Stream Finance is a decentralized finance (DeFi) protocol that provides yield-generating products for crypto assets. The project has described itself as a "SuperApp" for DeFi, a "yield bearing, MEV recapturing" decentralized exchange (DEX), and a "recursive looping yield-focused" platform ^{[1] [2] [3]}. It initially launched on the Sonic blockchain, a Layer 2 network, and later expanded its operations to the Avalanche blockchain ^[2]. The protocol gained significant user deposits before experiencing a severe crisis in late 2025 when its native stablecoin de-pegged, resulting in substantial losses for its users ^[3].

History

Stream Finance was established by a team of anonymous developers who operate under the pseudonyms 'Flow' and 'Ripple'. The project's official X (formerly Twitter) account was created in December 2022, with the protocol officially launching in February 2025 on the Sonic blockchain ^[2].

The platform experienced rapid initial growth, accumulating 110 million. The project announced its expansion plans early, stating on April 3, 2024, that it would deploy on the Avalanche blockchain. In June 2025, the team also announced future plans to deploy on the Berachain network ^[2].

Core Technology

Stream Finance's architecture is designed to generate high yields for users by deploying their deposited assets into complex financial strategies. The protocol's mechanism has been described as a "recursive looping" system, which suggests the use of leverage to amplify returns. This is supported by the team's distinction between user deposits (approximately 520 million) prior to its stablecoin crash ^[3].

Yield Generation Strategies

The protocol offers users a series of yield-generating vaults for assets including USDC, ETH (as wETH), BTC (as wBTC), and EURC. According to its official website, these vaults employ "market neutral strategies" to generate returns. These strategies are a mix of:

• Lending arbitrages
• Incentive farming
• Dynamically hedged high-frequency trading (HFT)
• Market making

On the Avalanche network, the protocol's vaults were specifically designed to execute basis and carry trades. This strategy involved arbitraging the difference between high funding rates on Avalanche and the lower cost of hedging the exposure, allowing users to earn yield without active management. The platform's design as a DEX also incorporates features to capture Maximal Extractable Value (MEV) to further enhance yields ^[2]. The protocol officially stated that potential risks for users included "Execution failure, smart contract risk, custody risk" ^[1].

Stablecoin Mechanism

Stream Finance featured a native stablecoin designed to be pegged to the U.S. dollar. However, sources have identified the stablecoin by two different names. The project's social media referred to it as STRM, an algorithmic stablecoin operating on a dual-token system. In this model, STRM was backed by a combination of over-collateralized crypto assets and the protocol's governance token, STREAM ^[2].

In contrast, reporting on the de-pegging event from Unchained Crypto identified the stablecoin as Staked Stream USD (XUSD). The stability of this asset was linked to the performance and integrity of the platform's underlying leveraged yield strategies ^[3].

Infrastructure

The protocol is secured by EigenLayer, utilizing the EthosStake Actively Validated Service (AVS). For cross-chain asset transfers, Stream Finance uses the Noble protocol, an interoperability platform also used by Circle for its stablecoins ^[2].

Stablecoin Crash (October–November 2025)

In late October and early November 2025, Stream Finance's native stablecoin experienced a catastrophic de-pegging event that led to the protocol's collapse and significant user losses. There are conflicting reports regarding the exact timeline of the event.

Timeline of Events

One set of reports, citing an Unchained Crypto article from October 29, 2025, states that the stablecoin, STRM, lost its peg on October 28, 2025 ^[2].

A separate report from Unchained Crypto, published on November 4, 2025, provides a different timeline. It states that the stablecoin, identified as XUSD, began to de-peg from its 100 million exploit on the automated market maker Balancer, raising concerns about potential market contagion. In response to the growing crisis, the Stream Finance team officially paused all deposits and withdrawals on its platform on Monday, November 4, 2025 ^[3].

Financial Impact and Cause

Both reports concur on the scale of the financial damage. The de-pegging event resulted in an estimated loss of 0.51 ^{[2] [3]}.

The cause of the crash was attributed to the protocol's underlying mechanics and market pressure. One analysis described the trigger as "a series of large-scale redemptions and swaps against the stablecoin's liquidity pools," which created a feedback loop known as a "death spiral" for the algorithmic asset ^[2]. The incident highlighted the risks associated with complex, leveraged DeFi strategies, particularly when a protocol's reported metrics, such as TVL, differ from those tracked by standard industry aggregators ^[3].

Protocol Response

Following the de-peg, the Stream Finance team took several steps to address the situation:

• Suspension of Services: All protocol operations, including deposits and withdrawals, were paused to prevent further losses and to begin an investigation ^{[2] [3]}.
• Legal Action: The platform hired lawyers from the firm Perkins Coie to conduct a formal investigation into the incident and the associated losses ^[3].
• Compensation Plan: The team announced a proposed compensation plan for affected users. The plan involved distributing the remaining assets in the protocol's treasury, supplemented by a portion of future protocol revenue ^[2].
• Public Communication: The team publicly acknowledged the suspension on X after users had already begun questioning the platform's status due to the visible de-pegging of the stablecoin. They also stated that a full post-mortem report would be released after their investigation was complete ^{[2] [3]}.