Firelight, a new decentralized finance (DeFi) protocol, is enabling staking for XRP users while providing on-chain protection for protocols against hacks.
Developed by Sentora and supported by Flare Network, Firelight allows XRP holders to stake their tokens for rewards linked to the demand for DeFi “coverage,” which helps protocols withstand losses from exploits, according to a Wednesday press release.
This model resembles insurance in traditional finance, an area where the $160 billion DeFi sector still struggles, with billions of dollars lost due to exploits and hacks that hinder its wider adoption.
“At this stage in DeFi’s evolution, it requires the same risk infrastructure that supports all other financial markets,” stated Connor Sullivan, chief strategy officer at Firelight. “Firelight introduces a capital-efficient protection layer that can absorb shocks, mitigate technical and economic risks, and enhance the resilience of the entire ecosystem.”
The system operates in two phases, the company described. Initially, users deposit XRP and receive stXRP, a liquid ERC-20 token that represents their stake. StXRP can be traded, utilized as collateral, or added to DeFi liquidity pools within the Flare ecosystem. In the subsequent phase, the staked XRP will support the Firelight cover pool, meaning the deposited assets are used to underwrite risk for DeFi protocols that participate.
If a protocol sustains a loss and fulfills Firelight’s criteria, the pool can disburse funds from the capital staked by users. This is similar to how insurers utilize collected premiums and reserves to settle claims. Premiums from covered protocols contribute to funding staking rewards.
Firelight utilizes Flare’s FAssets system to integrate XRP into DeFi. FAssets are completely decentralized synthetic versions of layer-1 tokens, enabling users to mint FXRP — a wrapped version of XRP — without relying on centralized bridges. StXRP is minted using FXRP, creating a direct path from XRP into Firelight’s staking system.
The protocol has undergone audits from OpenZeppelin and Coinspect and has launched a bug bounty through Immunefi.
Although XRP is one of the most widely held cryptocurrencies with a market capitalization of $130 billion, it has previously lacked native staking options, according to the protocol. The total value locked on XRPL currently sits at just $72 million, as per DefiLlama.
Firelight seeks to provide holders a new method to earn yield while reinforcing a security layer that could bring DeFi closer to meeting institutional standards.
Read more: Risk, Reward, and Resilience: Building Insurance Primitives in DeFi
