Two months, 10 DeFi protocols shut down. The technology was fine, but no one used them: liquidity is the only moat.

Over the past two months, at least 10 crypto protocols have announced shutdowns. Not because they ran away, but because they have no users and no money.

Not to mention mining companies like BlockFills and lending platforms freezing withdrawals. Just yesterday, Angle also announced (https://x.com/AngleProtocol/status/2029161525580112263) the gradual shutdown of EURA and USDA stablecoins, despite them once having a total locked value (TVL) of $250 million and good business partnerships.

In their announcement, Angle stated, “The decentralized stablecoin race has completely changed. Now, yield-bearing stablecoins are essentially just branding on top of existing vaults and lending protocols, with no need to maintain separate infrastructure.”

Most of these shutdown projects still have functioning products:

• Polynomial has a total trading volume of $4 billion across over 70 markets
• MilkyWay once had a TVL of $250 million
• Step Finance peaked at 300,000 monthly active users

I’ve used or at least experienced these products. The technology is sound, but no one is willing to pay to keep them running.

MilkyWay is a typical example: less than two years, four transformations. It started with Celestia liquidity staking, then shifted to re-staking, RWA tokenization, and crypto payment cards for rent payments… Each pivot chased the hot trend at the time.

Their description of re-staking hits close to home: “We saw the re-staking opportunity early, designed the system, reached a TVL of $250 million, completed security audits, and prepared for launch. But the market abandoned re-staking faster than anyone expected.”

In the end, they had to admit they couldn’t sustain until they found product-market fit.

Polynomial’s team was very straightforward about why they failed, giving a lesson to all perpetual contract projects: “In derivatives, good technology is useless. We improved execution speed, optimized user experience, built innovative infrastructure, but it all didn’t matter. Traders only go where there’s liquidity, and we had none. Everything else was just flashy features.”

The conclusion is even harsher: “Liquidity is the only moat for derivatives. You can’t beat liquidity with innovation, marketing, or development.”

The closure of ZeroLend serves as a warning to those trying to launch decentralized applications across multiple blockchains. They bet on niche chains like Manta, Zircuit, and Xlayer, but when the market turned bearish, these chains lost liquidity, and oracle services shut down.

Ultimately, long-term losses made it unsustainable.

Aave recently voted to shut down services on several chains, citing unprofitable operations as the reason.

There’s also Parsec, once a legendary tool in the space, used to track Terra, 3AC, and stETH depegging. But the team admits, “After the FTX crash, DeFi spot trading, lending, and leverage never returned to what they were. The market changed, on-chain behavior changed, and we didn’t truly understand it.”

Simply put, the market shifted, but we stayed the same. The market is brutal.

After Slingshot was acquired, it was completely shut down. Eden cut 80% of unprofitable products, leaving only core services.

As they said, “The 80/20 rule has become reality. Products that cost us 80% of our resources only generate 20% of our revenue.”

Finally, Step Finance is a special case: it was hacked on January 31, losing $26 million, and was declared dead. “We tried fundraising, acquisitions, but nothing worked.”

What do these failed projects have in common? They failed to adapt to the ever-changing market and lacked the funds to pivot again.

Each team bet on a certain ecosystem to explode, but the growth was either too slow or nonexistent. Celestia DeFi never truly took off, and on-chain derivatives struggle to compete with Hyperliquid, even veteran platforms like dydx and GMX are struggling.

Expanding into new chains and narratives is costly.

For players like me, moving funds from one platform to another is easy and inexpensive. But applications require more time and capital to prepare for potential new user bases.

The good news is, these are all “dignified deaths.” All projects give users time to withdraw, teams don’t run away or recklessly dump tokens. Compared to 2022’s outright exit scams, the industry has learned to die responsibly.