Firelight has added a Kraken-distributed USDC vault to its DeFi coverage protocol, opening a possible income stream for holders who deploy XRP-linked capital on Flare. The catch: those providers share in losses across Firelight's wider coverage portfolio, and no premium volumes have been disclosed.
A Kraken-distributed USDC vault will direct part of its yield to XRP-linked collateral providers who underwrite DeFi losses. On Oct. 15, Firelight announced it had added Kraken's Protected Strategies USDC vault, which is available through the exchange's DeFi Earn service.
Sentora, the vault's independent curator, arranged the enrollment. Kraken said it receives none of the coverage fees and neither arranges nor guarantees the payouts.
Kraken vault turns protection fees into XRP-linked income
Firelight operates on Flare, where participants supply FXRP, a representation of XRP created through the network's FAssets system. Stakers receive stXRP, which tracks their claim on the pool backing Firelight's coverage commitments.
Firelight converts fees paid in USDC into FXRP, which increases the collateral backing each staker's position. Returns compound through the redemption value of stXRP rather than through extra tokens sent to wallets.
However, the protocol has not disclosed how much premium income the Kraken vault has generated or how much FXRP it has acquired from those fees. The integration could generate demand for FXRP, but its launch creates no particular amount of new native XRP purchases, according to CryptoSlate.
XRP holders take on losses across the coverage pool
Firelight's staked capital supports all active covered vaults, so a provider earning premiums tied to Kraken can suffer losses from qualifying incidents elsewhere in the portfolio. The protocol first pays validated claims from a stablecoin reserve called the First-Loss Buffer. If that reserve runs out, Firelight proportionally reduces the assets backing each staker's position, a process known as slashing.
Depositors in the Kraken vault are eligible for compensation of up to $100,000 per address for each coverage period. Exits take time, because withdrawals currently take 30 to 60 days after an unstaking request.
Monthly renewals will test demand
Firelight resets coverage terms, prices and capacity across 30-day periods. At the next reset, Sentora and Firelight can revise fees and coverage limits, which will test whether depositors keep paying for protection.
Source: CryptoSlate
Trading involves risk.
Risk Disclaimer
