- Solana-based UXD Protocol is winding down.
- UXD DAO is voting to sunset the protocol.
- The process could take up to two years.
Solana-based stablecoin provider UXD Protocol with $7.5 million in user deposits is winding down its operations and will return unused capital to investors, the project announced on Monday.
UXD’s team blamed a lack of liquidity and the inability of its stablecoin model to achieve product-market fit as reasons for sunsetting the project which began in 2021.
“The model does lead to the stablecoin being stable, but [it] is not exciting enough for DeFi users and does not offer enough advantage over centralised stablecoins,” the team said in a DAO forum post on Monday.
“We think sunsetting the project, and returning capital to investors is the best use of capital and team resources.”
The protocol’s shutdown and capital reimbursement process is pending a DAO vote which is already underway and will last for one week.
If the vote passes, the complete shutdown process could take up to two years since there are illiquid assets in its insurance funds, the team said.
The long winddown window gives investors sufficient time to convert those illiquid assets to USDC and withdraw from the protocol.
The team proposed that two smart contract engineers be retained for the duration of the winddown process to ensure investors can redeem their funds.
Monday’s announcement recommended a $200,000 annual salary for both engineers.
As part of the shutdown process, UXD will burn $7.5 million worth of its UXP token.
Stablecoin contenders struggle
UXD is one of several projects, alongside Parrot USD and Hubble Protocol, that sought to challenge the dominance of centralised stablecoin issuers like Circle and Tether by offering crypto-backed alternatives.
The Parrot Protocol team rage-quit last year and walked away with $47.5 million, leaving aggrieved investors with only $27 million in the reserve pool to share among themselves.
That meant several investors exited the project with only a fraction of what they put into the protocol.
Hubble Protocol’s USDH stablecoin is only worth $2.7 million, a tiny fraction of the $3.8 billion Solana stablecoin market.
While UXD was never hacked directly, 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 Nigeria-based DeFi correspondent. He covers DeFi and tech. To share tips or information about stories, please contact him at osato@dlnews.com.
