In a groundbreaking move to protect users and recover financial losses if digital assets are lost or stolen, Firelight Finance, a decentralized risk hedging protocol, today announced a strategic partnership with Lombard Finance, a Bitcoin DeFi protocol. This partnership allowed Firelight Finance to join forces with Lombard Finance to introduce Bitcoin-backed DeFi hedge markets to help $BTC customers protect themselves and their digital assets against various risks in the chain.
Firelight is a decentralized DeFi insurance protocol built on the Flare Network and protects customers against financial losses that can occur when using decentralized finance. DeFi and crypto markets continue to experience major risks such as hacks, smart contract bugs, stablecoin depegging, protocol errors, and several other potential vulnerabilities. To mitigate such issues, decentralized insurance platforms (such as Firelight Finance and many others) have emerged to help users hedge against risks in the DeFi space.
ICYMI, we’re partnering with @Lombard_Finance to explore Bitcoin-backed DeFi hedge markets.
Together we explore new ways $BTC to support onchain protection infrastructure while expanding the utility for Bitcoin in DeFi. pic.twitter.com/8s62f4D7e1
— Firelight (@Firelightfi) May 23, 2026
Lombard Finance integrates FirelightFi
Based on the news development announced above, Firelight Finance has partnered with Lombard Finance to introduce a capital-backed layer of protection designed to work on Lombard’s Bitcoin DeFi platform. Lombard Finance is a DeFi platform built on the Bitcoin blockchain, with the aim of improving it $BTC‘s utility by integrating it into the decentralized financial landscape. This platform allows Bitcoin holders to create a liquid staking token called LBTC, which they can use for lending, staking, and various decentralized financial services in the DeFi world.
Based on this partnership, Firelight Finance has transitioned to Lombard Finance’s Bitcoin DeFi ecosystem as its coverage protocol. This means that Bitcoin investors, traders, holders, and users participating in Lombard’s DeFi vault ecosystem now have access to integrated protection against DeFi’s significant threats, such as smart contract exploits, network hacks, bad debt, failed liquidations, and many other risks.
Low insurance adoption poses risks to DeFi
With the partnership, Lombard Finance expanded its vault into the decentralized insurance sector, an integration designed to advance the way the Bitcoin DeFi ecosystem manages risk. This technical integration means that $BTC Holders can now deposit their Bitcoin into Firelight’s insurance pools, which act as coverage against potential network vulnerabilities and other outages.
The development comes as DeFi users are still chasing returns despite the majority of 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 TVL has insurance coverage, despite hacking incidents continuing as billions of dollars continue to flow through on-chain markets.