8 days ago3 min readSummaryFirelight Protocol raised $8 million in a funding round led by Gumi Cryptos Capital to develop an onchain protection layer for decentralized finance.The protocol, expected to launch with its first cover integrations in September, aims to settle eligible smart-contract exploit claims within 10 days through independent risk firms.Firelight plans to expand the collateral backing its cover system beyond XRP to liquid, non-yielding assets such as bitcoin and Stellar’s XLM as it targets fintechs offering onchain yield products.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 BTC$77,740.27 and Stellar's XLM, the firm told CoinDesk Tuesday.The investment round was led by Gumi Cryptos Capital, with Maven 11, Metalayer, Joint Effects and Tribe Capital also participating, the firm said. Firelight, which was incubated by Sentora, a DeFi infrastructure provider with $2.4 billion in assets held in its vaults, plans to launch the protocol and its first cover integrations in September.The project is tackling a problem that has become more pressing as fintechs and other mainstream financial firms experiment with onchain yield: DeFi can offer attractive returns, but a single smart-contract exploit can wipe out customer funds, while traditional insurance can take months to pay. Firelight is trying to bridge that gap with dedicated cover capital and a claims process designed to settle eligible losses in about 10 days.The risk has been highlighted by a string of attacks on DeFi projects. Over $9 billion in assets have been stolen in DeFi protocol exploits over the years, DefiLlama data shows.Firelight is also considering a broader universe of liquid assets that do not already generate substantial yield, CEO Anthony DeMartino told CoinDesk 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 onchainFirelight is betting that the bigger opportunity lies beyond crypto-native traders as fintechs, neobanks and payments companies increasingly plug onchain yield products into their apps.The possibility of losing customer capital to an exploit can become a major obstacle when a product is ready to go live, DeMartino said. Firelight aims to provide a protection layer that makes that jump less daunting.“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 sitting in bank accounts to migrate into fintech earn products powered by stablecoins, onchain vaults and wallets. Sentora itself has been working on bringing yield products to fintech applications, including payroll and remittance platforms, he said.The protection gap remains large. Roughly $80 billion is locked in DeFi, according to Firelight, while only a fraction of a percent is protected by onchain cover.Firelight is also trying to address another weakness of existing insurance models: the time it can take to determine a claim and get capital back to the affected investor.Under Firelight's planned system, a covered position is represented by an NFT. After an exploit, the holder can submit it to a consortium of independent risk firms, which determines whether an exploit occurred and whether 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 10 days from the initial claim through liquidation of collateral and payout.“The idea is to have the whole thing from start to finish be inside of 10 days,” DeMartino said.That 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.Related Assets12345678910