Summary
Type: Asset Assessment
Timeline: From 2025-07-07 To 2025-07-10
Overview
USDf is an overcollateralized synthetic dollar by Falcon Finance. It is minted when users deposit eligible collateral assets, including stablecoins (e.g., USDC) and non-stablecoin assets (e.g., BTC). The overcollateralization framework is designed to ensure that the value of the collateral consistently exceeds the value of the USDf issued, preserving its stability across varying market conditions.
sUSDf is the yield-bearing version of USDf. It is minted when USDf is deposited and staked into the ERC-4626 vaults of Falcon Finance, and the amount of sUSDf received by users is calculated based on the prevailing sUSDf-to-USDf value.
An asset assessment was conducted for sUSDf to evaluate its suitability as a collateral asset for the USDC and USDT markets on Ethereum within the Compound ecosystem.
Materials Reviewed
| Material | Version/Date | Source |
|---|---|---|
| Proposal Discussion | As of 2025-07-07 | Compound Community Forum |
| Technical Documentation | As of 2025-07-07 | Falcon Finance Documentation |
| Smart Contract Code | As of 2025-07-08 | sUSDf implementation |
Summary of Findings
Key Concerns
- The multisig responsible for upgrading the token contract’s implementation is undocumented and operates with a 4-of-6 threshold, where all the signers are EOAs. As such, compromised private keys could lead to malicious upgrades, posing significant risks to the Compound protocol.
- The top 10 token holders collectively own nearly 80% of the total supply, introducing centralization risks.
- The USDf/USD Chainlink price feed is flagged as “High Market Risk”, and the reported price recently dropped to $0.90.
- Concerns have been raised about the solvency and stability of sUSDf.
Positive Observations
The smart contracts developed by the Falcon Finance team have undergone two audits to ensure the technical soundness of the protocol.
Asset Information
Asset Name: sUSDf
Asset Type: Yield-Bearing Stablecoin
Created Date: February 10, 2025
Blockchain: Ethereum
Contract Address: 0xc8CF6D7991f15525488b2A83Df53468D682Ba4B0
Contract Verification: Verified
Asset Standard: ERC-4626
Key Metrics
The data below was verified on July 8, 2025:
| Metric | Value | Source | Verification |
|---|---|---|---|
| Total Supply | 296.45M | Etherscan | Verified |
| Holders | 829 | Etherscan | Verified |
| sUSDf-to-USDf Rate | 1.0469 | Etherscan | Verified |
| USDf Market Cap | $544.31M | Etherscan | Verified |
Token Economics
Unlike other synthetic dollar protocols that rely solely on positive funding rate arbitrage, the yield distributed to USDf stakers is derived from multiple different sources, aiming to ensure consistent returns regardless of market conditions. These yield sources include:
- Positive and negative funding rate arbitrage
- Cross-exchange price arbitrage
- Native altcoin staking
- Liquidity pools
Falcon calculates and verifies yields generated daily across all of its strategies and uses them to mint new USDf. A portion of the newly minted USDf is deposited directly into Falcon’s sUSDf ERC-4626 Vault, increasing the vault’s existing sUSDf-to-USDf value over time.
Supply Mechanics
Falcon offers two pathways for users to mint USDf: Classic Mint and Innovative Mint.
Through the Classic Mint, users can mint USDf by depositing supported stablecoins such as USDT and USDC, or by using non-stablecoin assets such as ETH, BTC, or select altcoins. The Innovative Mint offers an alternative method for users seeking to mint USDf with non-stablecoin assets. Under this mechanism, users commit their collateral for a fixed term, enabling access to liquidity while maintaining defined participation in potential price appreciation.
To mint sUSDf, users can deposit and stake USDf into Falcon’s ERC-4626 vaults. At any point in time, the sUSDf-to-USDf value reflects the total supply of sUSDf relative to the total USDf staked and accumulated yield in USDf, and is a gauge for measuring the cumulative yield performance. As such, the value of sUSDf increases over time as Falcon accrues yield through different strategies.
Users can permissionlessly unstake sUSDf to redeem the underlying USDf tokens, subject to a cooldown period that is currently disabled. Besides instantly selling USDf on external markets, users looking to exit their USDf positions have the option of initiating redemptions on Falcon. Redemptions are split into two types — a classic redemption and a claim. This is based on the type of asset a user is receiving for their USDf, with both forms of redemptions being subject to a 7-day cooldown period. Users will only receive their assets after this period, during which their redemption requests are processed.
Distribution
As flagged by Etherscan’s Safety Score card, there is a high concentration of token ownership, where the top 10 owners own close to 80% of the asset supply.
| Holder Category | Percentage | Notes |
|---|---|---|
| Top 5 Holders | 64.22% | The 1st and 3rd largest holders correspond to Pendle’s SY-sUSDf token and the FALCON token, respectively. The 2nd and 4th largest holders are EOAs. All other holders outside the top 5 each hold less than 4% of the total supply. |
| Top 10 Holders | 79.97% | N/A |
Access Control
| Role | Capabilities | Controlled by |
|---|---|---|
| Proxy Admin | Upgrading the contract implementation | 4-of-6 Safe multisig, where all 6 signers are EOAs |
| Default Admin | setRestrictedStatus, redistributeLockedAmount, transferInRewards, setCooldownDuration, and setVestingPeriod |
Same Safe multisig as above |
| Rewarder Role | transferInRewards |
StakingRewardsDistributor contract |
Asset Checklist
Token Standard Compliance
| Requirement | Status | Notes |
|---|---|---|
| ERC-20 | COMPLIANT | N/A |
| ERC-4626 | COMPLIANT | N/A |
Token Security
| Feature | Implementation | Notes |
|---|---|---|
| Audited | COMPLIANT | Two audits have been conducted. However, the audited GitHub repository appears to have been removed. |
| No Fee on Transfer | COMPLIANT | N/A |
| No Blocklist | NON-COMPLIANT | The admin can restrict certain addresses to prevent them from depositing and withdrawing. |
| No Delay on Transfer | COMPLIANT | N/A |
| No Unstaking Delay | NON-COMPLIANT | Although the unstaking cooldown is currently disabled, it can be set to a maximum of 90 days. |
Risk Assessment
| Risk Category | Level | Notes |
|---|---|---|
| Technical Risk | LOW | The token contract follows upgradeable ERC-20 and ERC-4626 standards and has undergone audits. |
| Economic Risk | MEDIUM | A recent LlamaRisk assessment outlined several concerns around the solvency and stability of sUSDf, including low asset maturity, transparency concerns, and inclusion of broad and low-quality collateral types in the reserves. |
| Price Feed Risk | HIGH | The USDf/USD price feed is tagged as “High Market Risk” by Chainlink, indicating that the reported price may be volatile or subject to uncertainty. On July 8, 2025, the feed price briefly dropped to $0.90, which could have resulted in losses for borrowers due to liquidations. |
| Centralization Risk | HIGH | The top 10 holders of the token collectively own nearly 80% of the supply, and the contracts are governed by a 4-of-6 multisig with no available documentation. |
Conclusion
The sUSDf token was reviewed for its potential use as collateral in the Compound ecosystem.
Several concerns have been identified, including price feed volatility, economic and centralization risks, and reliance on the admin multisig overseeing operations. As a result, we do not recommend adding sUSDf as a collateral asset at this time.
Final Recommendations
- If the asset were to be added to the Compound ecosystem as collateral, Gauntlet’s recommendations should guide its inclusion.
- The community should continuously monitor the admin multisig’s activity to ensure the token’s ongoing security.
- The price oracle solution for sUSDf should be resilient and account for the possibility of sharp price movements, particularly if it depends on high-risk underlying price feeds.