ZeroLend Shuts Down After Liquidity Dries Up Across Layer 2s
•February 17, 2026
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Why It Matters
The shutdown highlights the fragility of DeFi lending on Layer‑2 chains and warns investors about liquidity‑risk concentration in emerging scaling solutions.
Key Takeaways
- •ZeroLend TVL fell 98% to $6.6M.
- •Oracle providers withdrew support on key Layer‑2 chains.
- •ZERO token down 99% from 2024 peak.
- •Users urged to withdraw; assets may be stuck.
- •Closure underscores L2 liquidity volatility risk.
Pulse Analysis
ZeroLend’s rapid rise and abrupt fall illustrate the volatile nature of DeFi lending on Layer‑2 scaling solutions. Launched three years ago, the protocol quickly amassed $359 million in total value locked, positioning itself as a key player on networks such as Arbitrum, Optimism, and zkSync. Its promise of lower fees and faster settlement attracted both retail borrowers and institutional liquidity providers, fueling a brief but impressive growth spurt that seemed to validate the Layer‑2 model for mainstream finance.
The collapse was not triggered by a single hack or market crash but by a systematic erosion of core infrastructure. As broader crypto activity shifted away from certain L2s, trading volume and deposit inflows dwindled, leaving ZeroLend’s lending pools under‑utilized. Compounding the issue, several oracle providers withdrew support for the chains, undermining price reliability and increasing operational risk. With revenue streams unable to offset gas and maintenance costs, the protocol’s economics became unsustainable, prompting the founders to initiate a wind‑down and advise users to withdraw.
ZeroLend’s exit sends a cautionary signal to the DeFi ecosystem. It underscores the importance of diversified liquidity sources, robust oracle arrangements, and adaptable cost structures for projects operating on scaling layers. Investors and developers must now reassess risk models for L2‑based services, ensuring that future protocols can weather liquidity cycles without jeopardizing user funds. The episode may also accelerate discussions around cross‑chain liquidity bridges and insurance mechanisms designed to protect participants in a rapidly evolving market.
ZeroLend Shuts Down After Liquidity Dries Up Across Layer 2s
Another DeFi lender has called it quits.
ZeroLend announced Monday that it is winding down operations after three years, with founder “Ryker” saying the protocol had become unsustainable. The core issue was not a single exploit or market crash, but a slow bleed.
Several of the layer‑2 networks ZeroLend operated on saw activity and liquidity dry up, while some oracle providers stopped supporting those chains altogether. That made it harder to run lending markets reliably, and revenues failed to keep up with costs.
At its peak in November 2024, ZeroLend held nearly $359 million in total value locked. That figure has now collapsed by about 98 % to roughly $6.6 million. The ZERO token fell another 34 % in the past 24 hours and is down 99 % from its 2024 high.
This story is an excerpt from the Unchained Daily newsletter.
Users are being urged to withdraw funds, though some assets remain stuck on thinly traded networks. The team says it plans contract upgrades to help redistribute stranded liquidity. For token holders, however, the project’s closure appears final.
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