DeFi’s Fragile Foundation Falls Apart: $116 Million Breach Triggers Widespread Breakdown

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DeFi’s Fragile Foundation Falls Apart: $116 Million Breach Triggers Widespread Breakdown

Bitget-RWA2025/11/07 03:14

By:Bitget-RWA

- DeFi faces systemic collapse after Balancer's $116.6M exploit via boosted pool vulnerabilities, draining liquidity across Ethereum and Base. - Cascading failures hit Stream Finance ($93M loss) and Elixir's deUSD stablecoin, triggering liquidity freezes and 45% stablecoin value drops. - RedStone's Credora and Mutuum Finance aim to rebuild trust with risk ratings and non-custodial lending, but TVL remains low in Cardano's DeFi. - Analysts warn of persistent governance flaws and cross-protocol risks, as Bit

Recent flash loan exploits and liquidity crunches have shaken confidence in DeFi, with a series of major incidents revealing deep-rooted weaknesses in the industry. On November 3, 2025, the Ethereum-based automated market maker

Balancer

experienced its third significant breach, resulting in losses exceeding $116.6 million across several blockchains. The attackers took advantage of a faulty access control in Balancer’s boosted pools, siphoning liquidity from

Ethereum

, Base, and other platforms. The stolen assets, which included 6,851 osETH and 6,587 WETH, were consolidated into a single wallet, leading security company PeckShield to advise users to revoke protocol permissions,

as reported by TradingView

. This breach came after a DNS phishing incident in September that cost Balancer $238,000, highlighting ongoing security flaws in DeFi systems,

as noted by Bitget

The turmoil intensified as related protocols suffered knock-on effects. Stream Finance, a decentralized lending service, collapsed when an external fund manager disclosed a $93 million loss, causing a freeze on withdrawals. Elixir, a DeFi liquidity platform, had to discontinue its deUSD stablecoin after Stream defaulted on a $68 million loan, destabilizing the token. Elixir suspended redemptions and stopped minting to limit further liquidation risks, with 80% of deUSD holders already exchanging their tokens at a 1:1 rate with

USDC

according to Lookonchain

DeFi’s Fragile Foundation Falls Apart: $116 Million Breach Triggers Widespread Breakdown image 0

The crisis spread to stablecoins such as USDX, which dropped to $0.314, and USDe,

Ethena

Labs’ stablecoin, which lost 45% of its value within a month,

according to Lookonchain

These developments underscore the instability of DeFi’s collateral-backed lending structures.

RedStone

, a risk analytics provider, introduced Credora to bring transparency to credit exposures by offering standardized risk assessments for lending pools. CEO Piotr Kaźmierczak stressed the importance of measuring systemic threats following October’s $20 billion crypto sell-off and Stream’s downfall,

as reported by Cointelegraph

. Meanwhile, some critics maintain that DeFi’s governance mechanisms and dependence on cross-protocol collateral are still inadequate to avert future crises.

In the midst of these challenges, emerging platforms like Mutuum Finance are striving to restore confidence. The Dubai-based project is preparing to launch its V1 version featuring dual lending markets and non-custodial smart contracts. With 17,600 users and advanced testnet development, Mutuum aims to provide a safer alternative to conventional DeFi pools,

as reported by GlobeNewswire

. However, broader issues remain. Cardano’s DeFi sector, despite strong staking participation, continues to face low total value locked ($271 million) due to coordination and governance challenges,

according to Coinotag

As DeFi confronts its weaknesses, the future depends on stronger risk management, better governance, and innovative solutions like Mutuum Finance. Still, as one commentator remarked in Yahoo Finance, "At last, the casualties are coming to light," suggesting that more difficulties may be on the horizon,

as stated in Yahoo Finance

. The ongoing instability has also unnerved institutional players. Bitcoin’s recent dip below $100,000 and $2 billion in ETF outflows reflect broader economic worries spilling into the crypto space,

as reported by Cointelegraph

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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