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.
- 1 What’s the Difference Between Proof of Work (PoW) and Proof of Stake (PoS)?
- 2 The XRP Ledger
- 3 How is Spark (FLR) Used?
- 4 How Can I Acquire Spark (FLR)?
- 5 How Can I Stake Assets on the Flare Network?
- 6 Why Would I Want to Stake Other Tokens on the Flare Network?
- 7 How Can I Earn Passive Income from the Flare Network?
- 8 What is Flare Finance?
- 9 What is Trustline?
- 10 How Many Spark (FLR) Tokens Are There?
- 11 When is the Flare Network Launching?
- 12 How is the Flare Network Governed?
- 13 What is the Flare Time Series Oracle (FTSO)?
- 14 What is the Spark (FLR) Token Price Prediction?
- 15 Final Thoughts
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 process smart contracts? We will soon, thanks to the Flare Network!
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
How Can I Stake Assets on the Flare Network?
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:
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 Finance?
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:
In the future, more assets will be able to be voted in by the holders.
What is Trustline?
Trustline is a secure peer-to-peer credit network that offers a bankless alternative to credit cards. It is another form of decentralized finance and will also be offered on the Flare Network.
Trustline is unique because it offers Probity Vaults, which allow you to deposit your crypto into a secure blockchain vault while earning passive income, or to borrow against it. When you make a deposit into a Probity Vault, you will be given Aurei (AUR), which is a decentralized, multi-chain stablecoin that is backed by cryptocurrency reserves. Aurei is currently available on the Flare and XRP Ledger networks.
They will also offer the Trustline Credit Network (TCN) token, which is a governance token for their credit network. Your accumulated interest will be paid in TCN, which is convertible into Aurei at a 1:1 ratio. You can learn more about Trustline here.
How Many Spark (FLR) Tokens Are There?
There are 100 billion pre-minted Spark tokens with 8-10 billion of those being released at launch.
When is the Flare Network Launching?
The Flare Network is expected to launch around the end of June 2021 (+/- 2-4 weeks).
How is the Flare Network Governed?
The Flare Network is unique because it is governed by the Spark (FLR) holders. Each Spark token constitutes a “vote”, so holders with the most tokens will have the most influence. Issues that will be voted on include future F-Asset decisions and what FTSO provider gave the most accurate data to the network.
What is the Flare Time Series Oracle (FTSO)?
The Flare Time Series Oracle (FTSO) provides time series data estimates to the Flare Network in a decentralized manner. For the network to work properly, it needs to have accurate data from several external sources. For example, to mint your XRP to FXRP, the network requires the FLR/XRP price. It would obtain this information from the FTSO.
Spark (FLR) holders have the opportunity to provide accurate data estimates for a chance to earn more tokens, or they can delegate their votes to a different Flare user or an external FTSO service provider (e.g. PAC Global). Flare governance votes can also be delegated to others. You can learn more about the Flare Time Series Oracle here.
What is the Spark (FLR) Token Price Prediction?
Two Hour Blogger does not provide financial advice, but we believe that the Spark token will be in high demand. We do not know of any other cryptocurrency that allows you to earn low risk yield several different ways from the same token.
As more people find out about the Flare Network and its many passive income opportunities, they will rush to buy the Spark token from exchanges (e.g. Bitrue). These holders will then stake their tokens on the Flare Network to participate in the passive income opportunities, thus creating a supply crunch on the secondary market.
Less circulating supply with high demand will cause upward pressure on the price. The same thing will happen with the supported F-Assets (XRP, XLM, LTC, and DOGE) as more people stake them on the Flare Network. These holders will not have much of an incentive to sell their tokens while earning passive income.
According to Flare Network’s website, about 65% of the value of blockchain tokens are inaccessible to decentralized applications. That will change as soon as the Flare Network is launched. The value is in the utility, not the token, and Flare solves many real-world problems.
Flare has an extremely bright future, and we are excited to see it launch and grow. The network takes lots of the inefficiencies of traditional blockchain networks and allows them to work together to solve real-world problems.
Can you imagine using a credit card from a peer-to-peer lending network like Trustline, or obtaining insurance from a decentralized finance app like Flare Finance?
DeFi is going to change the world as we know it and make funds more accessible to the people who need them.
Disclaimer: Two Hour Blogger does not give financial advice. We make every effort to provide accurate information, but this space is constantly changing so please do your own research.