Solana-based decentralized finance (DeFi) project Friktion announced that it will be shutting down operations due to financial constraints. The platform has disabled the frontend interface and urged users to withdraw their funds.
“It has been a tough market for DeFi growth in recent months. Costs have outpaced revenue which is making us re-evaluate strategy going forward, starting with sunsetting the user platform,” said the company in a blog post.
The project, which launched in early 2021, aimed at providing structured products for DeFi investments, allowing investors to gain a portion of the revenue generated by investment pools.
“This decision was not made lightly, as Friktion has successfully navigated a number of challenges in the past, including Luna, FTX, and network outages. The company remains a strong believer in the future of Solana DeFi and will continue to support the ecosystem where it can,” reads the blog post.
Friktion’s platform saw significant growth in its user base, reaching almost 20,000 wallets and achieving a traded volume of over $3 billion and a total value locked (TVL) of $160 million in the first half of 2022. Despite the success, the platform was affected by the crypto market downturn.
In November 2022, Friktion introduced undercollateralized lending to cater to the increasing demand for DeFi among institutional investors.
The company had also raised $5.5 million in a Jan. 2022 funding round, which saw the participation of several investors, including DeFiance Capital, Solana Ventures, Tribe Capital, and Jump Crypto.
While the DeFi space has seen explosive growth, many projects have struggled to maintain their operations in the prolonged bear market. The closure of Friktion highlights the need for more sustainable business models.