Blockchain-Based Fireblocks Platform Explained
You may have heard of the blockchain-based Fireblocks platform.
Fireblocks platform is a product created for the crypto market to move and manage institutional assets. So what is this platform all about? Most of what you may have experienced as a crypto market trader or investor is buying and selling crypto assets on a small scale. A small-scale crypto investor may be trading with funds that range from a few hundred to tens of thousands of dollars.
When crypto investments break the seven-figure barrier, this marks a transition from a small-scale operation to an institutional-scale one. At the institutional level of investment, you cannot keep operating with the same tools as the small-scale, retail-level traders. It would help if you had a resource that guarantees better security, better pricing for your trades, and more robust tools to manage such enterprise-level investments. This is where the Fireblocks platform comes in.
Fireblocks is a platform that provides you with enterprise-grade resources to move and manage your digital assets securely.
The large sizes of institutional crypto portfolios require the brokers/exchanges handling their business to offer something beyond the regular. Several factors constitute risks in the crypto market. The first is the system of storing digital assets. Crypto assets are held on exchanges or in self-custody wallets with private keys. The two systems are fraught with risks.
Exchange-held assets are highly vulnerable because they are stored in online/hot wallets. Hackers are no longer the only threat to exchange-held tokens. Recent events such as the collapse of FTX and Celsius have shown that exchanges run by inexperienced hands with limited compliance and internal controls are as much a risk as a hacking team.
Self-custody wallets require that the owner of the assets secures the wallet with a private key. If the key is misplaced or compromised, the assets are lost forever.
Another requirement for institutional crypto investors is a robust trading environment that presents the user with professional tools that are not accessible to anyone else. For instance, institutions are very keen on risk management and prefer using platforms that provide market-neutral trade types.
As will be discussed later, the MPC proprietary protocol used in designing the institutional-grade wallets on Fireblocks also enables trades to be made up to eight times faster than the industry average. If you trade huge volumes, you must split up your trade sizes to get good executions without altering the market price too much. Having ultra-fast transaction speeds compensates for the inability to push out all orders simultaneously, and the MPC protocol guarantees this.
Digital asset operations you can perform on Fireblocks
a) Deposits and withdrawals using MPC wallets Multi-Party Computation (MPC) wallets are considered more secure than traditional crypto wallets as they utilize a system of wallet key management that allows multiple parties to simultaneously perform various cryptographic-based functions without revealing their inputs.
This means there is no single point of failure (such as losing your private keys) as with traditional wallets. Fireblocks is one of the pioneers of this technology. As an institutional player, you cannot pin the security of your massive crypto holdings to the existence of a private key. Considering that billions of dollars in crypto assets have been lost forever due to the misplacement of private keys, you would know that this is a big deal.
b) Trading with liquidity providers and trading venues Trading on an institutional basis requires a direct connection to liquidity providers. This level of trading is equivalent to wholesale trading because the liquidity required at this level is enormous. This large liquidity base enables institutional traders to get the best possible pricing and the cheapest spreads. The Fireblocks platform provides direct market access to liquidity providers, trading desks, and counterparties. This connection also provides access to a round-the-clock settlement of trades for more than 400 tokens across over 30 major exchanges.
c) Perform various account analytics functions Fireblocks also allows you to view various asset storage analytics. For instance, you can view your digital assets in offline vaults, exchanges, or in fiat accounts. You can also view your account inflows and outflows and check your open/closed trades and positions.
d) Speedy transfer of digital assets to and from centralized exchanges Another vital function required to effectively manage institutional crypto assets is the ability to move funds in and out of an exchange to a non-custodial wallet. Typically, institutional digital assets account for most fund outflows from centralized exchanges during market turbulence.
Whenever there is a market upheaval, the crypto market witnesses a large volume of outflows from centralized exchanges to private wallets. The UST collapse, FTX collapse, and the bankruptcy of Celsius led to net outflows from centralized exchanges. Institutional funds accounted for 68% -77% of these outflows.
The reason is not far-fetched. Capital preservation and risk management are at the heart of institutional-level investment operations. To protect capital during a market downturn, there has to be a secure pathway to move these large volumes of digital assets.
The Fireblocks platform offers this secure environment. Its connectivity with several exchanges ensures that such movement of funds can be done simultaneously, securely, and speedily.
Enterprise-level crypto portfolio management requires a more robust approach than what is obtainable in the retail segment of the market. Upgraded encryption, advanced cryptography that eliminates a single point of failure, and a secure system for conducting the industrial-scale movement of digital assets between exchanges and non-custodial wallets are a must. Fireblocks has provided a one-stop shop for institutional-level clients' needs.
The Fireblocks platform serves hedge funds, neobanks, PSPs, exchanges, prop traders, and lending desks. The platform supports all ERC-20 tokens and assets on the Binance Chain and the Avalanche network. You have to initiate the connection process by requesting access via the online form on the website.
Author: Brendan Beeken
Moni Talks Founder and Chairman Brendan Beeken is an entrepreneur, commercial strategist, investor, and philanthropist. He writes on a wide range of subjects, including cryptocurrency, decentralised finance, blockchain, business advice, and professional wellbeing, for news and business websites, as well as Latest Moni and his personal site, brendanbeeken.com. Brendan draws from his own research and more than two decades of personal experience in business to offer a unique insight, perspective, and commentary on diverse subjects. He is passionate about making the cryptocurrency space more accessible and encouraging safer and more responsible trading and investing. Brendan's LinkTree is https://linktr.ee/brendanbeeken.