ZeroLend is shutting down its decentralized lending protocol after three years, telling users to withdraw funds as liquidity dried up across several supported chains and the business became unprofitable.
Key Takeaways
- ZeroLend is closing after citing thin margins, low liquidity, and rising security threats.
- Several supported networks became inactive, and some oracle providers stopped supplying price data, making markets hard to run.
- The team set most markets to 0 percent loan to value, stopping new borrowing and pushing users to withdraw quickly.
- Users impacted by last year’s LBTC exploit on Base will get partial refunds funded by the team’s LINEA allocation.
What Happened?
ZeroLend, a decentralized lending protocol that offered lending markets across multiple blockchains, announced it is winding down operations and ceasing protocol activity. The team said it could not sustain operations as liquidity shrank on certain networks and security risks kept rising.
The protocol’s founder, known as Ryker, said the economics no longer worked and urged users to withdraw their assets as the shutdown process begins.
Why ZeroLend Says It Could Not Keep Going?
In its closure update, ZeroLend pointed to a mix of market and technical problems that made running lending markets increasingly difficult. The team said some chains it supported became effectively inactive, and liquidity thinned out on networks including Manta, Zircuit, and XLAYER. When liquidity falls, lending markets can stop functioning smoothly, spreads widen, and borrowers and lenders lose confidence.
Another major issue was the loss of support from price oracle providers, which supply the real time pricing data DeFi lending protocols rely on. If oracle data disappears or becomes unreliable, the protocol cannot safely value collateral or manage liquidations. ZeroLend said these conditions, combined with constant security pressure, made continued operations unsustainable.
The team also described the broader reality of DeFi lending economics: margins are often slim, and the risk profile is high. ZeroLend said it faced long stretches where it effectively operated at a loss because the costs of maintaining markets, managing risk, and staying secure outweighed what the protocol could earn.
Withdrawals, Locked Funds, and the 0 Percent Loan to Value Move
ZeroLend’s immediate priority is user withdrawals. The team said it wants users to be able to safely withdraw funds and it recommended that clients pull assets out as soon as possible.
To reduce risk during the wind down, ZeroLend set most markets to a 0 percent loan to value ratio, which blocks new borrowing. This limits fresh leverage from entering the system while existing positions unwind.
Some user funds are stuck on chains with weak liquidity. ZeroLend said it plans to update smart contracts on a schedule to free up as much as possible and redistribute frozen coins where needed. The message to users was clear: withdrawals matter now, especially on smaller networks where exit liquidity can vanish quickly.
LBTC on Base: Partial Refunds After Last Year’s Exploit
ZeroLend also addressed fallout from an exploit involving Lombard Staked Bitcoin (LBTC) on Base, Coinbase’s Layer 2 network. The incident happened in February of last year, when an attacker used a forged LBTC as collateral and drained liquidity.
For users who deposited LBTC in those markets, ZeroLend said it will provide partial refunds funded by the team’s LINEA drop allocation. The team asked affected users to contact moderators or submit a support ticket so it can coordinate next steps and keep communication direct.
TVL Collapse and Market Reaction
The shutdown arrives after a steep decline in usage. ZeroLend’s total value locked fell from a peak of $359 million in November 2024 to about $6.59 million at the time of the closure update. After the announcement, the protocol’s native token ZERO dropped 33.5 percent.
CoinLaw’s Takeaway
I see this as another reminder that DeFi does not fail only because of one bad event. It can fail from slow damage like liquidity leaving, oracles dropping support, and security costs stacking up until the math stops working. In my experience, lending protocols are especially fragile because they depend on trust in pricing, collateral, and fast exits. When any of that weakens, users run first and revenue disappears next. I found ZeroLend’s wind down plan more responsible than the silent failures we have seen before, but the real lesson is harsh: multi chain ambition means multi chain upkeep, and that bill can become impossible to pay.
