> ## Documentation Index > Fetch the complete documentation index at: https://docs.infinifi.xyz/llms.txt > Use this file to discover all available pages before exploring further. # infiniFi Risk Assessment Framework ## **Overview** InfiniFi employs a comprehensive and multi-dimensional risk framework to evaluate and approve underlying assets for inclusion in its balance sheet and yield strategies. This framework is modeled on institutional credit underwriting and asset-liability management principles, ensuring that every allocation meets the highest standards of transparency, liquidity, and capital protection. The assessment encompasses credit, liquidity, market, and operational dimensions, complemented by independent third-party validation and a dedicated risk council composed of leading risk managers in the digital asset ecosystem. The sections below are used to complete the [infiniFi Risk Rubric](https://app.notion.com/p/Risk-Rubric-Template-Public-2ea44c414f3680e68135d68ab0804945?source=copy_link). *** ## **1. Internal Risk Underwriting** InfiniFi conducts a full-spectrum evaluation of every prospective asset and yield source through an internal underwriting process that assesses both **quantitative and qualitative** dimensions of risk. ### **Key Evaluation Areas** * **Credit & Counterparty Risk** Assessment of the issuer’s solvency, over-collateralization ratio, and exposure mapping across underlying positions (e.g., Pendle PTs, Ethena, or Morpho strategies). Continuous monitoring of creditworthiness and counterparties ensures that concentration risks remain within acceptable thresholds. * **Redemption & Exit Liquidity** Detailed simulation of liquidity unwind scenarios, including standard maturities, emergency redemptions, and cross-market slippage. Redemption mechanisms are analyzed under both normal and stressed conditions to ensure that InfiniFi maintains stable redemption windows and predictable exit paths. * **Yield Sustainability & Dilution Risk** Measurement of yield persistence through modeling of capital saturation thresholds, projected returns under increased inflows, and performance decay relative to benchmark yields. * **Liquidity & Allocation Constraints** Establishment of exposure caps per protocol or strategy to preserve diversification and prevent illiquidity risk. InfiniFi maintains internal limits, ensuring that the portfolio is optimized properly from a risk/reward perspective across approved yield sources. * **Security Assurance** All protocols must undergo **two or more independent audits**, with preference of tier 1 auditors for formal verification. Smart contract integrity is validated through real-time on-chain monitoring and continuous alerting systems. * **Governance & Upgradeability** Evaluation of multisig structures, governance delay mechanisms, and administrative key management to mitigate governance-based risks and unauthorized protocol changes. *** ## **2. External Risk Validation** To complement internal underwriting, InfiniFi mandates a **third-party risk validation** from an independent analytics or rating firm (e.g., Exponential, Credora). This process verifies the accuracy of internal assumptions, benchmark alignment, and security posture. External ratings are continuously reviewed and integrated into InfiniFi’s internal dashboards to support real-time decision-making. *** ## **3. Risk Council Oversight** The InfiniFi Risk Council is comprised of risk experts from some of the top curators, hedge funds, and asset managers in the industry — providing an additional layer of risk oversight. To begin the process, an asset is brought to risk council and put up for a temperature check If any member of risk council objects during the temp check, the asset fails If the temp check passes, the asset is researched by the infiniFi Team. The Team prepares a diligence packet on the asset, using different methodologies based on which asset is being investigated (DeFi or RWA). At any point during diligence, the asset may be rejected by the team. Once the asset has gone through diligence research, the diligence materials are presented to risk council and put up for review prior to a full vote. Each full council member independently reviews: * The internal underwriting report; * The external risk validation; * Existing due diligence data from their respective risk frameworks. A period of questions and answers follows, and once all questions have been answered, a formal vote is held. Each member may abstain, vote for, or veto. When a veto is exercised, the asset is tabled indefinitely. If additional concerns are expressed, a reasonable cap may be proposed, discussed, and agreed upon, or the asset may be rejected. If no concerns are expressed, and a single member affirms pre-existing diligence approval, setting caps is left to the full discretion of the InfiniFi team and the asset is approved. If vetos are found to be abused, the team reserves the right to remove risk council members. *** ## **4. Core Eligibility Requirements** All assets are judged against the following baseline quantitative and operational criteria before proceeding to scoring: | **Criterion** | **Requirement** | | :- | :- | | Market Capitalization | \~ \$100M (fully diluted or circulating) | | Core Contract Age | ≥ 1 months | | Collateralization | Fully collateralized; no historical defaults | | Security Standards | ≥ 2 audits completed; no unresolved critical vulnerabilities | | TVL Stability | Demonstrated TVL consistency (“TVL × Days” analysis) | Any asset failing to meet these standards is automatically excluded from consideration. *** ## 5. Qualitative Methodology * **Delta-Neutral** * No investment may contain typical draw-down risk that will not be compensated for by yield accrual within a reporting period * **Reputable** * Counterparty risk assessment must come back clean. Reports of previous loss of user funds or questionable behavior are grounds for immediate rejection. * **Lindy Effect** * Established capital sinks are to be preferred. New systems which are functionally just T-bill vaults or Ethena pre-deposit farms are acceptable, as they do not introduce new functionality. * Must prove competence with sized capital management over at least one month, longer if truly novel system. * **Transparency** * Must document and open-source the codebase. * If assets are not on-chain, must provide a proof-of-reserves from a reputable provider. * **Security** * Two audits are expected, formal verification preferred. * Multisig/MPC setup must follow industry best-practices * **Fully Collateralized** * No algorithmic stablecoins are permitted. ## 6. Additional Policies * **Minimization of re-hypothecation** * Assets with significant portions of their TVL originating from re-hypothecation are to be excluded. This does not include normal lend/borrow loops, as executed by users, but places specific emphasis on cases where the asset’s backing includes itself at a rate above 5% of its composition * **Minimization of counterparty risk** * If an asset is itself composed of too many other sub assets, this is cause for concern. All sub-assets must pass our internal diligence, or deposit must be legally and fully insured at no-cost to InfiniFi (last-loss, by other terms). * Such strategies demand rigorous monitoring * No asset that can change its composition at-will with speeds exceeding our ability to exit it beyond one week should receive allocation (e.g. if they can change the portfolio composition at-will and it takes us longer than a week to get out, we won’t deploy at all) * **Leverage** * InfiniFi will not engage in leveraged strategies directly with its balance sheet. * Strategies that rely on high LTV looping strategies should have their TVL aggressively capped, if included at all (such strategies demand rigorous monitoring). ## 7. Liquid Investments * Must be instantly liquid relative to the size deposited within them. * For Example: Many smaller Money Market pools are off the table because we can’t deposit size to them without losing our ability to be instantly liquid. * Redeemable 1:1 with USDC with zero slippage in or out * Cannot have floating price * Cannot be pegged to USD, must (currently) be pegged solely to USDC * This may change in the future, but for the time being, it is technically simpler and therefore decreases our smart-contract surface area ## 8. Illiquid Investments * If not pegged 1:1 with USDC, must account for slippage and minimize entry/exit frequency * For long-duration assets such as PTs, should utilize escrow in excess of expected theoretical slippage for full-exit * Should ideally be recyclable for additional durations to avoid future-slippage (PT-sUSDe, for example) * NAV reporting must occur on a predictable schedule to facilitate interpolation, if not instantaneous * Must not have a longer duration than our longest duration lock option. * Total allocation to any single illiquid opportunity must not exceed the total value of the locked tranche * If at any point it does (e.g., due to unlocks, withdrawals, or tranche contraction), we will begin an orderly exit to bring exposure back within limits *** ## **9. Ongoing Monitoring & Review** All approved assets are subject to continuous surveillance and formal quarterly reviews. Event-based reviews are triggered by: * Protocol exploits or smart contract upgrades; * TVL drawdowns exceeding 10%; * Material governance or structural changes. InfiniFi employs internal monitoring tools for yield tracking, collateral health, and liquidity analytics. *** ## **10. Governance & Transparency** All approved strategies are publicly verifiable through on-chain data, with monthly reporting on: * Portfolio composition by asset class and risk band; * TVL exposure and redemption activity; * Yield attribution (base yield vs. incentive-based yield). InfiniFi’s governance framework is designed to align with institutional standards for transparency and auditability, with oversight by both internal and external risk entities. *** ## **Summary** InfiniFi’s risk framework ensures that every yield source undergoes rigorous quantitative analysis, independent validation, and expert review before inclusion. This multi-layered approach minimizes systemic exposure, aligns with institutional standards, and upholds InfiniFi’s mission to deliver sustainable, risk-adjusted yields within a transparent, on-chain environment. This documentation is built and hosted on [Mintlify](https://mintlify.com), a developer documentation platform.