The financial technology company Fordefi today announced an $18 million seed round, led by Lightspeed Venture Partners and joined by major crypto investors including the FTX-affiliated Alameda Research, Jump Crypto, Castle Island, and Electric Capital.
Fordefi (pronounced “Fortify”), which emerged from stealth last week, is led by a founding team with serious crypto pedigree, including CEO Josh Schwartz, who previously ran global sales at BitGo and was COO at Curv. Fordefi’s first product is a DeFi-focused wallet built for institutional investors and crypto-native funds working with decentralized applications.
In an interview, Schwartz said the main use cases for crypto have evolved during his time in the industry. While buying and HODLing previously was the primary focus for many, the emergence of smart contracts and dapps has presented new opportunities for investors, such as decentralized access to liquidity and yield.
“The challenge is, it’s a very different set of risks that are involved,” Schwartz told Coins2Day.
Smart contracts are at the heart of DeFi, but Schwartz said many people are interacting with dapps and signing transactions without “reading the fine print,” which leads to security issues, especially when it comes to custody of private keys and wallet management.
For institutional investors looking to get into the DeFi space, retail offerings such as MetaMask are not feasible from a security perspective for protecting users’ private keys. Institutional wallets are more focused on the management of private keys but aren’t optimized for interacting with DeFi.
“We’re this category creator in the middle,” Schwartz told Coins2Day.
Dima Kogan, Fordefi’s CTO, said there are two key aspects to custodial solutions. The first is protecting private keys. Fordefi’s wallet is MPC, or multiparty computation, meaning it distributes a user’s private keys while still allowing users to easily connect with dapps. The second is making sure that every time a private key is used, it’s used correctly—especially important in DeFi because users can’t always trust the origin of transactions.
“Our solution protects the private keys, but then it also provides all the necessary context for the user to make a meaningful decision every time they’re signing a transaction,” Kogan said.
According to Schwartz, Fordefi’s clients are mainly trading firms and DeFi-focused funds, as well as custodians.
An example is Alameda Research, the crypto-focused trading firm founded by FTX’s Sam Bankman-Fried with which Fordefi has “a close relationship,” Schwartz added.
As security issues around DeFi perpetuate questions about its sustainability—and harmful impacts to the crypto industry as a whole—Schwartz said Fordefi will add confidence for institutional players operating in the space.
“We don’t protect against people actually deploying a malicious contract,” he told Coins2Day, “but we provide tools to help people manage their risk and exposure before they’re actually going to interact with these contracts.”