Ripple Labs, the organization behind Ripple (XRP) is betting on Trustless transactions and decentralized finance (DeFi) with Flare.
The Flare Network, Ripple’s DeFi blockchain network, went live on 13 December 2020. Flare adds a protocol that enables trustless transactions, Federated Byzantine Agreements (FBA), and a host of other capabilities to Ripple. The Flare Consensus Protocol powers the Flare Network.
Ripple claims the Flare Consensus Protocol is the first Turing Complete Federated Byzantine Agreement protocol. The protocol allows Ripple Labs to create an algorithmically managed, pegged stablecoin, they design for DeFi. The stablecoin is the Spark (FLR) Token.
What is the Flare Network?
Ripple Labs claims the Flare Network is first smart contract platform that uses FBA consensus.
A smart contract is a digital robot they build in the blockchain. Smart robots carry out specific tasks. For example, an insurance smart contract can pay life insurance payments. Similarly, the smart contract in a stablecoin makes payment in fiat currency when you spend the stablecoin.
Ripple Launched the Flare Network with an airdrop of 45 billion Spark (FLR) tokens on 12 December 2020. Several cryptocurrency exchanges including Coinbase, Binance, Kraken, and KuCoin support Spark, InvestorPlace claims.
Interestingly, XRP holders can use Flare to generate an XRP-pegged token they call FXRP, InvestorPlace claims. XRP owners could use FXRP on Ethereum based DeFi applications.
If those claims are true, I think the Flare Network could solve of the biggest problems with Ripple (XRP). You cannot easily convert Ripple into Ethereum (ETH).
A lack of Ethereum convertability is problematic because they build most of the world’s blockhain platforms in Ethereum. In fact, Investopedia estimates there were over 200,000 ERC-20 compatible tokens in October 2019. ERC-20 or Ethereum Request for Comment Tokens are built in Ethereum.
Moving Currency through Ripple (XRP)
The Flare Network is an attempt to integrate Ripple with the larger cryptocurrency universe. Beyond that, I think the Flare Network is an effort to use Ripple’s Network to move and transfer assets.
I think the principal assets Ripple Labs wants to move are fiat currencies. The Flare website proposes accounts they call trustlines. If they work as advertised, trustlines will enable Ripple owners to transfer US dollars through the Flare Network.
The algorithmically managed, pegged stablecoin is an accounting mechanism that will make fiat currency payments through Ripple possible. Therefore, one way to think of Spark (FLR) is as a Ripple-stablecoin.
Adding the Dollar to Ripple (XLR)
Ripple Labs is entering the stablecoin business because stablecoins are popular. For instance, Tether (USDT) the most popular stablecoin had a 24-Hour Market Volume of $106.250 billion on 17 December 2020, CoinMarketCap estimates. That number represents all the Tether bought on that day.
In contrast, Bitcoin (BTC) the most popular cryptocurrency had a 24-Hour Market Volume of $72.413 billion on the same day. Thus people spend more on Tether than on Bitcoin (BTC).
Tether is popular because it allows people all over the world to access and buy the world’s reserve currency – the US Dollar. I think Ripple Labs wants to increase Ripple’s value by adding that capability to Ripple.
If the stablecoin works, the Flare Network could become rival Tether in value. I think a Ripple stablecoin could be popular because major banks including Santander (SAN) accept Ripple. The hope is to create a Ripple stablecoin a person could cash at Automatic Teller Machines (ATMs).
There is no evidence Ripple Labs has such a stablecoin or can build one. However, the Flare Network could be the infrastructure that will make such a stablecoin work.
What Value Does Ripple Have?
Mr. Market thinks Flare could add some value to Ripple (XRP). CoinMarketCap estimates Ripple had a Market Capitalization of $26.623 billion, a 24-Hour Market Volume of $21.881 billion, and a Coin Price of 58.6¢ on 17 December 2020.
CoinMarketCap bases those estimates on a Total Supply of 99.991 billion XRP, a Circulating Supply of 45.404 billion XRP, and a Maximum Supply of 1 trillion XRP. Unfortunately, CoinMarketCap offers no numbers for Spark (FLR) so I conclude Spark has no market value now.
In the final analysis, I think Ripple (XRP) is a good cryptocurrency and the Flare Network could add value to Ripple. Speculators seeking a cryptocurrency capable of growth need to investigate Ripple and Flare.
Originally published at https://marketmadhouse.com on December 17, 2020.