Developers of UXD stablecoin proposed to shut down the project due to low activity

What’s new? The team of the Solana blockchain-based UXD algorithmic stablecoin UXD protocol has proposed to close the project, the community of the decentralized autonomous organization (DAO) running it, which consists of UXP native token holders, can participate in the vote. The developers said the decision was not “light” because “iUXD has successfully navigated a number of challenges in the past. The UXD stablecoin has been stable through various market regimes and is integrated across many of the top DeFi protocols on Solana.” At its peak, the total value locked (TVL) of the project was as high as $40 million.

Community forum voting

What else is known? As part of the shutdown, the team will return a multi-million dollar insurance fund to token holders and investors — a process expected to take up to two years. Token holders will be able to vote on the terms of the shutdown, including how to distribute or destroy UXP's still-unallocated $10 million worth of tokens.

UXP was launched as a result of a $57 million tokensale in which 3 676 investors participated. Amid the news of the project's closure, the asset's exchange rate rose 40% overnight to reach $0,016, the highest since December last year.

DAO participants will be able to vote within the next six days. At the moment, 100% of votes are in favor of the closure decision.

The team explained that it suspended the protocol due to lack of liquidity and interest, adding that the product “does not offer enough advantage over centralized stablecoins.”

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After the closing bid, UXD lost its peg to the US dollar and is trading at $0,995. The asset has a market capitalization of $7,4 million. By comparison, the capitalization of the largest centralized stablecoins — Tether's USDT and Circle's USDC — is approaching $117 billion and $35 billion, respectively.

The UXD protocol used decentralized exchanges (DEX) Drift Protocol and Mango Markets as part of its initial strategy to maintain the peg. As a result of the latter's exploit in October 2022, UXD lost $20 million and the issuance of stablecoins was temporarily halted.

UXD is currently backed by the Credix Fintech pool, which contains a number of illiquid investments, making it difficult to redeem the stablecoin. The team said it will issue enough UXD to allow holders to exchange their funds into USDC, though it will take months to fully liquidate the reserves.

In the meantime, UXP holders can withdraw funds from the insurance fund during the six-month token conversion phase.

Launched in 2021, the UXD protocol raised $3 million in a seed round of funding led by Multicoin Capital and backed by now-bankrupt Alameda Research, as well as CMS Holdings, Solana Foundation and Solana co-founders Anatoly Yakovenko and Raj Gokal.