Firelight, a newly launched decentralized finance (DeFi) protocol, is introducing staking for XRP users, combining yield opportunities with an innovative protection layer against DeFi exploits. Developed by Sentora and supported by Flare Network, this protocol allows XRP holders to stake their tokens and earn rewards linked to the demand for DeFi “cover,” a safeguard designed to help absorb losses from potential hacks, as outlined in a press release on Wednesday.
The initiative addresses a significant gap in the DeFi sector, which has seen billions lost due to hacks and exploits. “At this stage in DeFi”s maturity, it needs the same risk infrastructure that supports every other financial market,” stated Connor Sullivan, chief strategy officer at Firelight. He emphasized that 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 operational framework of Firelight unfolds in two distinct phases. Initially, users deposit their XRP and receive stXRP, a liquid ERC-20 token that represents their stake. This stXRP can be traded, utilized as collateral, or added to DeFi liquidity pools within the Flare ecosystem. In the second phase, the staked XRP supports the Firelight cover pool, underwriting risks for DeFi protocols that choose to participate. If a covered protocol incurs a loss and meets specific criteria set by Firelight, the pool can disburse funds from the capital contributed by users, mirroring the model used by traditional insurers who rely on collected premiums and reserves to settle claims.
The financial health of the protocol is further bolstered by premiums paid by participating protocols, which contribute to staking rewards. Firelight harnesses the FAssets system from Flare to integrate XRP into DeFi applications. FAssets are decentralized synthetic versions of layer-1 tokens that enable users to mint FXRP, a wrapped variant of XRP, without depending on centralized bridges. StXRP is created using FXRP, providing a seamless transition from XRP into Firelight”s staking environment.
With audits completed by OpenZeppelin and Coinspect, alongside a bug bounty program launched with Immunefi, Firelight is prioritizing security. Despite XRP boasting a substantial market capitalization of $130 billion, it has historically lacked native staking options, with the total value locked on the XRPL currently amounting to just $72 million, according to data from DefiLlama. Firelight aims to not only present a new avenue for holders to earn yield but also to establish a security framework that could facilitate the DeFi sector”s progression toward institutional-grade standards.
