Introduction
Flare networks and its' native crypto token "Spark" is the new kid on the blockchain (pardon the terrible pun). Set up by Hugo Philion and Sean Rowan, Flare networks, has three major goals.
Bring smart contracts to the 75% of cryptos that are on the market and do not have smart contract functionality.
Fix the nightmarish scaling issues that often hinders crypto currencies that use the proof of stake model, by implementing the world's first Turing complete Federated Byzantine Agreement (FBA) network.
Unite cryptocurrencies so that they can interoperate with one another creating mass liquidity and utility.
Tell me about the tokenomics?
In total 100 billion spark tokens will be minted at the genesis block.
On the 12th Dec 20, Flare networks took a snapshot of the XRP ledger and will be airdropping approximately 45 billion Spark tokens to these XRP holders upon the launch of their heavily awaited network, which is expected in Q2 of 2021. (Note ripple labs and Jed McCaleb were excluded from the airdrop.
Out of the 100 billion spark tokens, Flare networks limited will receive 25 billion spark tokens, and the Flare foundation will receive 30 billion spark tokens.
So in summary, the 100 billion tokens will be distributed as follows;
Airdropped to XRP holders - 45 billion
Given to Flare networks Limited (a for profit entity) 25 billion
Given to the Flare Foundation (a non profit foundation) 30 billion
The Flare foundation will use these tokens to champion the network and use the funds to help build and develop the network.
To help maintain liquidity of the spark token, only 15% of the 100 billion coins will be dropped into circulation upon network launch. The remaining 85% of coins will be injected into the eco system at a rate of 3-4% per month. Therefore, the entire 100 billion tokens will be in circulation at some point in 2023.
In addition to the 100 billion tokens, an inflationary rate of 10% has been set at 10% per year. I appreciate most people panic when they see the word "inflationary" but as I explain a little later on in this blog, you will see why I am particularly bullish about this.
How will the network operate?
The Flare network will run on the XRP ledger mainly due to its' proven track record of being best in class for speed, volume and virtually non existent fees.
Transaction approval will be executed via nodes under the avalanche consensus model which is safe, secure, and is not tied to the value within the network (such as proof of stake) or use large amounts of unnecessary computational power (such as proof of work).
Spark tokens will be used as collateral to allow other cryptocurrencies to be minted onto the network to allow for interoperability and the use of smart contracts. Note whilst spark tokens will be held as collateral, they will only be at risk if the user decides to take the spark tokens out before the agreed time period.
Smart contracts
The flare network will leverage the power of the Ethereum virtual learning machine (EVM) which will allow the widely important use of smart contracts on the platform. This means that virtually any EVM smart contracts from other blockchains can port over to the flare network in a smooth trustless manner.
The use of smart contracts will allow Dapps and decentralised finance (DeFi) to be run on the network. DeFi is the craze right now - and for good reason.
The time series oracle
One of the areas of the flare network that I am particularly excited about is the flare time series oracle (FTSO).
The FTSO will act as the engine room to the network and will provide onsite real live data such as exchange rates, interest rates and much more.
The FTSO will obtain this data from spark token holders who will either input their own data feed into the FTSO, or delegate their rights to an FTSO data provider (FTSO.eu being one).
The FTSO will then take a median of the data sources to use within its' network creating a decentralised exchange, for example.
Talk to me about this inflation?
As mentioned earlier, annual inflation will be set at 10%. For example, if there are 100 billion coins in existence, a further 10 billion will be added each year with inflationary coins. Note inflation will be added daily.
This inflation policy is designed to reward holders who utilise the network and penalise those that do not, or those who are solely holding for speculative purposes. Remember a coin (or most assets for that matter) cannot survive purely on speculation - they need a use case.
Users who actively participate in providing data to the FTSO and who also take part in governance (such as voting) will be rewarded with these inflationary tokens. Those who merely "sit" on their coins will slowly see the value of their holdings eroded.
Users who provide incorrect data to the FTSO (either deliberately/maliciously or even by mistake) will not receive their inflationary rewards.
Initially I was a little skeptical at such a high inflation rate, but having understood it, I think it is rather genius. This inflationary mechanism will promote utility and good actors to the network and penalise those that do not wish to participate in the correct manner. A coin that has utility is a coin that will naturally drive value to the network.
What are the immediate plans for the network upon launch date
Flare networks have already said that XRP, Dogecoin and LTC will all be able to integrate into the network, exposing them to smart contracts for the first time. This alone will potentially bring billions of dollars onto the network.
Furthermore, they have recently announced that they are partnering with GALA games so that their gaming platform can be run on the flare network. Currently they are running on Ethereum ERC-20. This is a game changer for GALA games as the Flare networks will introduce minimal to no fees on their gaming platform. Note - GALA games users have been plagued by Ethereum's exorbitant fees.
Finally, Flare finance have announced they will be building a bunch of DeFi products on their platform ranging from yield farming, collateralised loans, insurance and much more.
Where can I purchase the Spark tokens from?
As the network has not yet launched, Spark tokens are only trading in an IOU (I owe you) form on bitrue. Holders of these IOU tokens will be given the actual Spark tokens on a 1:1 basis upon the launch of the network. They are currently trading at $0.66 (up nearly 100% from yesterday).
Note - Poloniex are also trading the Spark IOU, however, this one should be avoided as the conversion from the IOU to the real Spark token is not entirely clear.
Final thoughts
In my opinion, the Flare network will be revolutionary in the crypto world. It will bring smart contracts and Defi to 75% of the cryptocurrencies currently in existence with XRP, LTC and Dogecoin being the first to be added to this list. These three cryptocurrencies alone have a combined market cap of north of $30 billion dollars. That is a whole lot of liquidity.
What's more, the aggressive promotion of utility (through voting, the FTSO and inflation) will truly drive value to the network.
Disclaimer
I do own Spark tokens.
I am not a financial advisor.
