Flare Network: The Future of Decentralized Finance (DeFi)
Flare Networks
Flare Network is an exciting new distributed blockchain network that can be used to create bridges between networks and add utility to their coins. Cryptocurrencies are usually traded on exchanges (e.g. Coinbase) and held for investment purposes, but many of them do not have a solid use case. The few cryptos that do have a solid use case tend to be bogged down by inefficiencies in their network, making it difficult for them to scale. Let’s look at some examples below.
Bitcoin (BTC) was the first cryptocurrency to launch and is currently the most well-known, but it relies on a Proof of Work (PoW) algorithm to function. This requires a network of super-computers, also known as miners, to validate the transactions. Proof of Work is plagued by several problems, including high energy use, high costs, slow transaction times, mining centralization, susceptibility to attacks, and more.
Bitcoin’s initial use case was for decentralized payments (sending money without an intermediary – e.g. a bank), but it has not been very efficient at that purpose as the network continues to grow. For example, if you tried to pay for your coffee with Bitcoin, it would be cold by the time the merchant received your payment. For this reason, Bitcoin enthusiasts have tried to rebrand it as a store of value.
Another popular cryptocurrency that utilizes Proof of Work is Ethereum (ETH). Ethereum has a solid use case for smart contracts (trading something of value without an intermediary – e.g. a service provider), but it is also bogged down with the shortcomings of Proof of Work. Ethereum is currently working on Ethereum 2.0, which will use a Proof of Stake (PoS) algorithm.
What’s the Difference Between Proof of Work (PoW) and Proof of Stake (PoS)?
All blockchain networks require a consensus algorithm to operate. This is essentially a general agreement for how the blockchain will process transactions and how participants will be rewarded.
The original consensus algorithm is called Proof of Work (PoW), which sets the difficulty and rules for the work that miners do. Mining is another term for adding valid blocks to the chain, which is considered the “work”. In exchange, miners earn coins in the blockchain’s native asset (e.g. Bitcoin or Ethereum). In order to cover the high electricity costs and other associated expenses, miners usually sell these coins on exchanges. This adds downward pressure on the coin’s price as miners continuously sell them in the secondary market.
Some Proof of Work coins are in the process of moving to Proof of Stake (PoS), which requires miners to “lock up” a certain number of coins as collateral when launching a masternode. The locked up coins are usually held in their wallet, but they are unable to be sent anywhere while the masternode is processing transactions and earning rewards. This adds upward pressure on the coin’s price because there are less of them for sale in the secondary market. Most people want to launch masternodes to earn rewards, which are also usually earned in the blockchain’s native asset (e.g. Bitcoin or Ethereum).
Proof of Stake uses less energy and requires less specialized equipment than Proof of Work, but both algorithms are still slow. They are also susceptible to network congestion and high transaction costs. The transaction costs were so high during the 2021 crypto bull run that several cryptocurrency exchanges temporarily disabled deposits and withdrawals for all Ethereum tokens.
The XRP Ledger
The XRP Ledger was founded by David Schwartz, Jed McCaleb, and Arthur Britto in June of 2012 to address the limitations of Bitcoin and other Proof of Work coins. It operates on a Federated Byzantine Agreement (FBA) consensus mechanism, which requires nodes to be known and verified ahead of time. This allows the XRP Ledger to be fast, energy efficient, and very scalable. Payments moving across the XRP Ledger usually settle in 4 seconds.
The XRP Ledger is great for cross border payments and is a huge improvement from Proof of Work algorithms, but it is not Turing Complete. This simply means that it is not able to process smart contracts like Ethereum.
Wouldn’t it be great if we had a fast, energy efficient, and scalable alternative that is able to pr
Flare is the world’s first Turing Complete Federated Byzantine Agreement (FBA) Network. It is a distributed network that can be used to create two-way bridges between networks. For example, it integrates the Ethereum Virtual Machine (EVM) for smart contracts and the XRP Ledger for its speed and efficiency. This allows smart contract functionality to be brought to the XRP token and other coins that wasn’t possible before.
Flare is also unique because it doesn’t require its native token Spark (FLR) to secure the network. This means that Spark can be used to create utility. Proof of Work and Proof of Stake coins use their native tokens to secure the network.
How is Spark (FLR) Used?
The Spark token is used for three functions:
1. As collateral within decentralized applications (DApps)
2. For rewarding signal providers for giving accurate data to the network through the Flare Time Series Oracle (FTSO)
3. To participate in governing the network
How Can I Acquire Spark (FLR)?
The Spark token (FLR) can be acquired by the following methods:
1. Purchasing it on a participating exchange (e.g. Bitrue)
2. Staking other coins on the network to earn it (e.g. XRP)
3. Operating a masternode that provides accurate data to the network through the Flare Time Series Oracle (FTSO)
4. If you held XRP on December 12th, 2020 and participated in the Flare airdrop, you will earn some for free
Display real testimonials
When other tokens are staked (or minted) on the Flare Network, they become F-Assets (Flare Assets). For example, XRP would become FXRP and XLM would become FXLM. Your original tokens are secured by Spark (FLR), and there is a small fee to mint them.
So far, Flare has announced F-Asset support for the following tokens:
XRP (FXRP)
XLM (FXLM)
LTC (FLTC)
DOGE (FDOGE)
Why Would I Want to Stake Other Tokens on the Flare Network?
Staking other tokens allows you to earn passive income from your current holdings. For example, if you are invested in XRP, XLM, LTC, or DOGE, your only option to earn a profit is to buy low and sell high.
But wouldn’t it be great if you could earn passive income streams from your current holdings? Flare allows you to do that by participating in decentralized applications like DeFi (decentralized finance) that you wouldn’t otherwise have access to.
How Can I Earn Passive Income from the Flare Network?
Flare allows you to earn passive income from the same assets simultaneously. Yes, you read that correctly.
Spark (FLR) holders participating in the network will be able to earn daily rewards, delegate their FTSO votes to a signal provider for more rewards, and earn other tokens simultaneously.
The same goes for XRP, XLM, LTC, or DOGE holders that stake (mint) their assets on the Flare Network. The reward options mentioned above are low risk, but there will be other options within Flare Finance that can earn more rewards.
What is Flare Fiance?
Flare Finance is an independently developed decentralized finance (DeFi) application that allows Flare Network users to act as their own yield generating bank and exchange without giving control of their assets to a centralized party (trustless).
Flare Finance offers six products and a decentralized exchange (DEX).
1. FlareX: Enables users to swap currencies and earn passive income by providing liquidity to decentralized on-demand liquidity (DODL) pools
2. FlareWrap: Enables users to bridge their currencies to the Flare Network without needing an exchange
3. FlareFarm: Enables users to earn passive income through participation in various staking pools
4. FlareMine: Enables owners of Bitcoin (BTC) and Ethereum (ETH) mining rigs to mine various non-Proof of Work (PoW) tokens (e.g. Spark)
5. Flare Loans: Enables holders to earn passive income by pooling their assets to be loaned against a borrower’s collateral
6. Flare Mutual: Enables users to participate in a decentralized mutual fund to share risk together without the need for an insurance company
Flare Finance currently offers the following tokens:
YFLR
YFIN
YUSD
FLR
XRP
XLM
LTC
DOGE
ALGO
ADA
SHIB
SANSHU
TEL
CEL
BNB
CAKE
In the future, more assets will be able to be voted in by the holders.
1. Delegating your $WSGB means you earn delegation rewards. (1/3)
2. Placing that $WSGB into $WSGB/$CAND pool means you earn liquidity pool fees. (2/3)
3. Placing your $WSGB/$CAND LP Tokens into FlareFarm means you earn yield farming rewards. (3/3).
Triple Rewards possible, but optional of course
What is the Songbird Network?
Songbird is the Canary network for Flare, it will have two distinct phases. Prior to the launch of Flare, Songbird will be instrumental in the continued testing of the Flare Time Series Oracle, the StateConnector and F-Asset systems and the network architecture. The FTSO and F-Asset protocols will be live on Songbird with F-Assets generated from the underlying tokens.This will improve the security, stability and credibility for the ultimate launch of Flare.
Post Flare launch, Songbird is intended to be a long term network for testing governance led changes to Flare, such as the incorporation of new F-Assets, changes to the FTSO, F-Asset systems or any other network change.
In all periods Songbird has two other core uses. First, advanced testing and community building for applications that wish to launch on Flare. Ideally all applications that launch on Flare, especially those that utilize the FTSO and F-Asset systems will test initially on Songbird. Second, as a way for FLR token holders to familiarize themselves with key Flare protocols such as delegation to the FTSO, minting of F-Assets and usage of applications that build on Flare without putting their FLR tokens at risk.
Flare will launch with all the tested core protocols, FTSO, initial F-Assets and StateConnector. The use of Songbird as the testbed for potential updates to Flare means that between Flare and Songbird, Songbird will often be the more advanced network. Innovations and new dApp launches will happen first on Songbird and then may be rolled out on Flare after testing. This makes Songbird its own type of network which may be useful, in isolation, to applications that do not need the intended stability of Flare, but which wish to enjoy the core Flare protocols and potentially more advanced features that Songbird may offer ahead of Flare. This might generally appeal to lower value applications whereas Flare might appeal to applications handling greater amounts of value.
Songbird Token
Songbird will have its own token, Songbird ($SGB), which will be distributed once only and in the same ratio to all the same recipients of the FLR distribution. Total starting supply will be 15 Billion with initial inflation of 10% per annum through the FTSO and validator rewards systems. This means for every 1 XRP that was held at the time of snapshot 0.1511 SGB will be allocated.
There will be no pre-defined minting rewards pool, instead that supply will remain with the Flare Foundation. If you claimed FLR through self custody, you will use the same Ethereum style address but with a different chain ID to access Songbird. If you claimed your FLR through an exchange they will receive SGB on your behalf. You will need to ask them to distribute it to you.
Governance
Similar to Flare the SGB token can be used to perform a governance role. Unlike Flare this would not be over the implementation of changes to Songbird itself (as Songbird is subordinated for Flare for that purpose). Governance could however be useful in adding additional chains, prices and F-Assets, that haven’t been suggested by Flare governance, to the Songbird state connector, FTSO and F-Asset protocols respectively.
Launch order
Songbird will launch first as a pure EVM smart contract network this will enable testing of the network architecture and for the initiation of testing of third party dapps. Subsequently the FTSO, State Connector and F-asset systems will be enabled.
Flare Launch
Flare will launch after substantial testing of all systems on Songbird with the current final security audit scheduled to finish at the end of September.
Chaos warning
Songbird should not be considered a production ready network. It is for testing of the integrity of the proposed production network (Flare), proposed governance updates over time, the Flare core protocols and dApps launching on Flare. The Flare team makes no promise to continue support or development of Songbird in the future. The team at Flare and likely the various teams testing their dApps on Songbird will be actively trying to find and exploit bugs and other issues and break the network. Please therefore be aware that Songbird comes with a potential for loss of liveness, token loss and risk that is potentially greater than main net deployments. Measure twice, cut once.