In just the first 2 months of 2026, the crypto market has witnessed a rather unusual phenomenon: a series of DeFi protocols have announced their shutdown.

What is noteworthy is that the majority of these are not rug pulls, nor are they scam projects. These are protocols with real products, real users, and some even reached a scale of hundreds of millions of USD. But ultimately, they still had to cease operations.

A series of DeFi protocols have announced their closures

According to DefiIgnas statistics, in the first few weeks of 2026, at least 8–10 projects have announced shutdown.

Some notable names include:

  • MilkyWay

  • Nifty Gateway

  • Slingshot

  • Polynomial Protocol

  • ZeroLend

  • Parsec Finance

  • Step Finance

  • DataHaven

Even Angle Protocol, a stablecoin project that once achieved 250 million USD TVL, has also announced the closure of two products, EURA and USDA.

The surprise: Many products are still performing well

What surprises many in the industry is that most of these products are not bad at all.

For example:

  • Polynomial Protocol once handled over 4 billion USD in trading volume

  • MilkyWay once reached 250 million USD TVL

  • Step Finance has about 300,000 users each month

  • The technology is stable, the user experience is good. But in the end, they still had to close because revenues were not enough to sustain operations.

Lesson 1: Narratives in crypto change too quickly

A typical example is MilkyWay. In less than two years, this project continuously pivoted according to the hot narratives of the market:

Liquid staking on Celestia $TIA , then restaking, followed by tokenization of real-world assets (RWA), and even experimenting with crypto debit cards.

The problem is that narratives often change faster than product development. By the time the product is ready, the market has already shifted to a different story.

Lesson 2: In the derivatives market, liquidity is everything

The Polynomial Protocol team once admitted a very frank thing: good technology is not enough to win in the derivatives market.

They built a fast matching system, good trading experience, and many infrastructure improvements. But in the end, traders still choose the place with the deepest liquidity.

In the derivatives market, the rule is very simple: Liquidity → continues to create liquidity. That is also the reason why Hyperliquid is currently almost dominating the Perpetual DEX space.

Lesson 3: Multi-chain is not always an advantage

Some projects like ZeroLend operate on multiple blockchains simultaneously like Manta Network $MANTA , Zircuit, or X Layer.

In a booming market phase, this helps projects expand quickly. But when the flow of capital declines, liquidity on small chains evaporates very quickly. Oracles stop supporting, the market lacks liquidity to operate, and revenues cannot cover infrastructure costs.

Even Aave recently had to shut down some deployments on small chains due to not achieving minimum revenue.

A positive signal from the wave of shutdowns

Compared to the difficult market phase in 2022, the closures this time occurred quite 'cleanly'.

Most teams are:

  • Give users time to withdraw assets

  • Do not issue new tokens to exit

  • Do not freeze user funds

In other words, a project can fail, but still fail responsibly.

A rather harsh reality of crypto

Most of the 'dead' protocols do not fail due to poor technology, but because they choose the wrong ecosystem, bet on the wrong narrative, or fail to find product-market fit. Meanwhile, for crypto users, switching capital to a new narrative only takes a few seconds.

But for a DeFi protocol, changing direction means rebuilding the product, deploying infrastructure, and marketing from scratch. And sometimes, when everything is ready… users have left long ago.