- The Solana-based UXD protocol is on the way out.
- UXD DAO votes to end protocol.
- The process could take up to two years.
Solana-based stablecoin provider UXD Protocol, with $7.5 million in user deposits, is shutting down operations and will return unused capital to investors, the project announced Monday.
The UXD team blamed the project’s shutdown that began in 2021 on a lack of liquidity and the inability of its stablecoin model to achieve product-market fit.
“The model leads to stablecoin stability, but it is not exciting enough for DeFi users and does not offer enough advantages over centralized stablecoins,” the team said in a post on the DAO forum on Monday.
“We believe that completing the project and returning the capital to investors is the best use of the team’s capital and resources.”
The process of closing the protocol and repaying capital is pending a DAO vote which is already underway and will last for a week.
If the vote passes, the full closure process could take up to two years because its insurance funds contain illiquid assets, the team said.
The long liquidation window gives investors enough time to convert these illiquid assets into USDC and exit the protocol.
The team proposed that two smart contract engineers be retained throughout the liquidation process to ensure investors can recover their funds.
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Monday’s announcement recommended an annual salary of $200,000 for the two engineers.
As part of the closing process, UXD will burn $7.5 million of its UXP token.
Stablecoin contenders struggle to recover
UXD is one of several projects, alongside Parrot USD and Hubble Protocol, that sought to challenge the dominance of centralized stablecoin issuers like Circle and Tether by offering crypto-based alternatives.
The Parrot Protocol team furiously resigned last year and walked away with $47.5 million, leaving disgruntled investors with just $27 million in the stash to share among themselves.
This means that several investors left the project with only a fraction of what they had invested in the protocol.
Hubble Protocol’s USDH stablecoin is worth just $2.7 million, a tiny fraction of the $3.8 billion Solana stablecoin market.
While UXD was never directly hacked, it was one of the projects affected by Avraham Eisenberg’s $110 million exploit of Solana lending protocol Mango Markets in October 2022.
The protocol lost $19.9 million following the exploit, but was able to recover the funds shortly after.
Osato Avan-Nomayo is our DeFi correspondent based in Nigeria. He covers DeFi and technology. To share tips or information on articles, please contact him at osato@dlnews.com.
