DeFi’s ‘Unknown and Unpredictable’ Risks Limit Institutional Use – FireBlocks VP
Institutional investors have a “growing interest” in decentralized finance (DeFi) but are held back by the risks of on-chain transactions, according to a Fireblocks executive. The company aims to address these concerns by introducing new features to the platform.
“The risks are high for institutional investors traveling on DeFi transactions,” Shahar Madar, vice president of security and fiduciary products at Fireblocks, told Cointelegraph. “They manage more money than the average consumer trader.” Madar added:
“Unknown and unpredictable DFI engagement risks are something they should consider in their risk portfolios, which is a major hold back.”
Despite the concerns, Madar said institutional DeFi transactions on Fireblocks will grow 75 percent to “nearly $4.5 billion” in the first quarter of 2024.
While Defi is locked in at $95 billion in total value, according to Defillama, it has “attracted the attention of sophisticated attackers,” Madar said.
About $336.3 million worth of crypto was stolen through hacking and fraud in Q1, down from $437.5 million stolen in Q1 2023.
FireBlocks has added two new tools to its institutional DeFi suite: “Transaction Simulation”, which allows users to see what will be done to a wallet before signing a smart contract, and “DApp Protection”, which analyzes contracts for malicious entities and alerts users of “suspicious smart contracts”.
To attract institutions to DeFi, Madar “must prioritize security, user-friendly interfaces and effective risk management,” he said.
Related: Crypto sleuth warns of scammers behind DeFi protocol
Institutions, for their part, are being drawn to store, reclaim and simulate real-world assets, Madar said.
He added that Fireblocks users are swapping, lending, depositing and connecting to decentralized applications including Uniswap, Aave, Curve, 1inch and Jupiter.
Meanwhile, traditional finance players are interested in using real-world asset tokens and DeFi infrastructure to “establish a financial ecosystem that is safer from associated risks.”
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