Algorand’s largest DeFi protocol, Algofi, has announced that it will soon be shutting down. Prior to the announcement, the application accounted for 56% of the liquidity of its host blockchain
Algorand loses Algofi, its largest DeFi protocol
Algofi, previously the largest decentralised finance protocol (DeFi) on the Algorand blockchain (ALGO), is set to end its services:
1) Hey Everyone,
We have some unfortunate news to share regarding the Algofi protocol.
After a lot of reflection, the team has recently come to the unfortunate decision to begin winding down the protocol.
– Algofi (@algofiorg) July 10, 2023
The project offered the usual services you would expect to find on a DeFi application, namely decentralised exchange (DEX) and lending and borrowing functionalities.
Prior to the announcement, Algofi held 56% of the total locked-in value (TVL) on Algorand, and its liquidity has now fallen by more than 60% in 24 hours to less than $13m at the time of writing. Much of this liquidity has been redirected to the Folks Finance protocol.
Unclear reasons for shutting down the protocol
Even though the protocol teams remain confident in the Algorand consensus, they consider the end of the project to be necessary, without really providing any precise justification:
“That said, a confluence of events has taken place, putting an end to the construction and maintenance of the Algofi platform to the highest standards for a viable trajectory for our company. For this reason, we will begin to wind down the platform and put it into retirement mode only shortly. “
As a result, the collateral requirements necessary for lending and borrowing activities will become increasingly restrictive, so as to force investors to withdraw their funds from the app. In addition, no new governance proposals will be published, and liquidity mining programmes will be discontinued.
More generally, although the Algorand blockchain is intended to be a fast and inexpensive network, it is struggling to find its place in the layers 1 sector. On DefiLlama, the blockchain ranks 34th in terms of TVL in DeFi, with $42 million, more than five times less than in November last year.
As for ALGO, it is trading at nearly $0.11 a unit, in 47th place in the CoinGecko ranking for a capitalisation of $837.86 million.
