Elixir, the synthetic dollar protocol, officially announced this week that its stablecoin deUSD will enter a "sunset phase" starting in November 2025. The team will no longer be involved in subsequent operations, and on-chain governance and disposal of remaining assets will be fully handed over to token holders within a few weeks.
For a project that once managed over $1.5 billion in assets, this is not just about the operations team shutting down, but about pushing "decentralization" to its most controversial end, with huge losses on the books and the founding team choosing to leave.
The false prosperity propped up by recursive leverage
According to the analysis, Elixir's previous key partner, Stream Finance, reported approximately $93 million in bad debts, including a single default of $68 million that directly breached the balance sheets of both companies.
Elixir and Stream employ a "recursive lending" mechanism, similar to two people signing IOUs and then pledging them as collateral. What lenders see is a high amount of collateral, but in reality, it is just the same risky loan accumulated through a cycle of leverage.
When Stream defaulted, the real value of deUSD collateral plummeted, and the support rate dropped to 35% within hours. Market selling pressure surged, the stablecoin instantly lost its anchor, dragging down the entire liquidity pool. DeUSD was severely damaged and ultimately had no choice but to exit the market.
Aftermath Plan
The Elixir team then initiated a "dual-track" redemption process. Approximately 80% of the total user base, ordinary holders who did not participate in the Stream lending pool, could exchange their remaining reserves for USDC at a 1:1 ratio. After the redemption window opened, most retail investors had already exited unscathed.
Conversely, key participants providing deep liquidity to Stream face a 60% to 70% principal shortfall. Whether they can recover their losses through litigation or liquidation depends on the cross-chain asset's positioning and jurisdiction, which is time-consuming and uncertain. Furthermore, according to Elixir's original documents, the company is registered in a tax-free zone like the Cayman Islands, making it difficult to hold them accountable.
Is "community takeover" an empowerment or abdication of responsibility?
After completing the relatively easy redemption for retail investors, Elixir announced that it would transfer protocol governance, smart contract upgrade rights, and subsequent reward allocation to the DAO. On the surface, this aligns with the "decentralized" tenet of blockchain; in reality, the founding team has shed legal and debt burdens, leaving behind an empty shell with declining productivity and an unbalanced balance sheet.
In traditional companies, if they become insolvent, they typically enter bankruptcy proceedings, with the courts handling the liquidation. However, in the on-chain world, token holders are both shareholders and liquidators, responsible for raising their own legal fees, negotiation costs, and even voting on whether to continue maintaining validator nodes. "Community takeover" is more like passing a hot potato to the masses.
