Space Review | Frequent DeFi Failures: How the TRON Ecosystem Became a Benchmark for Stable Returns?

Recently, multiple noteworthy security incidents have occurred in the DeFi space, including project collapses, chain liquidations, oracle manipulations, and liquidity shortages. These risk events have led market sentiment to shift towards caution and self-preservation. Against this backdrop, DeFi is no longer just a symbol of technological innovation and wealth growth but has become a testing ground for risks intertwined and vulnerabilities exposed.

During this industry reflection period, SunPump hosted a new session of the SunFlash online dialogue. The current roundtable focused on the urgent topic: “With frequent DeFi collapses, how should risk hedging and asset allocation be balanced?” Inviting several industry veteran KOLs, the discussion aimed to cut through market noise and return to fundamental questions: Are these risk events occasional outbreaks, or are they systemic pains inevitable at this stage of DeFi development? Under multiple risks, how should users and institutions build their defense systems? More importantly, after repeated trust collapses, does DeFi still have the capacity to rebuild credibility, and what paths can lead to a more stable and sustainable future?

DeFi Collapses Analysis: Governance Failures and Systemic Risks Beneath the Illusion of High Returns

Behind the recent chain of DeFi collapses, many seasoned practitioners and researchers gathered at Space to explore their root causes. Although their perspectives varied, they generally agreed that these incidents are not isolated technical failures but rather the concentrated outbreak of structural risks accumulated during rapid industry growth. Among these, “pseudo-decentralization” governance loopholes and unsustainable high-yield models are repeatedly mentioned as two core risk points.

Mr. Mice sharply pointed out that many projects claiming “decentralization” actually have core permissions—such as fund management and contract control—highly concentrated in a few team members. He cited examples where some projects even lack basic multi-signature mechanisms; if internal issues arise, power can be easily abused, leading to collapses. This “pseudo-decentralization” makes the project essentially centralized, yet it leverages the “transparency” of blockchain to lower investors’ guard.

Child RIVER and Zane strongly agreed and further added that such governance loopholes might be masked during stable market periods but will be fully exposed during extreme market conditions or malicious attacks. 0xPink vividly summarized that although contracts are open-source and community governance exists on the surface, the core liquidation and oracle logic are still controlled by a few people. The entire system can fail instantly due to team mistakes or malicious manipulation.

On the other hand, unsustainable high-yield models are another significant risk source. Mr. Mice questioned, “Where does the money come from for annualized returns of 100% or 200%?” He pointed out that such high yields often rely on continuous inflows of new funds. Once market sentiment cools or liquidity dries up, this fragile yield model can amplify risks infinitely.

Finally, multiple guests emphasized that DeFi risks are not isolated single points but highly contagious. 0xPink pointed out that a protocol’s collapse can trigger liquidations, which then propagate to collateral assets and other protocols, creating chain reactions similar to bank runs in traditional finance. In this seemingly high-tech financial system, centralization of governance, unsustainable yield models, and widespread leverage collectively build a system offering high returns but extremely fragile.

Finding Certainty in Uncertainty: Stable Income Strategies in the TRON Ecosystem

Faced with unavoidable on-chain risks, how can individual users and institutional investors build their “defense fortifications” to hedge risks and balance returns? In the second part of this Space session, guests offered comprehensive strategies from basic to advanced, with a core consensus: through prudent investment strategies and dynamic monitoring, systemic risks that are uncontrollable can be brought into manageable scope.

For ordinary users, the guests unanimously emphasized the fundamental and effective principle of “not putting all eggs in one basket.” Child RIVER and Teacher 77 both suggested allocating most assets to mainstream stablecoins (such as USDT, USDC) and core assets like Bitcoin and Ethereum, while only using a small portion (e.g., 10%-20% of total funds) to experiment with high-yield new projects. This approach serves as a “trial and error” cost, ensuring that even if losses occur, they won’t cause serious harm.

When discussing specific investment strategies, 0xPink highlighted the TRON ecosystem as a feasible example balancing stability and returns. He first acknowledged the transparency advantage of over-collateralized stablecoins like USDD on-chain. Additionally, he regarded TRX, the platform token of TRON, as a valuable core asset, noting its significant appreciation this year has provided stable income. By combining stablecoins, platform tokens, and stable yield protocols within the TRON ecosystem, users can build a risk-controlled, flexible, and robust hedging system.

Based on this, he recommended a balanced allocation: dividing half of the funds into mainstream stablecoins like USDT, and the other half into core protocols such as JustLend DAO and USDD within TRON. Leveraging TRON’s mature DeFi ecosystem, users can amplify returns through a series of investment cycles. For example, converting TRX into staked tokens like sTRX, depositing into JustLend DAO to earn approximately 7.1% basic staking yield, and then using sTRX as collateral to mint USDD, which can be further deposited into JustLend DAO for additional gains. This “staking-minting-reinvesting” cycle can achieve an overall annualized return of about 13%.

This “semi-stable, semi-aggressive” portfolio can significantly enhance capital efficiency while maintaining risk control. Compared to high-risk, high-reward schemes, this strategy’s main advantage lies in its controllable risk and transparent pathways, providing investors with a more reassuring income option.

For larger funds or institutions, the strategy needs to be more systematic and precise. Mr. Mice emphasized the importance of establishing real-time on-chain warning mechanisms to monitor key indicators such as liquidation ratios and liquidity health, enabling timely actions like reducing positions or stop-loss when risks emerge.

In summary, rebuilding trust in DeFi may be a long journey. As the guests noted, trust cannot be quickly established through marketing but must rely on reliable mechanisms, transparent data, and proven products to gradually regain confidence. TRON’s ecosystem, with its focus on transparency, infrastructure development, stable yields, and compliance, offers valuable practical directions for this rebuilding process.