Recently, two noteworthy events have occurred in the DeFi space.

First, the lending protocol ZeroLend officially announced its closure after three years of operation. The superficial reason cited was the unsustainable economic model and slim profit margins, but the underlying issues are quite complex. On one hand, on-chain activity has indeed been sluggish, with price data providers halting support, and liquidity in chains like Manta, Zircuit, and XLAYER shrinking. On the other hand, security threats have been increasing continuously. In February last year, LBTC on Base was hacked, with attackers using forged LBTC as collateral to drain liquidity directly. Such incidents happen frequently, and since lending protocols are inherently low-margin, high-risk businesses, the team ultimately had no choice but to shut down.

The team's current top priority is to ensure users can safely withdraw their assets, especially those trapped in low-liquidity chains. Users affected by the LBTC hack will receive partial refunds, funded by the team's LINEA airdrop allocation. But honestly, this is the best they can do under the circumstances.

Interestingly, at the same time, another project, World Liberty Financial, is stirring up activity in the DeFi sector. The WLFI token recently hit a new low since its launch last year, with a 24-hour decline of 6.61%. The controversy centers around their operations on the Dolomite platform. In simple terms, they used their governance token WLFI as collateral to borrow stablecoins, and then drained Dolomite’s USD1 liquidity pool. The team claims this was to generate yields for other borrowers, but critics argue that this deepens the cycle risk. If WLFI’s price drops, the collateral weakens, and since all collateral is concentrated in the same depreciating token, it restricts withdrawals for other depositors on the platform. Worse still, the WLFI treasury’s buyback operations are now heavily in the red.

These two events actually reflect a larger issue: unstable liquidity, normalized hacking risks, and waning market confidence. DeFi may look glamorous, but its operational challenges and risks are greater than most people imagine.