Firelight Raises $8 Million, Broadens DeFi Coverage Beyond XRP as It Targets Bitcoin and XLM

Firelight Protocol has secured $8 million in funding to develop an onchain protection layer for decentralized finance, with plans to broaden its collateral base beyond XRP to include bitcoin and Stellar’s XLM, while offering fintechs and investors a quicker route to recoup losses from DeFi exploits and enabling token holders to earn yield on their protections.

• The funding round, led by Gumi Cryptos Capital, will support the development of Firelight’s onchain defense mechanism for DeFi protocols.
• The protocol aims to process eligible smart-contract attack claims within ten days using independent risk assessment firms.
• Firelight intends to extend the assets backing its cover system past XRP to include liquid, non-yielding assets like bitcoin and XLM, targeting fintechs that provide onchain yield solutions.

Firelight Protocol raised $8 million to build an onchain protection layer for decentralized finance, with plans to expand the assets backing its cover system beyond XRP (XRP) to bitcoin

The investment round was led by Gumi Cryptos Capital, with participation from Maven 11, Metalayer, Joint Effects and Tribe Capital, the firm announced. Firelight, which was incubated by Sentora, a DeFi infrastructure provider managing $2.4 billion in assets across its vaults, plans to launch the protocol and its initial cover integrations in September.

The project is tackling a growing challenge as fintechs and other mainstream financial institutions explore onchain yield opportunities: DeFi can deliver attractive returns, but a single smart-contract vulnerability can wipe out customer funds, while traditional insurance often takes months to process claims. Firelight seeks to bridge this gap with dedicated cover capital and a streamlined claims process designed to settle valid losses in roughly ten days.

DeFi attacks have underscored the urgency of this issue. Over $9 billion in assets have been drained through DeFi protocol exploits to date, according to DefiLlama data.

Firelight is also evaluating a wider range of liquid assets that do not already generate significant yield, CEO Anthony DeMartino told Decryptnews in an interview.

“There’s a bunch of different assets that we’re considering,” DeMartino said. “Anything … that’s a solid asset, that has good liquidity to it, that doesn’t provide its own natural yield, will eventually be eligible to be posted as collateral.”

Fintech money onchain

Firelight is betting that the larger opportunity lies beyond crypto-native traders, as fintechs, neobanks and payment platforms increasingly integrate onchain yield products into their offerings.

The risk of losing customer capital to an exploit can become a major hurdle when a product is ready for launch, DeMartino said. Firelight aims to provide a protection layer that makes this transition less intimidating.

“This isn’t built for degens,” he said. “This is built to bring the next wave of capital in. We want to be that protection layer to allow that adoption.”

DeMartino said he expects more money currently held in traditional bank accounts to migrate into fintech earn products powered by stablecoins, onchain vaults and digital wallets. Sentora itself has been working on bringing yield products to fintech applications, including payroll and remittance services, he noted.

The protection gap remains substantial. While approximately $80 billion is locked in DeFi, according to Firelight, only a fraction of a percent is covered by onchain insurance.

Firelight is also working to address another weakness of existing insurance models: the time it can take to verify a claim and return capital to the affected investor.

Under Firelight’s proposed system, a covered position is represented by an NFT. Following an exploit, the holder can submit it to a consortium of independent risk firms, which determine whether an exploit occurred and if it falls within the cover terms. The group includes GFX Labs, Hypernative, Credora, Native and Cyfrin.

Firelight is targeting three to four days for that decision and less than ten days from the initial claim through collateral liquidation and payout.

“The idea is to have the whole thing from start to finish be inside of ten days,” DeMartino said.

This speed is central to the product, he said, because a fintech yield program or leveraged investment strategy may not be able to wait months for an insurance claim to be resolved.

“For DeFi, we needed to create something … that needed to pay quickly, because if it doesn’t pay quickly, most of these companies will be out of business,” DeMartino said.

The new funding will go toward protocol development, expanding Firelight’s cover offerings and adding ecosystem partners.

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Anvil is a shared on-chain collateral layer built on a programmable letter of credit: reserve assets as a guarantee -no loan, no interest, keep custody & yield.