InfiniFi: An Overview

InfiniFi operates as a decentralized finance protocol that functions similarly to an on-chain bank for stablecoins. The system seeks to deliver enhanced yields to stablecoin holders by distributing capital across a diversified set of strategies spanning on-chain DeFi, tokenized private credit, and Real-World Assets (RWAs). Its principal approach avoids leverage and focuses on aligning depositor liquidity preferences with assets that match corresponding durations.

Overview

The protocol is intended to perform banking-like services on the blockchain with an emphasis on stablecoins, aiming to provide a more efficient and secure avenue for earning yield on those holdings. InfiniFi aggregates depositor capital and invests it into a hybrid mix of established on-chain DeFi protocols and higher-yield, less liquid off-chain instruments—such as corporate debt and trade finance—that have been tokenized and brought on-chain.

A key innovation is the capital efficiency framework that shifts allocations depending on user-selected liquidity preferences. Depositors indicate whether they want immediate liquidity or are willing to lock funds for a defined term; the protocol then pairs liabilities with suitable assets: liquid deposits feed into highly accessible on-chain strategies, while locked deposits are assigned to extended-duration, higher-yield assets like RWA portfolios. This model provides a baseline yield for liquid positions and an enhanced yield for locked positions, compensating users for supplying reliable long-term capital.

Co-founder Kevin Chen described the vision for the project, stating, "InfiniFi is what a bank would look like if built from scratch on-chain."

History and Funding

InfiniFi disclosed the completion of a $6 million seed funding round on February 20, 2024. The financing was co-led by Pantera Capital and Framework Ventures.

Additional participants in the round included Fabric Ventures, Comma3 Ventures, Block-0, Solidity Ventures, Fourth Revolution Capital, and NxGen. Several angel investors also supported the round, among them Prabhakar Reddy (Co-founder of FalconX), Michael Safai (Co-founder of Dexterity), 0xMaki (Co-founder of SushiSwap), DCF God, and Brian Pellegrino (Founder of LayerZero).

Franklin Bi, a partner at lead investor Pantera Capital, commented on the investment, "The platform's sophisticated capital allocation engine and transparent risk management framework set a new standard for on-chain banking." Vance Spencer, co-founder of Framework Ventures, added, "The biggest business in crypto is US dollar banking... InfiniFi is the ultimate answer to that."

Founders

The company was founded by Kevin Chen, Will Huang, and Derek Woloszyn. Before helping start InfiniFi, Kevin Chen worked in investment banking and then served as a portfolio manager at a quantitative trading firm prior to moving into decentralized finance.

Technology and Mechanism

InfiniFi's architecture centers on an allocation engine that deploys capital according to the aggregated liquidity choices of users. The protocol's Total Value Locked (TVL) was reported to be approximately 35.56 million in liquid deposits and $136.36 million in locked deposits.

User Experience

Interacting with the protocol follows a clear sequence of actions for users.

iUSD Token

The iUSD token serves as the primary instrument within the InfiniFi ecosystem, implemented as an ERC-20 receipt token for deposits and designed to capture yield on deposited assets. Notable attributes include the following:

• Deposit: A user deposits an approved stablecoin, such as USDC, into the InfiniFi protocol.
• Mint iUSD: Upon deposit, the protocol mints iUSD, a yield-bearing token that represents the depositor's share of the protocol's total capital pool.
• Choose Mode: The user selects one of two options for their iUSD holdings:
• Stake (Liquid): The user stakes their iUSD, which remains fully liquid and can be withdrawn at any time. This option earns a base yield, projected by the protocol to be up to 8% APY.
• Lock (Higher Yield): The user locks their iUSD for a predetermined duration. By providing long-term, predictable capital, the user receives a boosted share of the protocol's total yield, projected to be up to 12% APY.
• Earn Yield: The protocol's allocation engine deploys the pooled capital, and the generated yield is distributed to all iUSD holders.
• Type: A rebasing, yield-bearing token.
• Mechanism: The quantity of iUSD in a holder's wallet automatically increases as the protocol accrues yield. It is not designed as a stablecoin pegged to $1.00; rather, it is a token representing a growing claim on the underlying asset pool.
• On-chain Data: The token's market capitalization reflects the total value of stablecoins deposited in the protocol and can be tracked on data aggregators.
• On-chain DeFi: Capital from liquid deposits is typically deployed in established, overcollateralized lending markets like Aave and Compound, as well as in liquid staking derivatives and structured products.

Security

Security and risk controls are central to InfiniFi's design, reflecting the importance of managing exposures that arise from blending liquid on-chain instruments with less liquid off-chain assets.

Formal Verification

InfiniFi's smart contracts underwent formal verification by the security firm Certora. Formal verification is a process used to mathematically prove the correctness of code, offering a higher degree of security assurance than standard audits alone.

The verification engagement specifically targeted the logic for Fair Redemptions. The primary objective was to prove that the redemption mechanism is fair to all users and robust under various market conditions. This ensures that a few early redeemers cannot extract value at the expense of remaining depositors, a key risk when the protocol's underlying assets may be illiquid. The verification helps guarantee the protocol's solvency and fairness, especially during periods of high withdrawal demand.