Decentralized lending protocol ZeroLend is closing down after three years of operations due to unsustainable economic conditions in the blockchain ecosystem and the increasing security threats.
Liquidity crunch and oracle withdrawals hit ZeroLend
ZeroLend is designed for multi-chain operability, focusing on Ethereum Layer 2 solutions to minimize transaction fees. They create a trustless marketplace where users can lend assets and earn interest or borrow against their holdings.
However, they couldn’t overcome challenges including the withdrawal of price data providers, shrinking liquidity on networks like Manta, Zircuit, and XLAYER, and increasing hacker threats with the protocol growth.
“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 official statement said.
The oracles that provided them real-time price data dropped their support, breaking the lending market due to unreliable information and limitations caused.
ZeroLend top priority is their users
The protocol shared their concerns for the users’ assets and assured that they are working towards ensuring that users can safely withdraw their assets from the protocol.
A solution is also being developed to return funds to users whose positions are currently locked in inactive environments associated with platforms such as Manta, Zircuit, and Xlayer. They are planning to execute a timelock to enable redistribution of the affected assets, aiming to maximize asset recovery.
Lombard Staked Bitcoin, or LBTC, a yield-bearing, liquid staking derivative version of Bitcoin used for Decentralized Finance (DeFi) lending on the ZeroLend market, was met with exploitation in February 2025. The malicious actor drained the liquidity using a forged LBTC as collateral.
ZeroLend confirmed that with the support of the LINEA airdrop allocation received by the team, LBTC suppliers can receive partial refunds. The official statement requested the users to contact the moderators or submit a support ticket to coordinate the next step.
