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rubric v1.7.0

Historical bad-debt events

A economic risk factor in the v1.7.0 rubric. Measured per protocol on a e cadence.

Methodology how we score #

**What this measures** This factor records the count and total USD value of documented bad-debt events in which the protocol socialized losses across depositors. Bad debt occurs when a borrower's collateral is liquidated at a value insufficient to repay the outstanding borrow, leaving a deficit that the protocol absorbs. Sources include protocol governance forum posts, post-mortem documentation, and news coverage. The cadence is event-driven; the factor is updated whenever a new bad-debt event is confirmed.

**Why it matters** Bad-debt events are a direct measure of economic model stress. Unlike exploits (which are externally inflicted), bad debt represents a failure of the protocol's own risk parameters -- collateral factors, liquidation penalties, and borrow caps -- to account for tail scenarios. The dataset includes oracle manipulation attacks (Inverse Finance, Mango Markets) that used artificially inflated collateral prices to borrow against phantom value, resulting in uncollectible bad debt that was ultimately socialized. A protocol with a history of bad-debt events has demonstrated that its economic model is insufficiently conservative for its actual operating environment.

**Green / Yellow / Red** Green: zero documented bad-debt events in the hacks database or protocol governance history. Yellow: one or two bad-debt events with total socialized losses below one percent of current TVL, and risk parameters updated following the events. Red: three or more bad-debt events, or any single event with socialized losses exceeding five percent of TVL at the time, or any event without subsequent parameter updates.

**Common gray cases** Protocols that operate insurance funds or treasury backstops that absorbed bad debt without socializing losses to depositors may argue the event does not constitute a depositor loss; curator must evaluate whether the backstop mechanism was pre-committed (green) or ad hoc (yellow).

**Notable historical examples** No cross-hacked incidents currently linked in database for this factor.

Measurement what to look for #

Count and sum (USD) the number of documented bad-debt events where the protocol socialized losses across depositors.

Data & output #

Data source
Protocol governance forum posts + protocol docs incident history + rekt.news + DeFiLlama hack DB
Output format
Green / Yellow / Red
Evidence artifact
List of event dates + USD loss per event + protocol announcement URLs
Confidence signal
green = 0 bad-debt events; yellow = 1 event with full user compensation; red = ≥2 events or any uncompensated loss; gray = protocol history not assessable

Scored protocols 80 carry this factor #

Protocol RD-F-067
Aave v3 ethereum red Across Protocol ethereum green Aerodrome Finance base not_applicable Axelar Network ethereum not_applicable Babylon Protocol bitcoin not_applicable Balancer (v2 + v3) ethereum red Beefy Finance ethereum not_applicable BENQI avalanche green BlackRock USD Institutional Digital Liquidity Fund (BUIDL) ethereum not_applicable Cap (cUSD / stcUSD) ethereum green Centrifuge ethereum yellow Chainlink CCIP ethereum not_applicable Circle USYC binance not_applicable Compound V3 (Comet) ethereum yellow Concrete ethereum not_applicable Convex Finance ethereum not_applicable crvUSD (Curve Stablecoin) ethereum yellow Curve Finance ethereum yellow deBridge ethereum gray Dolomite ethereum green dYdX v4 (dYdX Chain) dydx yellow EigenLayer ethereum not_applicable Ethena ethereum not_applicable ether.fi ethereum not_applicable Euler V2 ethereum green Falcon Finance ethereum green Fluid ethereum yellow Frax Finance ethereum green GMX v2 (GMX Synthetics) arbitrum green Hyperlane ethereum not_applicable Hyperliquid arbitrum yellow Jito solana not_applicable Jupiter solana green Jupiter Perpetual Exchange solana not_applicable JustLend DAO tron green Kamino Lend solana green Kinetiq hyperliquid not_applicable Lido ethereum green Liquid Collective (LsETH) ethereum not_applicable Liquity V1 + V2 (LUSD / BOLD) ethereum green Lista DAO bsc yellow Lombard Finance ethereum green M^0 ethereum not_applicable Maple Finance ethereum red Marinade Finance solana not_applicable Meteora solana not_applicable mETH Protocol ethereum not_applicable Midas ethereum not_applicable Morpho V1 (Morpho Blue + MetaMorpho) ethereum yellow Multipli ethereum not_applicable Ondo Finance ethereum green OpenEden ethereum not_applicable Orca solana not_applicable PancakeSwap bsc not_applicable Pendle Finance ethereum not_applicable Polymarket polygon not_applicable QuickSwap polygon not_applicable Raydium solana not_applicable Rocket Pool ethereum green Sanctum solana not_applicable Save (formerly Solend) solana yellow Sky Lending (formerly MakerDAO) ethereum yellow Spark Protocol ethereum green Spiko stellar not_applicable Stake DAO ethereum not_applicable StakeWise v3 ethereum not_applicable Stargate Finance ethereum gray stHYPE (Valantis Labs) hyperliquid not_applicable SUNSwap (sun.io) tron not_applicable Superstate ethereum not_applicable Sushi (SushiSwap) — v2 + v3 + Trident + BentoBox/Kashi + SushiXSwap ethereum red Symbiotic ethereum not_applicable Synapse Protocol ethereum not_applicable Uniswap (v2 + v3) ethereum not_applicable USDD (Decentralized USD) tron not_applicable Usual (USD0 / bUSD0 / USUAL) ethereum not_applicable Veda (BoringVault) ethereum not_applicable Venus Protocol bsc red Wormhole ethereum not_applicable Yearn Finance ethereum not_applicable

Linked hacks no historical incidents linked #

No historical incidents are linked to this factor.
rubric_version v1.7.0 factor RD-F-067 category 4 carried 80 critical no