One of the key components of the Flare Network are F-Assets. While Spark (FLR) is the network’s native token, you can bring any of the supported cryptos onto the network to utilize as well. This unlocks smart contracts for the assets you own, essentially bringing utility to non-smart contract crypto. This allows users to participate in DeFi and other network applications with their existing crypto on a next generation blockchain.
These are the supported crypto at network launch and their F-Asset represenations:
In order to bring over your crypto from the supported Flare Network list, you need to go through a process called ‘Minting’. To focus on the concepts and not the technical details too much, there will be a process where you send your supported crypto of choice you would like minted to what is called an ‘Agent’. An Agent will then put up collateral, in Spark (FLR), on the Flare Network to allow for the F-Asset to be secured. Once the collateral from the agent is secured on the network, your Flare Network account will be given the F-Asset and is ready to be used.
Below is basic diagram on how the Minting process works. The diagram does NOT represent every aspect of the process, but is shown for conceptual purposes.
You are now free to use your F-Assets in whichever network applications support it. When you want to bring your F-Asset back over to the blockchain it originated from, you will go through a process called redemption. A redemption request tells an agent you want to convert your F-Asset back to its original form and for your crypto to be sent to your account on the blockchain it came from. After you receive your crypto, the Agent’s collateral is released back to them and the process has completed.
Below is basic diagram on how a Redemption Request is handled. The diagram does NOT represent every aspect of the process, but is shown for conceptual purposes. The diagram starts in the Flare Network (right to left).
You may be wondering what happens if the agent does not honor your redemption request? Can take my crypto and run with it? The answer is that it is possible, however unlikely as agents are highly incentivized to honor redemption requests. To put it in another way, agents are highly penalized for not giving back your crypto. Failing to do so results in them losing nearly 40% of their collateral position. Remember, agents put up collateral in order to mint the F-Assets you requested. Even if an agent fails to give you back your crypto, another agent can step in and handle your redemption request, or if all else fails you will be given the value of your original crypto in Spark (FLR), which in turn you can trade for your desired crypto.
The Flare Network incentivizes good behavior and has certain fail-safes in place when things go wrong. One thing to note is that there is a small minting fee you pay to an Agent in order for them to mint an F-Asset for you. Although this comes at a small cost to you, as we will touch on below, and in the Ways to Earn article, the fee becomes negligible when compared to the ways you can earn rewards on the network.
As stated above, minting an F-Asset allows you to utilize your crypto in the Flare Network’s ecosystem of network applications via smart contracts. This itself lets you participate in the world of DeFi and many other applications which offer yield on your crypto. But that’s not all you gain from minting an F-Asset.
The Flare Network will reward you in Spark (FLR) just by holding an F-Asset. You also get a F-Asset vote which you can delegate to a Signal Provider and earn rewards. So by merely minting and holding an F-Asset you can earn Spark (FLR), which can itself be used in applications on the Network. I know this might sound like a lot right now, but just know that there are many ways to earn yield on the Flare Network.
The Network highly incentivizes those who participate in it.