Alpaca Finance Shuts Down by 2025 End Citing Unsustainable Model

Alpaca Finance, a once prominent player in the decentralized finance (DeFi) space on the BNB Chain, has announced its decision to shut down operations by the end of 2025. The protocol, which was an early leader in leveraged yield farming, cited an unsustainable business model and intense competition within the DeFi landscape as the primary reasons for its closure.

The shutdown process will be phased, allowing users to withdraw their funds and redeem their assets. Front-end access will remain available through December 31, 2025, to give users time to withdraw their assets. The team behind Alpaca Finance has emphasized the importance of a structured and community-focused wind-down process to protect user assets.

Launched during the DeFi boom of 2021, Alpaca quickly rose to prominence on the BNB Chain, offering leveraged yield farming strategies that allowed users to amplify returns by borrowing capital to farm liquidity pool (LP) tokens. At its peak, Alpaca held over $1 billion in total value locked (TVL) and was one of the most-used protocols on the chain. However, internally, Alpaca had been operating at a loss for over two years, with revenue tied directly to protocol usage. This challenge was compounded by the project’s fair launch structure with no VC backing or pre-mined tokens.

The final blow came in late April, when Binance delisted ALPACA, the protocol’s native token. While the event triggered a brief price rally due to short liquidations, it also severely restricted liquidity and user access to the token. This made it harder for Alpaca to pursue new initiatives or strategic mergers. The team explored M&A discussions with several projects, but as the market turned downward again in early 2025, those deals fell through.

The shutdown will affect all of Alpaca Finance's products, including its original yield farming platform, automated vaults, and decentralized perpetuals. Users are advised to withdraw their funds and redeem their AUSD as soon as possible, and to stay updated through the official blog for further instructions.

Alpaca Finance's shutdown serves as a reminder of the volatility and challenges within the DeFi space. The industry needs sustainable models to ensure long-term viability and growth. As the DeFi landscape continues to evolve, it is crucial for projects to adapt and innovate to stay competitive and resilient. The decision to shut down was not made lightly, but the team believes it is the most responsible course of action to safeguard the community and ensure a graceful and secure wind-down.