What is Flare Network?
Flare Network is a layer-1 network that uses the Flare consensus mechanism. The Flare Network is committed to two major visions.
- Blockchain networks that do not support smart contracts, including Bitcoin, account for approximately 65% of the Crypto market's total market capitalization, and Flare Network wants to bring smart contracts to these networks to unlock the potential of these network-native assets
- PoS networks face the problem of staking returns becoming less attractive when DeFi returns increase. Flare Network hopes to solve this problem by introducing a new consensus mechanism
Flare Network, which is a smart contract platform and is also compatible with the Ethereum Virtual Machine (EVM), also provides components to support other non-smart contract platform blockchains to implement asset mapping on Flare Network. These mapped assets will be able to use smart contracts on Flare Network. In this way, Flare indirectly enables the smart contract services to non-smart contract platforms.
Flare consensus is said to be the first Turing-complete federal Byzantine protocol (BFA, Ripple, and Stellar all use similar consensus mechanisms), as opposed to Proof-of-X-type consensus mechanisms (PoW/PoS). In PoX-type consensus, the validator needs to hold a certain percentage of resources (e.g., arithmetic in PoW, staking in PoS) in order to get the corresponding probability of being selected to generate a block. The information contained in the block is decided by the selected validator and verified by others. In BFA-type consensus, however, validators do not need to compete for the right to generate blocks, but each validator needs to reach a consensus on the information contained in the block.
To put it simply, there is only one validator in PoX that actually do the question, and when it is done, the other validators verify the accuracy of the answer and then vote on it. In BFA, each node has to do the same question and check the answer with each other afterward. Compared with the PoX consensus mechanism, BFA consensus does not require certain resources to protect the security of the network. But the disadvantage is that the more decentralized the network is, the more difficult it is to reach consensus, so the current blockchain using BFA consensus is relatively less decentralized.
What Is TokenInsight's Rating for Flare Network?
TokenInsight has rated Flare Network's current performance with a BB and a positive outlook. It ranks in the middle of the list of public chains and smart contract platforms. Similar projects with a BB rating include Cardano, Ethereum Classic, Litecoin, and others.
The breakdown of the rating results is scored as follows.
- Underlying Technology & Security 48.9%
- Roadmap & Progress 56%
- Token Economics 71.73%
- Token Performance 50.8%
- Ecosystem Development 39.7%
- Team, Partners & Investors 64.67%
Roadmap & Progress (56%)
Flare Network started in 2019, the same year it received funding led by Ripple. on September 17, 2021, Flare launched its Songbird testnet. Then on July 11, 2022, the Flare mainnet went live for a 6-9 month Beta test. And on January 9, 2023, Flare officially launched its native asset $FLR and listed it on exchanges.
While it appears that the Flare Network has been in steady development, its actual development progress has often fallen short of expectations. According to the announcement, Flare mainnet was scheduled to go live on July 4, 2022, but actually went live on July 11, one week later than expected. The $FLR distribution was originally planned for October-November 2022, but was only officially completed in January 2023. In addition, according to the official roadmap, there are still some key components missing before the full functionality of the Flare Network mainnet goes live, and the estimated completion date for these developments has not yet been announced.
Underlying Technology & Security (64.55%)
Flare Network has made its code base publicly available on Github, including the validator node client (both Flare Network mainnet and Songbird testnet), components related to cross-chain asset mapping services (mainly FTSO and State Connector), and related technical documentation.
Flare Network has launched a bug bounty program on its own that didn't work with third parties.
As of January 2023, Flare Network has not experienced any security-related crises.
Token Economics (71.73%)
Native Asset $FLR
$FLR is a native asset of Flare Network and is primarily used for Gas fees, asset mapping, and decentralized governance. There is no cap on the supply of $FLR, with an initial supply of $100 billion, and decreasing annual inflation, with the incremental $FLRs being used only to continuously incentivize validators. Approximately 40% of the initial supply will be allocated to the development team, 10% to early investors, and approximately 50% to Flare Network users via airdrop, etc. The detailed distribution and vesting plan are as below.
It's worth noting that approximately $4.28 billion of $FLR was airdropped to $XRP holders on January 9, which represents about 15% of the current circulating supply. However, the snapshot of this airdrop was taken 2 years ago, in December 2020, so Ripple veterans can try to see if they qualify for the airdrop and how to claim the $FLR airdrop.
Mapped Assets F-Asset
In addition to the native asset, Flare Network plans to support various assets on other chains converting them into mapped assets on Flare Network through its mapping feature (F-Asset) on Flare Network. This asset mapping is similar in principle to $BTC/$WBTC in that it is done by a third-party agent collecting the native assets and then issuing proofs representing the assets held on other networks, i.e., mapped assets, but the difference is that the F-Asset issuance and redemption process on Flare Network is more decentralized.
First, the issuance of F-Assets does not rely on a single reputable centralized entity; any user can become an agent for issuing F-Assets. Let's use $XRP as an example.
- To become an $FXRP agent, you need to set up an address on the Ripple network that can receive $XRP, and then deposit a certain amount of $FLR in F-Aseet smart contract on the Flare Network.
- When the $XRP holder wants to map $XRP on Ripple to the Flare Network, the holder can send $XRP to the specific address of the agent on Ripple.
- Upon confirmation of receipt, the F-Asset smart contract will send $FXRP 1:1 the number of $XRP to the $XRP holder's designated address on Flare Network.
- When the $XRP holder wants to redeem the $XRP on Ripple, he needs to send the $FXRP on the Flare Network back to the F-Asset smart contract and burn it. After confirmation, the agent will send the $XRP back to the $XRP holder's wallet address
- The F-Asset Smart Contract requires the Agent to deposit $FLR in excess of 250% of the value of the issued F-Asset as a deposit. And if the $XRP holder does not receive the $XRP after a certain period of time after the $FXRP burn, the F-Asset Smart Contract will deduct $FLR of the corresponding value from the Agent as compensation
In addition, the communication between F-Asset's issuance target network and the original network is done through a component developed by Flare, without relying on a centralized entity. It operates in a similar way to Stargate, consisting of multi-chain clients (State Connector in Flare Network) and a message relay (FTSO in Flare Network). Unlike Stargate, its message relays do not rely on third-party services from Chainlink.
Token Performance (50.8%)
On January 9, Flare officially launched its web-native pass-through $FLR and simultaneously went live on several centralized exchanges. As of January 17, $FLR was available for spot trading on a number of exchanges including OKX, Kucoin, Kraken, Gate.io, Bybit, and Bitfinex.
On January 17, $FLR's 24h trading volume was approximately $1.3 million, of which approximately 30% was on Bitrue. The price of $FLR peaked at about $0.15 at the beginning of the launch and then quickly dropped to around $0.04, a drop of more than 70% from the ATH price.
Ecosystem Development (39.7%)
Flare has about 250,000 followers on Twitter, which is almost identical to the number of wallet addresses shown in its blockchain browser, but its on-chain activity is not very active. One reason for this is that the Flare Network's key cross-chain interoperability feature is not live, and it is currently a single ecosystem with no other ecosystem participants. The second is that its own ecosystem is not rich in projects. According to DeFiLlama, the total TVL of the Flare Network ecosystem is about $650,000, and there is only one project, Pangolin, which is a DEX born from Avalanche. Obviously, the number of projects that users can participate in on the Flare Network is still very limited, and Flare still has a long way to go in terms of ecosystem development.
Closing Thoughts
The Flare Network is currently facing slow development progress. How many technical hurdles do we still have to overcome to realize the vision of bringing smart contracts to non-smart contract platforms? We don't know, Ripple users have been waiting for 2 years, will they continue to wait? In addition, the enrichment of projects in the ecosystem is also urgent on the agenda. Although the mainnet and the native asset were successfully launched, users still need richer projects and unique user experiences. Otherwise, they can only take the $ FLR airdropped and look around.
Based on the above information, TokenInsight has rated Flare Network's current performance with a BB rating and a positive outlook.
Read more: https://tokeninsight.com/en/research/analysts-pick/what-is-flare-network-rating-analysis
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