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.
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're going to get into the dirty details of what the Spark token is
and what's in the future for Flare Network.
Let's get it!
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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 Flare drop information is bringing me back to my college days.
Sipping Red Bull until 2AM,
writing endless research papers.
And today, let's tackle this Spark breakdown
like a 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 YouTube algorithm know that you give this channel an A+.
Also, I never stayed up until 2AM writing research papers.
I just didn't write them.
But anyways, let's start with 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 bull cycle.
XRP is neither proof-of-work or proof-of-stake.
Rather, it relies on a consensus protocol to validate transactions.
XRP cannot be mined.
100 million coins were launched at the outset
with 60% of those coins held by Ripple Labs
and 1 billion of that 60% gets released into circulation per month.
So let's define some terms.
Flare,
not just a marine distress signal
or the buttons Jennifer Aniston had to wear in the movie Office Space.
Chotchkie's
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.
Now, we have 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 the word 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
This is 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, 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's dependent on finishing security testing.
We expect this at the end of June, plus or minus two to four weeks.
So, 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 that a 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 belongs on the pages of a philosophy book,
all of it really boils down to this 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 will create too much of a gray 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 dataset.
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 just used to seeing, like Uniswap, PancakeSwap, Curve and Balancer,
well, they 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 the chain.
As a project scales, the validators must also scale.
And this can cause problems and increase fees.
Flare Network chose to work around the 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 one, representing Yes, or a zero, 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 five F-Assets that will launch on Flare Finance,
XRP, Stellar, Cardano, Dogecoin and Litecoin.
To yield farm with these assets,
the user will give an agent their asset tokens such as ADA or Litecoin.
They will receive an equivalent F-Asset in return
minus the service fee.
This F-Asset will be FXRP, FXLM, FDOGE, et cetera, et cetera,
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 synthetic 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 two 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 will be penalised.
There will be rewards for putting F-Assets into the exchange,
and rewards will also be given for validating transactions.
According to Flare Network,
the Spark airdrop will happen sometime this month.
Anyone who held XRP on the snapshot date of December 12, 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
if you don't like free money.
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,
planning 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 that 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 airdrop 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.
It 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 its 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.