Algorand’s Largest DeFi Protocol to Shut Down

Algofi, which accounted for more than 50% of value on Algorand, said it will shortly move into withdrawal-only mode.

Algofi, a decentralized finance lending protocol built on the Layer 1 blockchain Algorand, plans to shutter operations by the end of the year. Algofi, which facilitates lending, borrowing and trading, raised $2.9 million from investors, including a pre-seed round led by Y Combinator.

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

In a July 11 announcement, Algofi’s developers said they had decided to wind down the protocol, citing a “confluence of events” that had taken place which had rendered maintaining the protocol unviable. 

“We will begin sunsetting the platform and put the platform in withdrawal-only mode,” the developers said. 

“This is obviously not the outcome any of us on the team or in the community hoped for at the outset of this project,” they added. 

Beginning Sept. 1, collateral factors of ALGO, vALGO, STBL, USDC, goBTC, and goETH will be reduced from 75% to 0% by December, on both V1 and V2 lending markets. Ongoing liquidity mining programs will be halted and no future proposals would be enacted.

Until the announcement, Algofi accounted for more than half of Algorand’s $41 million in Total Value Locked (TVL). Over the last 24 hours, however, Algofi’s TVL dropped 60% to under $14 million.

Earlier this year, the U.S. Securities and Exchange Commission (SEC) named Algorand a security, along with five other tokens, in a lawsuit against crypto exchange Bittrex. The SEC’s characterization came despite comments made by Chairman Gary Gensler a few years prior, praising the Algorand blockchain and saying “you can create Uber on top of it.”