Fidelity-backed Fireblocks offers institutional clients access to Compound's lending protocol

Quick Take

  • Crypto security firm Fireblocks has integrated with Compound to let clients earn passive interest through the latter’s lending protocol
  • Right now, users of Compound would have to access the services through MetaMask or a hard wallet, which deters institutional investors due to the lack of security
  • Fireblocks client Amber Group said that the integrated feature offers a more secure alternative but the firm might not utilize it due to low interest rates on Compound.
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The Fidelity-backed crypto security firm Fireblocks has integrated with DeFi platform Compound to allow its clients to earn interests via Compound’s lending protocol. 

According to a Tuesday press statement shared with The Block, Fireblocks clients can now deploy assets stored in the Fireblocks Hot Vault into Compound and start earning passive yields.

Fireblocks uses multiparty computation (MPC) to secure the transfer of user assets. Traders can store their assets in the Fireblocks Hot Vault – which offers both online and offline storage functionalities – and move their funds between wallets. 

Currently, investors would have to use Web-3 wallets like MetaMask or hardware wallets to access platforms like Compound, which is less than ideal for institutional traders, said Kevin Yedid-Botton, a principal at DeFi-focused investment company ParaFi that is also a client of Fireblocks. 

"If you're like a retail user with a couple thousand dollars in your wallet, there’s no issue there," said Yedid-Botton. "But if you're running big bucks, you certainly wouldn’t want to put a couple million dollars on your MetaMask wallet just to interact with Compound."

Tiantian Kullander, co-founder at Amber Group – a crypto finance firm and one of Fireblocks’ clients – agreed with Yedid-Botton on this point. 

"For most people, it's pretty unimaginable to have someone managing a key MetaMask plugin and trading millions of dollars of firm capital," Kullander said. 

"I think most of the trading firms and OTC desks use Fireblocks now because it allows you to move funds around with MPC where keys are created separately and you don't have that key-man risk," he continued. "To have this integration, it allows this institutional enterprise to integrate with a pure-play DeFi platform that can bridge this gap we see now."

On the other hand, however, Kullander said Amber Group might not utilize the new feature as much due to the low-interest rates currently offered on Compound. The 30-day average interest rate for ETH lending on Compound, for instance, is only 0.01%.

"I don't think we're gonna be using this product necessarily," Kullander said. "If we lend our ETH out on Compound, we are on one basis points per annum and that's just to compensate for the smart contract risk you're taking lending funds out on Compound. It is not worth it."


© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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