If you have been browsing chain news this month, you will likely feel a strong sense of dissonance:
On one hand, various DeFi protocols have been hacked in the 'November Nightmare' — Balancer was drained of 120 million dollars due to a smart contract vulnerability, and Stream Finance's xUSD stablecoin plummeted from 1.2 directly to 0.54 dollars, the entire 'yield layer' has been nailed at the eye of the storm;
On the other hand, Falcon Finance is still telling you:
Mortgage assets into Falcon, mint USDf, get sUSDf,
You can continue to enjoy 'structured yield dollars' in the CeDeFi world.
The question then naturally arises—after such a "hack season," does Falcon Finance / USDf / sUSDf still deserve to be placed in the "relatively safe and profitable tier"? Or should it actually be categorized as a higher-risk option?
Let's first clarify what exactly happened during this "hacker season".
Statistics from security companies and the media generally point to the same magnitude:
In November alone, the combined losses from on-chain hacking, vulnerability exploitation, and UG exceeded $120-170 million, an order of magnitude higher than the previous month.
Balancer v2 alone was exploited by someone who took advantage of a rounding logic bug and siphoned off more than $100 million in assets across nine blockchains, making it the biggest DeFi hack so far in 2025.
This is just the tip of the iceberg this year—according to the CertiK report, the entire crypto industry lost nearly $2.5 billion in the first half of 2025 due to hacks and scams, more than in the entire year of 2024.
What's even more troublesome is the **"Level 2 damage"**:
Stream Finance's USD protocol with stacked yields was quickly questioned by the market after Balancer's troubles, and xUSD de-pegged and fell to $0.54 at one point;
The issue of on-chain "black box vaults" has been brought to the forefront:
PoR (Proof of Reserves) is opaque.
Strategy leverage not disclosed
Users only see the price of a stablecoin, but not the actual exposure behind it.
Chainalysis' CEO even directly named:
DeFi currently has a TVL of nearly $150 billion, but many protocols are still in a state of "growing scale first, then improving security."
This line is practically an ATM for professional attackers.
Here's a simple translation:
The "yield layer" is becoming a primary battleground for hackers.
Each layer of accumulated benefits, each composability, could potentially become the next domino.
In this context, when looking at Falcon Finance, you shouldn't just focus on catchy phrases like "sUSDf annualized 9-12%".
Structurally, Falcon Finance is a standard CeDeFi yield USD protocol:
The underlying layer uses stablecoins, BTC, ETH, and even a portion of RWA as collateral to mint USDf at overcollateralization ratios such as 1.25x and 1.5x.
The process involves using USDF to subscribe to sUSDF, followed by strategies such as funding rate arbitrage, basis trading, and staking returns.
The top management uses FF for governance and buybacks, tying cash flow and risk parameters together.
This means:
In the "hacker season" story, Falcon Finance is neither a pure DeFi smart contract aggregator like Balancer,
It's not like USDC, which is just a "naive and easy-to-use stablecoin for payments."
Falcon Finance / USDf / sUSDf is more like:
A structured USD certificate that combines CeFi execution, DeFi contracts, and RWA custody.
Alright, after this barrage of criticism in November, let's dismantle Falcon one by one, addressing the issues exposed during the hacker season:
The first point, which everyone is talking about, is: "composability becomes systemic risk."
Only after Balancer was breached did the market truly realize:
Many stablecoins and yield tokens (including xUSD, for example)
One layer after another of mortgages, loans, and reinvestments.
Each agreement appears to "only do its own part".
But once the chain is pulled out, it becomes a long line from LP pool → lending market → leveraged vault → farm.
Once the first link (Balancer) is broken,
The LP pool was drained.
The price of xUSD, which is backed by upper-level collateral, has begun to decouple.
The valuation of collateral and the logic of liquidation in the lending market are starting to clash.
Add a touch of FUD and the entire capital will flee out of the country.
In contrast, Falcon Finance's path to composability is actually much shorter:
The main entry point for users is Falcon's own vault (minting USDf, staking sUSDf).
The strategy layer is mostly executed within whitelisted CEXs and a few DeFi protocols.
Then, a "white box within a black box" is created through the custodian and internal risk control:
The strategy has limited transparency, but the supply chain is relatively controllable.
The agreement knows where its positions are, rather than being scattered across a bunch of farms.
This is not to say that Falcon Finance has no risk, but rather that the form of risk is different:
The core risk of DeFi black box vaults is: "I don't know how many protocols you've put your money into."
The core risk of Falcon's CeDeFi model is: "I believe you are really following the risk control manual and will not recklessly use leverage."
For players with a higher risk tolerance, the latter is actually more quantifiable.
You can request a clearer PoR, position allocation, strategy explanation, and audit report.
But you can't expect pure DeFi farms to never run into problems during the multi-chain hacking season.
The second point is a lesson learned the hard from this hacker season: "11 audits can't prevent one wrong assumption."
The issues exposed about Balancer this time are quite typical:
The agreement has a long history and a large number of audit reports.
But what was truly exploited was a logical detail regarding the "rounding direction"—
All auditors assumed there were "no problems" in these areas.
This becomes a fatal flaw when deployed on a large scale and across multiple chains.
Chainalysis puts it more bluntly:
Many DeFi teams have never truly managed security with a "bank-grade" mindset.
Their KPIs are TVL and revenue, not "nothing can go wrong even in extreme circumstances".
This criticism, when applied to Falcon Finance, is actually a mirror reflecting its true nature:
From an "algorithm-friendly" perspective, Falcon will continuously emphasize:
Multiple custody,
audit,
Cold and hot separation
Real-time PoR
Risk monitoring dashboard...
But in a true black swan event, the market actually only looks at two things:
When the security team receives a call at 3 a.m., do they have the authority and contingency plan to "shut down the gate with one click"?
After an incident, can the user recover the collateral or receive insurance compensation within a reasonable timeframe?
Therefore, Falcon Finance/USDf after November,
To gain the trust of the "whale perspective," the word "audit" must be broken down:
Smart contract level:
It's not just about "having several auditors".
The question is whether there has been dedicated formal verification and continuous monitoring for high-risk modules such as liquidation logic, oracles, and cross-chain bridges.
CeFi Implementation Level:
Have you ever simulated a scenario where "the exchange freezes your account / the API key is stolen / a sub-account is flagged for risk control"?
How can Falcon's strategic positions be exited without market crashes or a chain of liquidations?
Hosting and PoR aspects:
Does the PoR report reflect a "snapshot of yesterday" or a state that is as close to real-time as possible?
What are the absolute values and percentages of each type of collateral asset (stablecoins, BTC/ETH, RWA) in the vault?
For companies that are already accustomed to writing "Digital Asset Treasury" on their balance sheets, these are the key factors in deciding whether or not to include USDf/sUSDf.
The third point is a quiet change that occurred after this round of hacking: "Whales no longer just look at APY, but first look at 'what will happen in the worst moment'."
When Balancer was hacked and xUSD de-pegged in November, you could see a very typical behavioral pattern:
Smart money's first reaction isn't "Is it cheap to buy it now?"
Instead, they quickly went to investigate:
Does this protocol have a vault design for risk isolation?
Have the high-yield strategies been separated from the basic stablecoin pool?
Is there an insurance fund? Is there an LLR (last-resort buyer) mechanism?
If you applied this checklist to Falcon Finance, you would probably break it down like this:
For USDF holders:
The worst-case scenario is not a drop in APY, but rather the collapse of the collateral pool and the failure of the liquidation logic;
You need to be sure of:
Oracles won't feed out ridiculous prices during extreme market conditions.
OCR and buffering mechanisms allow the protocol to automatically reduce its position during a 15-minute plunge, rather than freezing it.
For sUSDf stakers:
The returns you're reaping are essentially from the strategy team running neutral strategies such as delta-neutral/basis on CEXs and DeFi.
The worst-case scenario is that a particular execution chain (a CEX / a DeFi protocol) is hacked or liquidated.
You should know:
Will this portion of the loss wipe out the entire sUSDf?
Or does it only affect a single vault level?
How much can be covered by insurance funds and contractual income replenishment?
For FF whales and DAO vaults:
What you are buying is the "residual claim to the entire mechanism":
If USDF/sUSDF survives the black swan event, you can enjoy a continuous cash flow and buybacks;
If something major happens to the system one day, FF might be the first buffer layer to be cut.
Therefore, joining Falcon Finance after November is essentially answering a new question:
"Am I willing to pay a 9-12% coupon rate for this CeDeFi risk structure?"
Instead of simply viewing it as a 'safe deposit with a few more percentage points than USDC'?
Returning to our initial question:
At this juncture of "hacker season + security repricing,"
Where should Falcon Finance / USDf / sUSDf fit in your asset allocation table?
My answer will be a bit more restrained than it was a few months ago:
If you are managing cash in a compliant vault/company account:
You should place payment stablecoins (USDC, bank-grade stablecoins) under the GENIUS Act framework in the "cash tier";
Place government bonds/RWA funds in the "risk-free rate tier";
Place Falcon Finance / USDf / sUSDf in the **“Structured Yield USD + CeDeFi Risks”** category.
If you are a DeFi player but have already started managing your positions using a "vault mentality":
You can convert a small portion of your stablecoin exposure into USDf/sUSDf.
The premise is that you accept:
Its risk is more like that of a "coupon product that has insurance and risk control, but still loses principal".
Instead of ETFs/government bonds, which are unlikely to be wiped out as long as the country doesn't collapse.
If you're just looking for a dollar asset that lets you "sleep the best":
To be honest, Falcon Finance, a CeDeFi structure, is not on your answer list.
What you really want is a bank deposit, a money market fund, or the whole set of regulated payment stablecoins in the US, not a structured yield layer.
From an algorithmic and trending perspective, Falcon Finance/USDf is currently hovering on a very thin line:
On one hand, there's the "revenue narrative" that TVL is still growing and the annualized strategy return is still in the double digits;
On the other hand, there is the reality that more than $4 billion may be hacked in 2025, and the collective magnifying glass of security companies and regulatory agencies.
What you really need to do is not ask "Is Falcon safe?"
Instead, the question is, "After this round of DeFi security repricing,
How much risk budget am I willing to give it?
Finally, as usual, let me clarify:
The above is my personal research perspective based on publicly available hacker data, security reports, and market dynamics, combined with the public structure of Falcon Finance / USDf / sUSDf. It does not constitute any investment advice, nor does it constitute a guarantee of the security of Falcon or any protocol.
Do you use Falcon Finance? Do you mint USDF? Are you willing to hold sUSDF in a long-term position?
You yourself are in this blockchain world where hacking is rampant and profits are tempting.
A risk contract signed for myself.@Falcon Finance $FF #FalconFinance
