DeFi’s Fragile Foundation Falls Apart: $116 Million Breach Triggers Widespread Breakdown
Recent flash loan exploits and liquidity crises have severely undermined confidence in the decentralized finance (DeFi) sector, exposing fundamental vulnerabilities throughout the ecosystem.
Major Exploits and Their Impact
- On November 3, 2025, an exploit on Ethereum-based Balancer resulted in a $116.6 million loss due to vulnerabilities in boosted pools, draining liquidity across Ethereum and Base networks.
- Stream Finance, a decentralized lending platform, faced a collapse after an external fund manager revealed a $93 million loss, which led to withdrawal freezes and disrupted liquidity.
- Elixir’s deUSD stablecoin was discontinued after Stream Finance defaulted on a $68 million loan, causing a 45% drop in stablecoin value and further destabilizing the DeFi market.
Recovery Efforts and Ongoing Challenges
Projects like RedStone's Credora and Mutuum Finance are attempting to restore trust in DeFi by implementing risk rating systems and promoting non-custodial lending models.
Despite these efforts, the total value locked (TVL) in Cardano’s DeFi ecosystem remains low, highlighting continued hesitation among investors and users.
Analysts’ Warnings
Experts caution that governance weaknesses and cross-protocol vulnerabilities persist, posing ongoing risks to the stability of DeFi ecosystems.
The recent string of high-profile failures has intensified scrutiny on DeFi's systemic resilience and its ability to recover from cascading liquidity shocks.
Author’s Summary
The recent massive exploits and liquidity failures reveal deep structural flaws within DeFi, challenging its resilience and demanding urgent governance reforms.