Posted 10 months ago | by Catoshi Nakamoto
Holders who had XRP in their wallets and exchanges back in December will soon be getting a reward from Ripple Labs; an airdrop of Spark Tokens, the new utility token for the Flare Network. The Flare network will bring smart contracts and DeFi to XRP, and Ripple is using some innovative methods and protocols for creating liquidity, determining price, and validating transactions. There’s a lot of information to cover, and by the end of this video you might come out with a minor in computer science. We’re calling it the Flaredrop! And today we get into the dirty details of what the Spark token is, and what’s in the future for Flare Network.Read More
Let’s get it.
Welcome to Bit Boy Crypto; home of the Bitsquad, the largest crypto community in all the interwebs. My name is Ben. Everyday on this channel I show you how to make money in crypto. If you like money and crypto make sure to hit that subscribe button. In this video we talk about the upcoming Spark airdrop, and what it means for XRP’s new smart contract network: Flare.
Something about sifting through all this Flaredrop information is bringing me back to my college days; sipping red bull until 2am writing endless research papers. Let’s put on the old Kennesaw State ball cap, and start this Spark breakdown like any good research paper: with some definitions. But first- don’t forget to smash up the like button for more content. It helps the channel and lets the youtube Algorithm know that you give this channel an A-plus.
XRP- you know it, we love it. Well… love is a strong word…but we do think it’s likely going to be making some serious gains this bullcycle. XRP is neither proof work work or proof of stake. Rather, it relies on a consensus protocol to validate transactions. XRP can not be mined; one hundred million coins were launched at the outset with 60% of those coins held by Ripple labs, and one billion of that 60% can be released into circulation per month. Let’s define some terms:
Flare- not just a1 marine distress signal or the buttons 2Jennifer Aniston had to wear in the movie Office Space. Flare is the network that will bring full smart contract utility to the XRP ecosystem; and will be used to airdrop Spark tokens to XRP holders.
Spark- The fuel, or the “spark” that lights the flare network. Spark is the Flare network’s native token, and is used to collateralize F-assets (When you hear f-assets think wrapped tokens, but Flare-wrapped). It will also communicate price information to the Flare network’s oracle and allow DeFi transactions, as well as yield farming and liquidity mining.
Flare Finance- Where all the yield farming and liquidity mining will happen. This is the DeFi product of the Flare Network, which will allow swapping, and enable rewards for validating transactions and putting up collateral.
The Spark airdrop has been in the crypto syllabus since December of 2020, when Ripple first announced that an Airdrop would be coming to XRP holders sometime in the future. In April of this year, the official Flare Twitter let everyone know that “The Flare distribution will start when the Flare Network goes live. The team is working to make this happen SAFELY as soon as possible. It is dependent on finishing security testing. We expect this at the end of June plus or minus 2 to 4 weeks” What is meant here by “safely” is that the tokens will be distributed in increments so the token doesn’t immediately dump when it airdrops. The first stage of the airdrop will be 15% of the total amount the holder can claim, and the rest will be distributed slowly over a two to three year period.
The purpose behind the Spark token is to act as collateral, and provide liquidity for the Flare smart contract network. The network will use the same coding language as Ethereum, and all of its development will be identical to what’s used with the Ethereum Virtual Machine. This means interoperability that will allow developers who are already familiar with Ethereum to work on Flare. The Spark token will also be used to communicate information to the Flare Time Series Oracle. Even though the name sounds like it 3belongs on the pages of a philosphy book, all it really boils down to is a computerized mechanism that keeps the price up to date. For the network to be decentralized, the price of assets on the network can’t be determined by data from other exchanges. This would create too much of a grey area about whether or not it’s truly decentralized.
To solve this issue, the Oracle gets price information from Spark tokens by giving Spark holders a vote on what the current price should be. The top and bottom 25% of the votes are deleted, and the oracle is programmed to find the median price number in the data set. If a user’s estimate is close enough to the oracle output, then that user gets a reward. In short the Flare Time Series Oracle is an automated market maker that uses voting to determine price, and Spark tokens are both the “ballots” that are used for voting, and the reward for having the most accurate vote. DeFi exchanges that we’re used to seeing like Uniswap, Pancake swap, Curve and Balancer, use automated market makers that operate a little differently. It’s a new innovation to see voting being used to price assets on an exchange.
The Flare network validates transactions a little differently too. Proof of stake transaction security is usually dependent on validators who stake the token and gain rewards for mining the next transaction block in a chain. As a project scales, the validators must also scale; and this can cause problems and increase fees. The flare network chose to work around this scalability issue by using the Flare Consensus Protocol, which allows nodes to collaborate with each other in smaller groups called quorum slices. These are trusted groups that come up with a consensus together.
Every two quorums are made to intersect by one or more members being a part of two groups. This ensures that the consensus that quorums come to are similar, and it keeps the network safe from bad actors. The messages between nodes are then tracked by a Directed Acyclic Graph, and each message is voted on with either a 1, representing yes, or a 0, representing no. This is called Federated Virtual Voting, and it’s what allows transactions to be ordered and completed on the blockchain.
Flare Finance will bring DeFi to the Flare network, and it will use Spark to create secure transactions and yield farming. There are currently four f-assets that will launch on Flare Finance: XRP, Stellar, Cardano, Dogecoin and Litecoin. To yield-farm with these assets, a user will give an agent their asset token, such as ADA or Litecoin, and they will receive an equivalent F-asset in return, minus a service fee. This F-Asset will be fXRP, fXLM, fDOGE, etc etc; and it can be compared to a “wrapped” asset. This is similar to liquidity mining on the Curve DeFi platform, where you receive S-assets, or Synthetics wrapped assets, when you stake: like sBTC.
When an asset token is sent to an agent on Flare Finance, the agent will collateralize the transaction with 2 and a half times the equivalent price in Spark tokens. This keeps the transaction secure because if an agent doesn’t come through with their end of the smart contract agreement, or tries to “make off” with the funds, the user would receive two and a half times the value in Spark tokens, and the agent would be penalized. There will be rewards for putting f-assets into the exchange, and rewards will also be given for validating transactions.
According to Flare Networks, the Spark airdrop will happen sometime this month. Anyone who held XRP on the snapshot date of December 12th, 2020 will be eligible for the airdrop coins. Exchanges will automatically distribute the allotted share of Spark tokens for each eligible wallet. Ripple employees don’t have any access to the airdrop, and users have the option to opt-out of the airdrop. There’s been some chatter on the internet about concern for tax implications of the airdrop, and others are looking forward to getting the Spark tokens and plan to save them and see what happens with the Flare network in the future. Users will receive the equivalent amount of Spark token that they had in XRP on the snapshot date, and depending on how much XRP the holder had, there can definitely be some tax implications for the sudden influx of new funds.
An article on Forbes.com warns that the IRS taxes airdropped tokens like income, meaning that these funds will have to be reported at tax time, and taxes will have to be paid. Depending on how the value of the asset matures, the ability to easily pay taxes on the airdrop will vary; and might need some planning by holders who will receive a large amount.
Pencils down class. Flare is vying for the gold star of DeFi with it’s own way of being a studious pupil of smart contracts, and only time will tell how useful this network will become.
That’s all I got! Be Blessed, Bitboy out.