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One of the most exciting and far-reaching evolutions in the blockchain network has been the Decentralized Applications (DApps) and smart contracts. As the pioneer of this evolution, the Ethereum blockchain has been propelled into being the most versatile in the crypto space. It is also the second-largest by market cap.
Borrowing from Ethereum’s ever-increasing popularity, other blockchain systems have been keen to explore this evolution. A good example is Cardano, having risen to its current position as the third-largest by market cap as a result. The XRP ecosystem is a key player in the crypto world. It explores the smart contracts ecosystem from a new and vibrant angle through the launch of Flare Network.
Introducing the Flare Network
The Flare network can be defined as a decentralized network that aims to onboard the entire spectrum of smart contracts onto the XRP’s Ripple blockchain. It can do so thanks to its new characteristic, that of creating a bridge between blockchain ecosystems. Therefore, a link can be created between Ethereum and XRP’s ledgers, enabling the XRP digital asset to be used with smart contracts.
Smart contracts refer to transaction protocols or computer software that automatically controls and executes events. They are also designed to document these legally relevant events as per the terms of a contract as agreed on. Smart contracts eliminate the need for a trusted third party and reduce fraud losses and the incidence of malicious activities. They offer a trustless and decentralized ecosystem that is secure.
The flare network operates an improved version of the federated byzantine agreement (FBA) consensus protocol. Their version is summed up as the flare consensus protocol FCP.
The Flare Consensus Protocol
Flare’s FCP version of the FBA consensus protocol is characterized by being entirely ordered and leaderless. It’s a huge deterrent to would-be attackers. An attacker cannot define and identify which of two transactions will first be ordered in a transaction set. By utilizing a federated virtual voting (FVV) mechanism, flare’s FBA is a lot simpler than other previous FBA consensus.
The FBA consensus protocol has a key advantage, a better security system. It doesn’t rely on income-generating models such as proof of stake (PoS) to verify a transaction’s authenticity. PoS based protocols tend to tie the security of the entire system to crypto staking validators. Such dependence on validators has the effect of limiting the crypto’s usage to only ways that don’t jeopardize the whole network’s security. It ends up limiting the digital asset’s effective usability hence its versatility.
A key challenge with FBA is its fragility to cascading failure. Failure in a single node could result in the wholesale failure of the entire system. To resolve this, Flare implements a unique node list or UNL. It helps emphasize node clarity while still enabling user simplicity and maintaining FBA’s open membership aspect.
How The Flare Network Works
A good query is just how the flare network can onboard smart contracts onto the ripple blockchain. Interoperability has been a key issue in the DApps and smart contracts space.
The process starts with the integration of the flare network to the Ethereum Virtual Machine (EVM). EVM is a powerful code stack environment in the Ethereum blockchain that is responsible for executing smart contracts. Since smart contracts are written in higher languages, EVM’s purpose is to convert them into instructions a computer can execute.
By linking to the EVM, flare can run what is termed as Turing complete smart contracts. That is, smart contracts can be executed by a machine if given instructions, sufficient time, and the required memory.
Flare Network’s Digital Assets
Flare network is a host to two key digital assets. The first is its native token, the Spark token (FLR), and the second is the FXRP, a representation of the XRP token on the flare network.
Spark Token (FLR)
Spark is the primary native digital asset of the flare network. Besides having a similar base use case as other native cryptos in other systems, Spark plays the following specialized roles;
- Used as blockchain oracles. A blockchain oracle is essentially a third-party data provider utilized as a bridge between smart contracts and other outside software systems.
- Used as collateral when trading within DApps. To be precise, it may keep it in a margin or arbitrage trading account to cover for any potential losses incurred by a trader under leveraged trading.
- Participate in the action of protocol governance. There is a specific FLR token for governance availed by the network. It leverages the token’s general property as a bridge between Ripple and Ethereum’s EVM to define how the nodes in the two systems interact. It also influences how data is routed between the two blockchain ecosystems. These two are key actions in protocol governance.
With these three roles, the network aims to foster the creation of Spark-dependent applications (SDA). The SDAs enables the representation of tokens in a trustless manner onto other networks, normally on smart contracts supporting ecosystems. However, these networks are not just limited to those supporting smart contracts. Therefore, they enable the onboarding of smart contracts’ spectrums on ecosystems like that of XRP.
As defined under the last section of the Spark token, FXRP is an example of a trustless representation of an SDA-enabled token. It is also on a non-smart contract native network. As such, it makes FXRP the first DApp for the Flare network. FXRP is the trustless representation of the XRP digital asset onto the flare network.
Creating the FXRP token
To create the FXRP token, one has to hold the Spark FLR token. Holders of this FLR then send it to flare’s smart contracts, using it as collateral in an arbitrage trading system to create FXRP. Holders initiating these transactions are termed originators.
The huddle crossed by this process is solving the interoperability issue between blockchains. Interoperability, especially with regards to smart contracts, occurs in the following ways.
- A public blockchain smart contract can’t exert control over an XRP address on its own since they are unable to maintain the secrecy of private keys.
- Attempting to onboard XRP onto the smart contracts ecosystem by the use of coding would also prove unsound. A central body of individuals would be required to control and authorize transactions using a multi-signature address. It means the token won’t be decentralized, neither will it be trustless, key defining factors of smart contracts. Arbitrage can maintain thanks to arbitrage trading, a 1:1 token peg of the XRP to the FXRP. At the same time, it also generates a creation fee from the originators. The fee is 0.1% of the transaction value.
The originator, in turn, generates revenue from the difference between the system’s FLR: FXPR collateral exchange requirements and the FLR: XRP exchange rate. The FXRP utilizes a Flare Time Series Oracle to track the XRP/FLR prices. The FLR token, on the other hand, is utilized for governance to oversee factors like the collateral exchange requirement and creation fee—the two, together with the Spark FLR token, form the 3 elements of the flare network.
Initially, smart contracts and DApps were a reserve for blockchain ecosystems that featured them from their inception. Flare network’s ingenious strategy of using Spark-dependent applications has changed that in a major way.
XRP holders are now able to enjoy smart contracts via FXRP tokens through FLR token usage as collateral. Thanks to the SDA model, developers now have a field day trying to extend the possible applications the flare network can offer. The possibilities are not just limited to the Spark FLR token. The Flare token is utilized for governance, and Flare Time Series Oracle may also offer new distinctive DApps creations.