DeFi’s ‘unknown and unpredictable’ risks curb institutional use — Fireblocks VP

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Institutions are keen on DeFi, and its use among them is growing, but on-chain risks are hamstringing further adoption, says Fireblocks’ Shahar Madar.

DeFi’s ‘unknown and unpredictable’ risks curb institutional use — Fireblocks VP

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Institutional investors have a “growing interest” in decentralized finance (DeFi) but are held back by the risks of on-chain transactions, says a Fireblocks executive. The company aims to address these concerns by introducing new features to its platform. 

“For institutional investors navigating DeFi transactions, the risks are significant,” Fireblocks security and trust products vice president Shahar Madar told Cointelegraph. “They manage significantly more funds than the average consumer trader.” Madar added:

“The risks of unknown and unpredictable DeFi engagements is something they have to consider within their risk portfolio, which is what essentially holds them back.”

Despite the risks, Madar said institutional DeFi trading on Fireblocks rose 75% in the first quarter of 2024, reaching “nearly $4.5 billion.”

With DeFi having $95 billion in total value locked, according to DefiLlama, it has “attracted attention from sophisticated attackers” said Madar.

Around $336.3 million worth of crypto was stolen in hacks and scams in Q1, down from $437.5 million stolen in Q1 of 2023.

 Source: PeckShieldAlert

Fireblocks added two new tools to its institutional DeFi suite: “Transaction Simulation,” which allows its users to see what a smart contract will do to a wallet before it is signed, and “DApp Protection,” which analyzes contracts for malicious elements and alerts users of “suspicious smart contracts.”

For DeFi to attract institutions, Madar said it “must prioritize security, user-friendly interfaces, and effective risk management,” which he thinks could “transform perceptions of DeFi and the entire industry.”

Related: Crypto sleuth warns of scammers behind DeFi protocol

Institutions, for their part, are increasingly drawn to staking, restaking and tokenizing real-world assets, said Madar.

He added that Fireblocks users are actively “swapping, lending, staking and bridging” on decentralized applications, including Uniswap, Aave, Curve, 1inch and Jupiter.

Meanwhile, the interest of traditional finance players leans toward real-world asset tokenization and using DeFi’s infrastructure to “establish a safer financial ecosystem without counterparty risks.”

Magazine: Synthetix founder Kain Warwick: It’s DeFi that’s wrong, not the market

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