Thread by @512M_AG

Recently, @StreamDefi's xUSD stablecoin collapsed catastrophically, wiping out millions and leaving users with massive losses.

One platform with zero exposure was @infiniFi, which rejected xUSD months earlier, thanks to their risk framework, which we'll explore.

1/12 👇 🧵

The xUSD collapse wasn't just another protocol failure. It exposed how DeFi platforms assess risk.

Users trusted not only Stream Finance, but also established risk curators who onboarded xUSD without adequate vetting to @eulerfinance and @MorphoLab lending markets.

The fundamental flaw was devastating yet simple: opaque yield strategies that couldn't be verified or monitored. Users believed they held a stable, yield-bearing asset backed by "diversified DeFi strategies".

Instead, they had exposure to undisclosed, high-risk positions nobody could properly evaluate.

infiniFi's risk team evaluated xUSD months before the collapse and rejected it outright.

Their framework uses a three-layer governance structure: Internal Risk Underwriting, External Risk Validation, and Risk Council Oversight with veto power.

infiniFi requires assets to pass the following criteria:

Contract age: ≥1 month
Collateralisation: Fully collateralised
Security: ≥2 independent audits
Transparency: Open-source OR continuous proof-of-reserves
Reputation: No previous loss of user funds

xUSD failed spectacularly on multiple fronts:

Only ONE audit (Code4rena) vs the required minimum of two
ZERO transparency into strategies or positions
Promises of "transparency coming soon" that never materialised
Impossible to verify where funds were actually deployed

Compare this to @protocol_fx's fxUSD, which was approved:

16 audits from tier-1 firms like Trail of Bits and OpenZeppelin
Complete on-chain visibility of all backing
Instant redemption mechanism proven during volatility
Transparent yield sources from ETH staking

The key differentiators are stark.

While xUSD operated in complete opacity with unverifiable yields and undisclosed external managers, fxUSD provides complete transparency with verifiable over-collateralisation and disclosed dependencies.

@StreamDefi @protocol_fx @infiniFi infiniFi's live dashboard demonstrates what transparency looks like:


Users can verify total supply metrics, all positions with detailed breakdowns, TVL allocation per position, current and average APY, and direct links to underlying protocol data.stats.infinifi.xyz

The xUSD collapse teaches clear lessons: transparency is non-negotiable, systematic risk management beats yield chasing, and user protection must take priority over growth metrics.

You cannot manage risk you cannot measure.

infiniFi's framework represents a blueprint for how DeFi should work.

Binary pass/fail criteria prevent rationalisation. Multi-layer governance ensures expert consensus. Complete transparency enables continuous monitoring. This prevented real losses whilst other platforms exposed users to hidden risks.

Read the complete analysis of why infiniFi never onboarded xUSD and what this reveals about genuine risk management versus security theatre in DeFi.

512m.io/blog/risk-mana…