ZKSync Ends Ignite Incentive Program Amid Market Challenges

Liquidity Rewards Discontinued as ZKSync Shifts Focus

ZKSync’s DeFi Steering Committee (DSC) has confirmed that the ZKSync Ignite liquidity reward program will not be renewed, officially ending on March 17, 2025. The decision brings an abrupt halt to the second season of Ignite and cancels the final Phase 6 reward allocation for Season 1. The team cited ongoing bearish market conditions and a strategic pivot toward the Elastic Network as the primary reasons for the discontinuation.

The prolonged crypto downturn has made sustaining Ignite financially unfeasible. ZKSync acknowledged the necessity of reallocating resources, stating that maintaining a high-yield liquidity program in current market conditions was unsustainable. The ZK token, which peaked at $0.26 on December 8, 2024, has since plummeted 72% to $0.072, intensifying sell pressure and diminishing the program’s effectiveness. 

Initially, Ignite allocated 300 million ZK tokens over nine months, with 100 million distributed in Season 1. At launch, these rewards were valued at $21 million, but their worth has since dropped to just $6.8 million. The program’s rising costs and diminishing impact ultimately forced the DSC to abandon further funding.

The end of Ignite marks a turning point for ZKSync’s DeFi ecosystem. The initiative significantly boosted adoption, propelling ZKSync’s total value locked (TVL) to $270 million—far exceeding its original $100 million target. However, with incentives winding down, TVL has fallen to $139 million, reflecting broader market struggles. 

Liquidity continues to drain, with stablecoin holdings down 60% over the past year, leaving ZKSync with just $74 million in stablecoin liquidity. The network, once a strong competitor to Base and Arbitrum, now sees fewer than 20,000 active daily wallets, a sharp decline from previous highs.

The DSC justified its decision by pointing to the program’s unsustainable nature. Ignite’s incentives initially offered over 40% APY, attracting yield farmers more interested in short-term profits than long-term engagement. As rewards dwindled, so did user activity, exposing a lack of organic demand. 

The ZK token’s struggles further highlight shifting market sentiment. Open interest in ZK is heavily skewed toward short positions, with 37% of derivatives traders betting against the token. Despite previous airdrops and liquidity incentives, ZK has continued to slide, mirroring the broader downturn affecting Layer 2 networks.

Looking ahead, ZKSync is shifting its focus to the Elastic Network, an initiative designed to create a scalable, interconnected ecosystem of zero-knowledge rollups. The network aims to improve interoperability and long-term sustainability, steering away from heavy reliance on liquidity incentives. 

Governance adjustments and new tokenomics models are also under development, with the ZKSync Foundation planning a more hands-on approach in shaping the project’s future. Instead of aggressive expansion, the team is prioritizing organic growth, aligning its strategy more closely with Ethereum’s long-term liquidity landscape.

This article has been refined and enhanced by ChatGPT.