Today, we’re excited to announce that Fireblocks has integrated with Compound, a DeFi (decentralized finance) lending platform with $163M in interest-earning assets across 8 markets.
Compound enables users to lend and borrow popular cryptocurrencies in exchange for interest or debt. With Fireblocks, institutions now have a simple and secure way to deploy digital assets into Compound for the first time.
An (interest)ing challenge
Until now, it hasn’t been easy for OTC desks, hedge funds, and market makers to earn interest on assets at rest, because:
- The speed at which trading venues have to operate has made it impossible to earn interest through staking.
- Many of the top ten cryptocurrencies don’t support staking.
- The existing options for moving assets to and from interest-earning protocols were designed for retail investors.
It’s become common for large trading players in crypto to hold millions of dollars in digital assets, with many of them leaving their assets sitting idly on exchanges.
Secure, institutional crypto savings accounts
While there are a number of different ways our customers are already using this new integration, one of the most compelling use cases is crypto savings accounts for institutions – which allow OTCs, hedge funds, market makers, etc. to passively earn interest on digital assets, even in short intervals.
Now with the Compound-Fireblocks integration, institutions can keep their assets safe and accessible in the Fireblocks Vault, all the while passively generating up to 7% interest.
It’s the first time trading venues can earn interest, even in very short intervals (as quickly as every 15 seconds).
Bringing MPC to DeFi
Before Fireblocks, the main way Compound could be accessed was through a service like MetaMask – a Chrome web extension-based wallet where the private key is stored in the browser.
While this was sufficient for some retail customers, institutions have largely been left behind. They require a higher level of security than something like a Chrome web extension can offer, so they have been unable to interact with smart-contract based platforms and the $4.7 billion digital asset lending industry.
Fireblocks represents the first institutional usage of MPC (multi-party computation) in DeFi. Now, deploying institutional assets on a DeFi protocol like Compound is not only secure – it’s also extremely fast and easy.
“As Compound is a smart-contract based protocol, leveraging MPC is the only way to layer institutional controls like multi-user approvals and eliminate a single point of compromise when depositing funds into Compound, and during redemption of the loan.This integration offers unparalleled security around private key protection for smart-contracts,” said Uri Stav, CSDO at Genesis Global Trading.
How to use Compound with Fireblocks
Compound <> Fireblocks FAQ
How does the Compound protocol work?
- Compound is the first “liquidity pool” – instead of lending assets directly to another user, you supply liquidity to a market, and users borrow from that market. There are no pre-defined durations or terms (such as “90 days”) – you can use the Compound protocol for as short as one block, or as long as you’d like; you’re free to withdraw or repay at any time. Learn more about how Compound works here.
Do I have to open a Compound account or can I just use the feature?
- No, you don’t need to create a Compound account. You only need a Fireblocks account to get started– then you can send or withdraw assets to Compound directly from your Fireblocks Vault.
What is the interest rate?
- In each market, interest rates are determined algorithmically (based on supply and demand), and interest accrues every Ethereum block. You will see the current interest rate for each asset in the Fireblocks console before you deposit or redeem the loan.
Will I be able to set permissions for Compound deposits and withdrawals?
- Yes, because we’ve implemented MPC on the Compound protocol, you will be able to create rules and assign user permissions for Compound related transactions. This allows you to control who will have permission to deposit or redeem the loan, as well as who will be required to approve Compound related transactions on the account.
Will this cost extra?
- Currently, we do not charge extra for this feature and will make it available to all Fireblocks customers starting this week.
Is this insured?
- The transfer of assets between Fireblocks and Compound, and C-Assets stored in the Fireblocks Vault is covered by our A.M. Best A-rated insurance policy. However, the smart-contract itself on Compound is not covered by Fireblocks insurance.
Does Fireblocks support borrowing from Compound?
- Not yet, but this feature is currently on our roadmap.