Firelight Raises $8 Million to Backstop DeFi Vaults With Staked XRP

The Sentora-incubated cover protocol already holds $76 million in staked XRP on Flare. Its first cover integrations go live this month, into a market where onchain protection covers about 0.1% of DeFi.
By:The Defiant Team•
DeFi

Firelight, a cover protocol that uses staked XRP to backstop DeFi vaults against exploits, has raised $8 million in a seed round led by <a href="https://www.gumi-<a href="https://xpertsstudio.com/cryptos-next-bull-market-could-be-led-by-wall-street-not-retail/” title=”Crypto’s Next Bull Market Could Be Led by Wall Street, Not Retail”>cryptos.com/” rel=”nofollow noopener” target=”_blank”>Gumi Cryptos Capital, with its first cover integrations scheduled to go live this month.

Onchain cover has stayed marginal relative to the capital it would protect. DefiLlama tracks $123.7 million across 27 insurance protocols against $88.3 billion in total DeFi value locked, or about 0.14%, and Nexus Mutual alone accounts for roughly 88% of that capital. Firelight’s structure separates the two: the capital backing cover is staked XRP, which does not sit inside the protocols being covered.

Maven 11, Metalayer, Joint Effects and Tribe Capital also took part in the round. Firelight has been live on Flare since December in a bootstrapping phase that takes deposits without cover attached, and holds $76 million up 20% over the past 30 days. That makes it the largest protocol on Flare, which has $133 million in total value locked across 39 protocols. Deposits are capped at 65 million FXRP

“Protocol cover and capital protection remain among the biggest blockers to institutional adoption of DeFi,” Anthony DeMartino, co-founder and chief executive of Firelight, said in a statement. “Institutions need confidence that they can deploy capital onchain with credible protection against smart contract and economic risk.”

XRP as the Balance Sheet

Stakers deposit XRP, which is bridged to Flare as FXRP through the network’s FAssets system, and receive stXRP, a liquid staking token. That pool is the capital that pays cover claims. Firelight says it will add BTC and XLM as backing assets.

When stXRP launched in December, it carried no rewards and no cover product behind it. Premiums from the vaults and protocols buying protection are what pay stakers, so the September launch is what makes the position yield-bearing.

Stakers Absorb the Losses

Firelight’s documentation states that staked capital is slashed when a validated claim exhausts a first-loss buffer, applied pro rata across all staking positions, with the amount fixed at the moment the slash instruction is generated. The protocol also states plainly that “Firelight Coverage is not insurance” and that buying it does not create an insurance contract.

Claims are assessed by a consortium of five outside firms — GFX Labs, Hypernative, Credora, Native and Cyfrin — which validate incidents against published coverage criteria using onchain attestation. That splits adjudication from the capital, which in most onchain cover sits with the same entity that decides whether to pay. Nexus Mutual told cover holders in 2021 that the $120 million BadgerDAO exploit would fall outside its terms if it was confirmed as a frontend attack, because the protocol’s smart contracts were untouched.

Covered events include smart contract exploits, reentrancy failures, oracle manipulation, governance attacks and bad debt. Pricing is set by monitoring risk components in real time rather than at policy inception. Firelight has been audited by OpenZeppelin and Coinspect and runs a bug bounty through Immunefi.

Second Date for Launch

Firelight and Sentora announced in a joint post that native cover for Sentora’s public and private vaults would launch in the second quarter of 2026. That has moved to September. Sentora, formed last year from the merger of IntoTheBlock and Trident Digital, curates DeFi vaults for Kraken and EtherFi and says it has deployed more than $3 billion.

DeMartino is chief executive of both Sentora and Firelight. He ran risk strategies at Coinbase and traded at HSBC, Barclays and UBS before that. Jesus Rodriguez, who co-founded Sentora and whose AI startup NeuralFabric was acquired by Cisco last year, is Firelight’s chief technology officer while remaining in his Sentora role. Chief Strategy Officer Connor Sullivan joined from Fireblocks, after underwriting reinsurance at TransRe.

XRP traded at $1.38 on Tuesday, down 6.7% over the past week

Flare Network

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Source: thedefiant.io