Yield Protocol’s infiniFi Brings Fractional Reserve Banking Onchain—But Smarter

DeFi just pirated Wall Street's oldest trick—with zero permission.

Yield Protocol's infiniFi replicates fractional reserve banking onchain, cutting out the middlemen who've been skimming profits for centuries. No vaults. No gatekeepers. Just code-enforced trust.

The twist? Transparency replaces opacity. Every multiplier gets logged onchain—unlike your neighborhood bank's shadow ledger.

Early tests show 8x capital efficiency (take that, Basel III). Liquidity pools now self-leverage like a 1920s banker on margin—minus the inevitable collapse. Probably.

One protocol engineer shrugged: 'We didn't break finance. We just open-sourced the loopholes.'

Traditional banks hate this one weird trick.

Source: infiniFi

Based on infiniFi’s website, whether you’re opting for a liquid (siUSD) or locked (liUSD) yield, you get a comparatively superior yield than the underlying protocol.

It’s a neat business model.

But what infiniFi is doing in itself — borrowing short and lending long — isn’t all that different from what banks usually do.

The innovation comes from the fact that the entire stack is on the blockchain.

That’s how you, as a user, can sleep easily at night — you know your bank isn’t pulling a Sam Bankman-Fried and pursuing unchecked leverage against the most illiquid assets.

InfiniFi’s reserve composition is completely transparent onchain, so you don’t have to rely on a quarterly call report.

You can easily look up USDC deposits and iUSD tokens minted against it to determine its exact asset-liability mismatch, if any.

You can also examine a breakdown of the protocol’s yield strategies, or whether the protocol is abiding by its liquidity buffers — down to the amount and type of assets they’re made up of.

In the event of a hack or “bank run,” an explicitly coded loss waterfall will determine who gets paid in order.

The highest-yield and locked liUSD token holders are first in the firing line, absorbing losses first. 

SiUSD stakers (lower yield, no lock) are hit only after locked users are wiped. Plain iUSD holders come last.

No one wants to see this happen, but users can at least find some respite in the fact that they won’t have to wait two years like FTX depositors did.

InfiniFi has attracted $33 million in TVL and has an ongoing six-month points program launched at the start of June.

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