XRP Holders Can Earn Fees, Face Losses in Kraken Vault

Firelight added Kraken’s Protected Strategies USDC vault to its coverage protocol on Oct. 15. The vault is available through Kraken’s DeFi Earn service, where depositors receive protection in exchange for a lower yield. Sentora, an independent decentralized-finance platform, arranged the enrollment.

Kraken’s published annual percentage yield includes fees charged by Firelight and Sentora. Those fees may change each month. Kraken does not receive the fees, arrange coverage or guarantee claim payments.

Depositors in the USDC vault can receive up to $100,000 per address during each coverage period. Payments remain subject to the vault’s total coverage limit and the capital available to settle claims.

Firelight operates on Flare and uses FXRP, a representation of XRP created through the network’s FAssets system, as collateral. Participants who supply FXRP receive stXRP, which represents their share of the pool supporting the protocol’s coverage commitments.

When a covered vault pays for protection, Firelight adds the premiums to a shared capital pool. Fees paid in USDC are converted into FXRP, increasing the assets backing stXRP. The return is reflected in the redemption value of stXRP rather than paid as additional tokens.

The shared pool supports all vaults covered by Firelight. A collateral provider earning premiums linked to the Kraken vault can therefore face losses from a qualifying incident in another covered vault.

Firelight first uses a stablecoin reserve called the First-Loss Buffer to settle validated claims. If the reserve is exhausted, the protocol can reduce the assets backing each staker’s position, a process known as slashing. A claim can reduce the amount of FXRP redeemable for stXRP, including premiums already added to the pool.

Covered incidents include specified smart-contract exploits, oracle failures, governance attacks and failures in a protocol’s economic design. Normal asset-price declines, changes in advertised yields and routine liquidity shortages are excluded.

Firelight’s independent Risk Consortium determines whether an incident qualifies for coverage. Sentora distributes approved USDC payments to eligible wallets. Kraken does not finance the claims.

Collateral providers cannot exit immediately. Withdrawals currently take 30 to 60 days after an unstaking request. Exposure to eligible losses can continue during part of that period, while premium accrual ends when the request is submitted.

Firelight launched its coverage protocol on Oct. 6 with Sentora’s USD Protected and Protected RWA vaults. Coverage terms, prices and capacity reset every 30 days, allowing vault operators to renew protection under revised conditions.

Kraken users do not need to hold XRP to deposit into the USDC vault. Firelight’s collateral providers can use XRP they hold to obtain FXRP. Firelight has not disclosed the premium income generated by the Kraken vault or the amount of FXRP acquired from those fees.