DeFi (decentralized finance)’s popularity has exploded in the past year, with almost $15 billion in USD locked in DeFi smart contracts today — in comparison to under $1 billion in December of last year.
However, DeFi is currently inaccessible for most institutional investors outside of the core space. As former Morgan Stanley banker and current Jump Capital executive Peter Johnson said, “If you want to participate in DeFi and yield farming, you need to know what you’re doing. It’s mostly technical folks who have been in this for a while.”
For organizations looking to utilize DeFi strategies like decentralized exchange trading, decentralized lending/borrowing, staking, and yield farming, Fireblocks now offers secure, enterprise-grade – and most importantly easy – access to all decentralized exchanges and apps.
We’re making it possible for institutions to launch DeFi strategies while ensuring that they can still meet security, operational, and regulatory requirements.
There’s been an exponential increase (almost 700%) in assets locked in DeFi since the beginning of the year. Data via DeFi Pulse.
Institutional DeFi access before Fireblocks
To access DeFi protocols today, most institutions utilize browser-based apps, hardware wallets, or custom integrations. But these technologies are unable to offer enterprise-level security, efficiency, and scalability.
Exposed private keys
Some institutions use browser-based/mobile app integrations to access DeFi protocols. Though these apps can be sufficient for consumers, they present a variety of security pitfalls for trading firms, hedge funds, and OTCs.
The biggest issue with browser-based DeFi app integrations is that you’re leaving your private keys in and signing transactions from the browser. When a hacker steals browser-held information (e.g., with a simple malware-based attack), pocketing your funds is an easy next step.
Some organizations add an additional layer of security to their DeFi operations by holding their private keys on a hardware wallet (such as Trezor and Ledger Nano devices).
The issue with utilizing a hardware wallet to add security to DeFi is that it presents operational and governance problems for institutions. High-value transactions should require a multi-approval workflow and policy checks. Unfortunately, it’s very difficult to enforce institutional policies and procedures when using a single physical device – especially in the era of remote work.
Alternatively, you can develop your own DeFi infrastructure, building custom integrations for every DeFi protocol the trading team wants to access.
However, there are a wide – and growing – variety of DeFi protocols, each requiring your team to build and maintain a secure integration. Depending on your engineering resources, this can become time-consuming and expensive.
No audit trail
Utilizing retail wallets makes it almost impossible to create a centralized audit trail. For accounting and compliance purposes at an enterprise level, auditability and transparency are paramount.
Unfortunately, accessing DeFi through consumer-grade apps also means your assets aren’t insured – and if we’ve learned anything thus far (many exchanges have been hacked and been unable to return their users’ funds), it’s that institutions need insurance when it comes to this asset class.
Expanding Fireblocks DeFi access
In early 2020, we launched our Compound integration – the first institutional wallet connected to DeFi at the time. Today, we’re expanding Fireblocks DeFi access to all decentralized exchanges and apps.
The Fireblocks DeFi API and browser extension deliver a complete institutional-grade solution that encompasses operational security, efficiency and compliance.
- Secured private keys (utilizing next-gen MPC and hardware isolation)
- Automation for algorithmic trading (DeFi API)
- Internal policies and workflows, such as requesting multiple authorizations when sending assets to a specific protocol.
- Governance to prevent financial-hacking – to limit access to less established protocols
- Auditability for compliance (Centralized transaction logs)
- Insurance (Up to $30 million covering cyberattacks, internal fraud, software bugs, and more)
“We’re incredibly excited to see Fireblocks offer its institutional clients access to Uniswap’s deep and long-tail liquidity pools. Continued support and adoption from professional investment firms and infrastructure providers is vital for the healthy long-term growth and maturation of decentralized finance.” – Hayden Adams, Founder, Uniswap
How do I use Fireblocks DeFi?
Fireblocks offers two mechanisms to access decentralized exchanges and DeFi apps.
1) Fireblocks DeFi API
The API framework allows programmatic access to DeFi, which is most suitable to an automated and algorithmic interaction with protocols, such as DEX market making, lending and borrowing, liquidation bots, minting & burning, and other use-cases that require real-time interaction.
The Fireblocks DeFi API consists of:
- A set of new endpoints that allow customers to invoke smart-contract functions.
- An SDK that connects with Ethers.js, Web3, and other popular DeFi libraries, with code examples to the most popular protocols.
- New policy rules that allow multi-user approvals for smart-contract transactions and protocol level sanctioning.
2) Fireblocks DeFi Browser Extension
In addition, Fireblocks provides a browser extension that allows customers to interact with DeFi protocols through their web app. The browser extension identifies the user and feeds the requested DeFi transaction into the selected Fireblocks Vault to enforce the security of pre-configured policies and MPC signing.
Which DeFi apps can I access via Fireblocks DeFi?
Using Fireblocks DeFi, you can now securely access decentralized exchanges (DEX) like Uniswap and Curve, decentralized lending/borrowing, yield farming, staking, and many other popular DeFi apps, such as:
- Consensys Codefi
- Rocket Pool
- Kyber swap
Interested in learning more about how Fireblocks secures digital assets for institutional investors? Download our newest security whitepaper for everything you need to know about the state of digital asset security in 2021.