Yield Protocol, a decentralized finance (DeFi) project that offered fixed-rate lending and borrowing on stablecoins, has announced that it will cease operations by the end of 2023. The project, which was backed by prominent investors such as Paradigm, Framework Ventures, and CMS, cited low demand and regulatory uncertainty as the main reasons for its closure.
Yield Protocol launched in April 2022 to provide a novel solution for fixed-rate lending in DeFi. The protocol used a tokenized bond system that allowed users to lock in interest rates for different durations.
It also integrated with other DeFi platforms such as MakerDAO, Aave, and Compound to offer more liquidity and yield opportunities. However, the project failed to attract enough users and capital to sustain its operations.
Lack of Interest Led Yield Protocol to Its Demize
According to DeFi Pulse, Yield Protocol’s total value locked (TVL) peaked at $22 million in April 2022 and declined to $2 million as of October 3, 2023. The protocol also faced competition from other DeFi projects that offered similar or better services for fixed-rate lending, such as Notional Finance, Element Finance, and YieldSpace.
In addition, the project faced regulatory challenges as the crypto industry became more scrutinized by authorities around the world. The protocol’s team said that they were concerned about the legal implications of issuing tokenized bonds and the potential liabilities for the developers and investors.
In a tweet on Tuesday, Yield Protocol’s X account announced that the protocol would “wind down” and that borrowing and lending would stop in December 2023. The team also thanked the community for their support and encouraged users to withdraw their funds from the protocol as soon as possible.
The decision to wind down arises from the lack of sustainable demand for fixed-rate borrowing on our platform along with the increasingly challenging regulatory environment in the US, Europe, and the UK.
— Yield Protocol (@yield) October 3, 2023
Yield Protocol is not the first DeFi project to close down amid the bear market and regulatory pressure. In September, GRO, a yield optimization platform on Avalanche, decided to discontinue its operations after a DAO vote. In July, AlgoFi, a lending platform in Algorand, also announced its shutdown due to low adoption and technical issues.