- Alpaca Finance has announced its shutdown after four years of operation
- The platform has experienced a 94% decline in Total Value Locked from its peak
- The decision follows prolonged revenue challenges and shifting DeFi market dynamics
Alpaca Finance, once the go-to yield farming protocol on the BNB Chain, has announced that it is sending itself to the abattoir. The platform, which peaked with nearly $1 billion in Total Value Locked (TVL) in 2022, has been on the slide ever since, now holding only $55 million. The founders have blamed the changing face of DeFi for the drop in funds held, saying that automated systems are taking the place of manually operated platforms.
The Rise and Fall of a Fluffy DeFi Giant
Launched in 2021, Alpaca Finance quickly became a leading leveraged yield farming protocol on the BNB Chain. Its innovative approach allowed users to amplify their returns by borrowing assets for yield farming, attracting a substantial user base and significant capital. Unfortunately, just a year after launch, the bear market struck, with an inevitable drop in fortunes when the market turned.
Once the bear market was over, Alpaca Finance then found itself on the wrong side of the DeFi evolution. The introduction of concentrated liquidity automated market makers (AMMs), such as Uniswap v3, offered users more efficient capital deployment and built-in leverage. These advancements rendered Alpacas external leverage model less competitive, leading to a decline in user engagement:
No More Business
Despite efforts to innovate and cut costs, Alpaca Finance faced persistent revenue shortfalls, leading to an administrator known as Bibendus commenting on the projects Discord server, Theres no more business.
DeFi Llama gave notice of its decision on X, noting the incredibly difficult decision to wind down operations:
The platform has been operating at a loss for over two years, making its continuation unsustainable, and the team acknowledged the challenges, noting, Despite our best efforts, the changing DeFi landscape and declining revenues have made it impossible to continue operations.
The project outlined a structured shutdown process to ensure users can retrieve their funds:
- June 2025: Disabling the creation of new positions
- End of July 2025: Automatic closure of any remaining open positions
- End of 2025: Permanent shutdown of the platforms front-end interface.
Users are advised to close their positions and withdraw funds promptly to avoid complications.
A Warning Beacon
Alpaca Finances journey underscores the rapid pace of innovation in the DeFi sector; while it once stood at the forefront of leveraged yield farming, the platforms decline highlights the importance of adaptability in a constantly shifting market. As DeFi continues to mature, Alpacas story serves as both a testament to innovation and a cautionary tale about the challenges of sustaining success in the crypto world.
