Institutional investors are showing a growing interest in decentralized finance (DeFi), but they are hesitant due to the risks associated with on-chain transactions, according to a Fireblocks executive. To address these concerns, the company is introducing new features to its platform.
Shahar Madar, the Vice President of Security and Trust Products at Fireblocks, explained that the risks involved in DeFi transactions are significant for institutional investors, who manage larger amounts of funds compared to individual traders. Despite these risks, institutional DeFi trading on Fireblocks increased by 75% in the first quarter of 2024, reaching nearly $4.5 billion.
Madar noted that DeFi, with a total value locked of $95 billion according to DefiLlama, has attracted attention from sophisticated attackers. However, the amount of crypto stolen in hacks and scams in the first quarter of this year decreased to $336.3 million, compared to $437.5 million stolen in the first quarter of 2023.
To cater to institutional investors, Fireblocks has added two new tools to its institutional DeFi suite: “Transaction Simulation” and “DApp Protection.” The Transaction Simulation tool allows users to preview the effects of a smart contract on a wallet before it is signed, while the DApp Protection tool analyzes contracts for malicious elements and alerts users about suspicious smart contracts.
Madar emphasized that for DeFi to attract institutions, it needs to prioritize security, user-friendly interfaces, and effective risk management. He believes that by doing so, it could transform perceptions of DeFi and the entire industry.
In addition to DeFi, institutional investors are increasingly interested in staking, restaking, and tokenizing real-world assets, according to Madar. Fireblocks users are actively engaging in activities such as swapping, lending, staking, and bridging on decentralized applications like Uniswap, Aave, Curve, 1inch, and Jupiter.
Overall, traditional finance players are leaning towards real-world asset tokenization and utilizing DeFi’s infrastructure to establish a safer financial ecosystem without counterparty risks, Madar added.
In conclusion, the Fireblocks executive believes that it is the DeFi industry that needs to be improved, rather than the market itself, in order to attract more participants and ensure its long-term success.