Jack Paul 
Firelight Finance, a decentralized risk cover protocol built on the Flare Network, has announced a strategic partnership with Lombard Finance, a Bitcoin DeFi protocol. The collaboration aims to introduce Bitcoin-backed DeFi cover markets, helping BTC customers protect their digital assets from various on-chain risks like hacks, smart contract bugs, stablecoin depegging, and protocol failures.
How the partnership works
Firelight Finance is integrating into Lombard Finance’s Bitcoin DeFi ecosystem as a cover protocol. This means that Bitcoin investors, traders, holders, and users participating in Lombard’s DeFi vault ecosystem now have access to integrated protection against threats like smart contract exploits, network hacks, bad debts, and liquidation failures. Lombard Finance is a DeFi platform built on the Bitcoin blockchain. It allows Bitcoin holders to mint a liquid staking token called LBTC, which they can use for lending, staking, and various other decentralized financial services.
Under the partnership, Lombard extends its vault into the decentralized insurance sector. BTC holders can now deposit their Bitcoin into Firelight’s insurance pools. These pools function as coverage against potential network vulnerabilities and other failures. This integration aims to advance how Lombard’s Bitcoin DeFi ecosystem manages risks.
Low insurance adoption remains a challenge
The development comes at a time when many DeFi users continue chasing yields despite their on-chain finances remaining exposed to hacks, phishing scams, and private key compromises. Last week, on Friday, May 15, research shared by crypto insurance protocol Nexus Mutual revealed that less than 2% of DeFi’s total value locked (TVL) has insurance coverage. This is despite hacking incidents continuing while billions of dollars keep moving through on-chain markets.
Decentralized insurance platforms like Firelight Finance have emerged to help users hedge against risks in the DeFi space. The partnership with Lombard Finance potentially brings more attention to the need for coverage in Bitcoin-based DeFi, which has seen rapid growth but also faces security concerns.