DeFi’s $222M November Blow: Stream Finance and Balancer Exploits Lead to Massive Asset Losses

Key Points

• DeFi protocols experience losses totalling $222 million in early November, with Stream Finance losing around $93 million.
• The overall debt to lenders following the incidents is nearly $285 million.

The DeFi ecosystem has been hit by several incidents in November, resulting in a total loss of $222 million. This includes the loss of roughly $93 million in Stream Finance assets.

After these events, analysts noted that the overall debt to lenders across different markets is close to $285 million.

Stream Finance’s Incident

Stream Finance, a DeFi app that specialises in vault-style strategies, experienced an exploit on November 3. This led to the freezing of deposits and withdrawals and a significant drop in the value of its collateralized stablecoin, Staked Stream USD (XUSD).

XUSD’s value has decreased by over 73% in the past 24 hours, trading at around $0.32 after previously reaching $0.24.

Investigation and Debt Analysis

Stream Finance has engaged law firm Perkins Coie LLP to investigate the incident. They are also actively withdrawing all liquid assets and have suspended all withdrawals and deposits.

Analysts have identified an overall debt to lenders on various platforms of almost $285 million, excluding indirect exposure. This includes stablecoins with indirect exposure to Stream, such as Elixir’s deUSD and Treeve’s scUSD.

Assets tied to XUSD, XBTC, and XETH were rehypothecated across multiple protocols, including Euler, Silo, Morpho, Gearbox, and Enclabs. The largest curators linked to Stream-backed lending markets include TelosC, Elixir, and MEV Capital.

Understanding the Incident

Stream Finance operates a synthetic asset protocol that issues XUSD, XBTC, and XETH. These assets are backed by onchain collateral like BTC, ETH or stablecoins to mint xAssets, which can be traded, staked, or used as collateral on other DeFi platforms.

This model relies on overcollateralization and rehypothecation to maximize capital efficiency. However, this design also increases systemic risk – if xAsset collateral values fall or counterparties fail, losses can cascade via a contagion to the interconnected protocols that rely on them.

The analysis from YAM reveals a liquidity mismatch and collateral devaluation among Stream’s xAssets, which were re-lent across other protocols. The widespread rehypothecation involved the fact that the failure of one vault could become contagious to others as well.

Other DeFi Incidents

The Stream Finance event follows another incident in the DeFi ecosystem marked by Balancer’s exploit on November 3. Losses of over $116 million were highlighted by SpotOnChain, while blockchain security firm Peckshield estimated losses of over $128 million in assets drained from Balancer’s vaults.

Additionally, an oracle manipulation attack on Moonwell DeFi led to $1 million being drained from lending pools on Base and Optimism, as revealed by the security firm CertiK.

These three events totalled approximately $222 million erased from DeFi protocols at the beginning of November, highlighting the strong link between liquidity and collateral systems across chains.

The general crypto market is experiencing high volatility, and it’s down by over 4% in 24 hours. However, BTC is showing slight signs of an upward reversal, climbing above $104,000 after an earlier drop below the level.