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 Capital, and Castle Island.
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. Fordefis 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, its a very different set of risks that are involved, Schwartz told Fortune.
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 arent optimized for interacting with DeFi.
Were this category creator in the middle, Schwartz told Fortune.
Dima Kogan, Fordefis CTO, said there are two key aspects to custodial solutions. The first is protecting private keys. Fordefis wallet is MPC, or multiparty computation, meaning it distributes a users private keys while still allowing users to easily connect with dapps. The second is making sure that every time a private key is used, its used correctlyespecially important in DeFi because users cant 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 theyre signing a transaction, Kogan said.
According to Schwartz, Fordefis 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 FTXs Sam Bankman-Fried with which Fordefi has a close relationship, Schwartz added.
As security issues around DeFi perpetuate questions around its sustainabilityand harmful impacts to the crypto industry as a wholeSchwartz said Fordefi will add confidence for institutional players operating in the space.
We dont protect against people actually deploying a malicious contract, he told Fortune, but we provide tools to help people manage their risk and exposure before theyre actually going to interact with these contracts.
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