

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