The Flare XRP airdrop is a way to distribute tokens and incentivize network usage without doing an ICO. The airdrop is similar to what Uniswap did in November, when they airdropped UNI tokens to every Ethereum address that had ever interacted with the exchange.
While there are already lots of smart contract platforms in the cryptocurrency ecosystem, Flare sets itself apart from the rest. It has a new consensus mechanism and also a unique use case. We’ll cover both of these topics in a later section.In this article:
How the XRP Flare Airdrop Works
There is a maximum supply of 100 billion Spark (FLR) tokens. Of these, 45 billion tokens will be given to XRP holders. The distribution will be a simple 1-to-1, with 1 FLR token being awarded to an investor for every 1 XRP they own. The snapshot for the airdrop took place on December 12th. Anyone who was holding XRP at that time is eligible to receive the airdrop.
The first distribution will happen when the Flare mainnet goes live, sometime in Q1 or Q2 of 2021. Initially, just 15% of the tokens will be distributed. The remaining 85% of tokens will be distributed over the next couple of years. Presumably this is done to reduce selling pressure.
The process for claiming Spark tokens will differ depending on which wallet an investor is holding their XRP in. Most major wallets have posted guides about how their users can claim their Flare tokens. Here are some links to a few of the more popular wallets and their Flare token guides.
Most major exchanges also support the Flare airdrop. Investors can check here to see if an exchange is supporting the airdrop.
The Spark Token
The native token on the Flare network is called Spark. Somewhat counterintuitively, the ticker symbol for the Spark token is FLR.
One of Spark’s primary use cases is preventing spam transactions from clogging the Flare network. Although it would have been technically possible to enable free transactions on Flare, that would have made it too easy for spammers to clog up the network with pointless transactions.
FLR has a couple of other uses besides preventing spam transactions.
- FLR can be used as collateral in various decentralized applications, similar to how ETH is used as collateral in MakerDAO
- FLR can be used for protocol governance, similar to UNI for Uniswap
- FLR is the native asset used to transact value on the Flare network
More information about the network and the Spark token can be found in Flare’s whitepaper.
The FXRP Token
FXRP is a tokenized version of XRP that exists on the Flare network. It’s similar to WBTC on Ethereum. What’s unique about FXRP is that it’s minted and redeemed via a decentralized process, similar to how tBTC works on Ethereum.
To mint FXRP an XRP holder can send their coins to a special address on the Ripple blockchain. Once the coins are in the address, a set of decentralized agents create an equivalent amount of FXRP on Flare which the XRP holder can claim.
The value of XRP on the Flare network is maintained via arbitrage. If FXRP is too expensive, investors can mint new FXRP to benefit from the divergence. If it’s too cheap, it’s possible to arbitrage the opportunity by buying FXRP and then converting it into XRP at a favorable exchange rate.
At first this tokenization service will only be available for XRP, however, Flare will eventually create a system for other cryptocurrencies. The most likely candidate to add next would be BTC.
What is the Flare Network?
The Flare protocol is a decentralized smart contract platform that uses the Avalanche consensus mechanism. One of the most unique aspects of Avalaunch is that it doesn’t use a network token for security purposes. Here’s what that means.
The Bitcoin network creates BTC to pay miners in exchange for securing the network. One of the side effects of this Proof of Work model is that miners are constantly selling new coins into the market. So all other things being equal, Proof of Work creates a situation where the consensus mechanism ends up exerting downward pressure on price.
Ethereum, once it fully transitions to Proof of Stake, is slightly different. Similar to Bitcoin, tokens are distributed to stakers in order to incentivize them to stake. However, unlike Bitcoin, with Proof of Stake a certain number of tokens are locked up and thus unavailable in the market. Lower token availability means higher prices, since there is less supply. So Proof of Stake’s effect on the token price is somewhat more complicated.
Because Avalanche doesn’t use a token, price is not related to the consensus mechanism. Given that it’s different from POS and POW, it will be interesting to see how Avalanche works in the real world, once the mainnet is launched. A full explanation of how Avalanche works can be found here.
Flare’s USP (Unique Selling Proposition)
For a smart contract platform to compete with Ethereum it has to have an edge, a reason that users would want to engage with that platform rather than Ethereum. Flare plans to compete with Ethereum in two ways.
1) Scaling - The Avalanche consensus mechanism allows Flare to scale in a way that Ethereum can’t. It’s too early to tell exactly how fast Flare is going to be, but it’s going to be significantly faster than Ethereum.
2) Wrapped Cryptocurrencies - Flare’s main selling point is that it wants to be the platform with the most tokenized assets. For example, we’ve seen the explosion of wrapped Bitcoin on the Ethereum network.
Flare wants to do something similar on their network, just not with Bitcoin. Flare is starting with XRP but eventually they would like to bring in other assets as well. Litecoin, Bitcoin, Zcash, Stellar Lumens or any other cryptocurrency!
XRP Investors Have to Claim their FLR
By focusing on a niche area, Flare sets itself apart from Ethereum and other competitors like Cardano or Tezos.
Anyone who was holding XRP on December 12th, 2020, is eligible to receive a 1:1 airdrop of Flare’s new Spark token. Investors who’ve kept their XRP on an exchange will need to check with the exchange if it intends to support it. Investors storing their XRP in a personal wallet will need to follow a specific set of steps to claim their FLR, depending on the wallet.
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This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.