Firelight Protocol Raises $8M to Expand DeFi Protection Beyond XRP

Firelight Protocol has raised $8 million to develop an onchain protection layer for decentralized finance (DeFi), with plans to expand its collateral system beyond XRP to include Bitcoin (BTC), Stellar (XLM) and other liquid crypto assets.

The funding round was led by Gumi Cryptos Capital, with participation from Maven 11, Metalayer, Joint Effects and Tribe Capital. Firelight, incubated by DeFi infrastructure provider Sentora, plans to launch its protocol and initial cover integrations in September.

The project aims to address one of DeFi’s biggest barriers to broader adoption: losses caused by smart-contract exploits. More than $9 billion has been stolen through DeFi protocol attacks over the years, highlighting the risks faced by investors and financial companies moving funds onchain.

Firelight plans to combine dedicated cover capital with a faster claims process. The company is targeting payouts within 10 days, significantly reducing the potentially lengthy settlement periods associated with traditional insurance.

CEO Anthony DeMartino said Firelight could eventually accept a wider range of assets as collateral, particularly cryptocurrencies with strong liquidity that do not naturally generate significant yield.

The protocol is positioning itself primarily for fintech companies, neobanks, payment providers and other businesses integrating stablecoin and DeFi yield products. Firelight expects more capital currently held in traditional bank accounts to move toward onchain financial products, increasing demand for protection against exploits.

Under Firelight’s proposed system, covered positions will be represented by NFTs. Following an exploit, holders can submit their positions for assessment by a consortium of independent risk firms, including GFX Labs, Hypernative, Credora, Native and Cyfrin.

The consortium will determine whether an exploit occurred and whether the incident qualifies under the cover terms. Firelight is targeting three to four days for this assessment and less than 10 days for the entire process, including collateral liquidation and payout.

With roughly $80 billion locked across DeFi and only a small percentage protected by onchain cover, Firelight sees significant room for growth. The newly raised capital will support protocol development, additional DeFi protection products and expansion of its ecosystem partnerships.