Skip to main content

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.

​
What happens if there’s a Bank Run?

In the traditional world, the FDIC (or another bank) would bail out a bank that is in distress IE: Silicon Valley Bank. We believe AMMs are the next generation backstop for these scenarios. InfiniFi has iUSD or siUSD pools on three different AMMs (Balancer, Fluid, Curve) to solve this problem. For this example we will use Curve.
  • The iUSD/USDC pool on Curve serves as a market to facilitate the “buyer of last resort”.
  • We defend against bank-runs by allowing for the sale of liquid liabilities (iUSD/siUSD/liUSD) on Curve. In the event that direct redemptions through infiniFi are temporarily unavailable due to illiquidity, users can choose to sell their iUSD on the Curve StableSwap AMM, likely incurring losses through depegged pricing or slippage in the process, but guaranteeing the availability of immediate liquidity for those in need of it.
  • Arbitrageurs take advantage of the depegged price to purchase iUSD at a discount, redeeming it within a few weeks as liquid capital becomes available directly through the infiniFi Redemption queue from the maturing illiquid assets and will profit off of the spread - restoring balance to the iUSD price through this action.

​
What happens if there is a hack on one of the underlying pools that infiniFi is deployed into?

  • In the event of a single asset failure, either liquid or illiquid, the loss will be realized fully at the moment that the asset is declared “in Default” and will be socialized across all locked-iUSD depositors in the system. Those who are locked up for longer periods of time or who voted to allocate capital to that asset will take a larger relative percentage of loss, a natural symmetry to their receiving a larger percentage of gain for the same conditions. The infiniFi multi-sig will execute a process to distribute any funds that are able to be recovered to lock-iUSD depositors.

​
What happens if there is a hack on one of the underlying Protocols that infiniFi is deployed into?

  • The process for handling this loss is identical to that described above, though for an entire protocol, losses will likely be larger.

​
What happens if there is a hack on multiple of the underlying Protocols that infiniFi is deployed into?

  • Depending on the size of the protocols, this could result in illiquid depositors becoming completely bankrupt (addressed below). In the event that it does not, losses will be significant, but iUSD holders will still be shielded from loss. The larger that InfiniFi becomes, the less impactful such an event is likely to be, as more and more protocols providing assets to InfiniFi means that each protocol represents a smaller and smaller amount of risk to the system as a whole.

​
What happens if locked-iUSD depositors have absorbed losses, are wiped out, and there is still additional bad debt?

  • In the event that a black swan event wipes out multiple protocols such that locked-IUSD depositors are completely bankrupt, iUSD holders will have losses socialized across their positions. No preference will be given to which holders are impacted and which are not, Capital will be removed utilizing a rebase-mechanism to decrease balances rather than increase (as occurs under normal operation). iUSD will remain pegged in this event, but cascading liquidations as a function of collateral being removed from underlying lending protocols will likely lead to temporary depegs.

​
What happens if underlying illiquid yields are lower than liquid yield for a short period of time?(partially inverted yield curve)?

  • The asset ladder will necessarily skew shorter-term, as the yield curve typically inverts at the longer duration assets, propagating upstream to shorter-terms one. While long-term assets may be lower-return than short-term ones, the odds are good that short-medium term will still outperform short-term. New participants in InfiniFi will have less incentive to lock for longer durations than they previously did, but even as the market shifts, InfiniFi will still offer returns that are greater than are accessible external to it. These partial inversions also are typically quite acute and occur during market instability - they often don’t last long in DeFi and shouldn’t represent a long-term risk to the system.

​
What happens if underlying Illiquid yields are lower than liquid yield for a sustained period of time? (fully inverted yield curve)?

  • In the event that the yield curve fully inverts, where yields become higher the shorter term any asset of any duration is, InfiniFi will no longer operate normally. This scenario is extremely unlikely and would result in the system no longer having incentives to retain depositors. People would gradually unbond from InfiniFi, withdraw their money, and leave. However, no catastrophic failure would occur.

​
What happens if all Defi yields go down? (market crashes, etc.)?

  • InfiniFi will still offer higher yields than the market is able to, however, absolute yields will also go down. We typically represent a vertical positive improvement to rates, not a guaranteed return (when dealing with variable-rate assets)