Flare Network: Explain it to me like I am 5 years old.
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Autor: Andrzej Mackowiak 29.10.2023r.
Editor info: This article is a winner of Flare Network’s No-Code Challenge at ETH LONDON 2023 Hackathon.
Blockchain technology is complex, and explaining its nuances to someone who is not familiar with it can be challenging. It is like trying to explain the concept of infinity to a toddler.
However, the blockchain industry is rapidly growing and evolving, and its potential is beginning to be more fully understood by the general public. This is due in part to the increasing availability of educational resources and the development of more user-friendly interfaces.
When Web 3.0 is widely adopted, specialized knowledge will likely not be required to use it, and the user experience will be even more seamless.
This will change the way we interact with the internet in much the same way that the adoption of the World Wide Web did decades ago. Who remembers connecting to the internet using dial-up and the specific sound it made during that operation? We experienced such things almost 30 years ago.
Given the current state of industry development, I dare to say that we are already on the verge of adopting Web 3.0, and the revolution will come to us sooner than we expect. In my opinion, we will not have to wait another 30 years for this to happen.
The subject of the Flare Network is undoubtedly complex as well, and it can be difficult for non-technical market participants to grasp. My observations of the crypto-community suggest that its potential has not yet been fully recognized. This may be due to the fact that the network is still relatively new, although it is proposing solutions to problems that already exist.
But the devil is in the details, in this blog post, I will try to explain how Flare solves today’s blockchain problems in a fundamentally different way from the other existing competitive solutions and how it is directing the future path for the industry to follow.
2. The Fundamentals of Flare Network
Flare Network is a Layer 1 blockchain that uses the Ethereum Virtual Machine (EVM). In simple terms, the EVM is a Turing-complete virtual machine, which means that it can execute any program that can be expressed in code. This allows developers to build a wide variety of decentralized applications (DApps), including decentralized exchanges, games, and financial products. The EVM is also responsible for maintaining the state of the blockchain, meaning that it keeps track of the balances of all accounts, as well as the code and state of all smart contracts. By using the EVM, Flare Network allows developers to build DApps using Solidity, the most popular smart contract programming language. This makes Flare Network friendly to a wide range of developers, which can potentially boost development on the network.
Like Ethereum, Flare Network uses proof-of-stake, but Flare’s consensus algorithm is more advanced. Flare chose to adopt the Avalanche Snowman++ consensus algorithm into its architecture.
Avalanche Snowman++ is a sophisticated proof-of-stake consensus protocol that is designed to be highly scalable and secure. It uses a unique combination of directed acyclic graphs (DAGs) and consensus checkpoints to achieve fast transaction finality and high throughput.
Flare’s consensus algorithm has several advantages over other proof-of-stake consensus mechanisms:
- First, Avalanche Snowman++ enables Flare to process thousands of transactions per second, which is essential for a blockchain designed to support many decentralized applications (DApps).
- Second, Avalanche Snowman++ is highly secure and resistant to attacks such as Sybil attacks, denial-of-service attacks, and 51% attacks, because it uses many techniques to prevent malicious actors from gaining control of the network.
- Third, Avalanche Snowman++ is also relatively energy-efficient, compared to other proof-of-stake consensus mechanisms.
The Flare Network consists of three chains:
- C-chain: on which the Ethereum Virtual Machine runs and with which the vast majority of the community currently interacts.
- P-chain: on which staking takes place.
- X-chain: which is intended for fast and simple monetary (micro) transactions and is currently not in use.
Overall, Avalanche Snowman++ is a state-of-the-art proof-of-stake (PoS) consensus protocol that offers a number of advantages over other PoS consensus mechanisms. It is highly scalable, secure, and energy-efficient, making it well-suited for a variety of blockchain applications.
3. Flare Network’s core protocols
The Flare Time Series Oracle (FTSO) and State Connector protocols, integrated into the Flare Network base layer, are essential components that enable Flare smart contracts to access timely and accurate off-chain data and to interact with other blockchains without needing centralized intermediaries.
a) Flare Time Series Oracle
Flare Time Series Oracle (FTSO) is a decentralized oracle that provides Flare smart contracts with timely and accurate off-chain data. It is a native oracle for time-series data, meaning that it is specifically designed to handle this type of data.
FTSO delivers probabilistic data, which is data that is associated with a probability or likelihood of being true or accurate. This type of data can be used to make predictions or inferences about future events or outcomes. Examples of probabilistic data include weather forecasts, stock market predictions, and medical diagnoses based on symptoms.
FTSO works by using a network of Data Providers, who are independent entities that collect data from various sources, such as decentralized or centralized exchanges. The data from the Data Providers is then aggregated and verified by FTSO, and then made available for the end user.
This protocol is an important part of the Flare Network because it allows smart contracts to interact with the real world data. By providing access to off-chain data, FTSO enables Flare developers to build applications that can solve a wide range of problems.
Flare Time Series Oracle — workflow , Source: https://docs.flare.network/tech/ftso/
Benefits of FTSO:
- Decentralization: FTSO is not controlled by any single entity, but by a network of independent Data Providers. This makes it more resistant to censorship and manipulation. The goal is that these entities would be completely independent of each other and, in addition to improving the price forecasting algorithm (which gives income to both them and network users), would also actively participate in building the ecosystem by providing valuable tools, solutions, or supporting infrastructure. Thanks to this solution, the FTSO protocol and the data delivery system on the Flare Network do not have a single weak point that could be attacked, making the entire solution extremely resistant to attacks.
- Accuracy: FTSO aggregates and verifies data from multiple Data Providers to ensure that the data is accurate and reliable. According to a report by the Flare team, their analysis showed that FTSO prices are very close to prices on the Kraken exchange, which suggests that FTSO is a reliable, accurate, and secure source of price information. Link to the report: https://flare.network/wp-content/uploads/FTSO_Kraken.pdf
- Timeliness: FTSO provides data to Flare smart contracts in a timely manner, which is essential for applications that need to make decisions based on real-time data.
- Versatility: FTSO can provide Flare smart contracts with a wide variety of data, from asset prices to weather data to sports data.
Potential applications of FTSO
- Decentralized exchanges (DEXes): FTSO can be used to provide DEXes with real-time asset prices, which is essential for DEXes to function properly.
- Lending and borrowing protocols: FTSO can be used to provide lending and borrowing protocols with data on interest rates and asset prices. This data is used by the protocols to calculate interest rates and to assess the risk of loans.
- Insurance protocols: FTSO can be used to provide insurance protocols with data on weather events, flight delays, and other events that may trigger insurance claims. This data is used by the protocols to assess the risk of claims and to set premiums.
- Stock market: FTSO can be used to provide real-time data on stock prices, which can be used by traders to make more informed decisions.
- Real estate prices: FTSO can be used to provide real-time data on real estate prices, which can be used by homeowners, renters, and real estate agents. This can help to stabilize the real estate market and make it more accessible to people of all income levels. Accurate real estate prices are essential for tokenizing this market segment.
- Weather forecasting: FTSO can be used to provide real-time data on weather conditions, which can then be used by farmers, businesses, and individuals. This can help to reduce the risk of damage from natural disasters and improve agricultural productivity. For example, a farmer could use FTSO data to determine when to plant and harvest crops. They could also use the data to predict the likelihood of a drought or flood. Data from FTSO can help them to protect their crops and avoid financial losses.
- Sports betting: FTSO can be used by bookmakers to provide real-time data on sports results and odds. This can help to make the sports betting industry more transparent.
- DAO voting: FTSO can be used to provide real-time data on voting results in Decentralized Autonomous Organizations (DAOs). This can help to improve the accountability and transparency of DAOs. For example, a DAO participant could use FTSO data to determine whether to vote for or against a specific proposal. They could also use the data to see how other DAO participants are voting. This will help them to make an informed decision and ensure that their vote is counted.
These are just some of the potential applications of the data provided by FTSO. As FTSO matures and its capabilities improve, it is likely to be used in even more innovative ways.
Currently, the FTSO protocol provides data to the blockchain in three-minute intervals. In the near future, the FTSO updated protocol will support 1000s of prices, but not all will be updated at the same time on a block level — they will have a regular update period for all of them but dapps would be able to request a price update (for a batch) that will then be updated on block level speed. (updated)
Source: Filip Koprivec, Senior Solidity Engineer at Flare Network — on stage during the ETH London 2023 Hackathon.
The Flare team calls the data provided by the FTSO system a “public good” because it is available to the end user for free. The network of decentralized signal providers is rewarded from the inflation built into the protocol. The use of a native protocol allows the FTSO system to be highly scalable and secure.This will likely help it achieve wider adoption, as data provided on the blockchain will play a major role in the future.
b) State Connector
Unlike FTSO, which provides probabilistic data, the State Connector protocol provides deterministic data from other blockchains and off-chain data sources. Deterministic data is data that is known to be true or accurate, and that is not subject to change. This means that the data can be precisely predicted and calculated. Examples of deterministic data include mathematical equations, physical laws, and computer algorithms. When we ask a binary question of “yes” or “no”, or “1” or “0”, deterministic data allows for a precise answer.
The State Connector offers improved security, flexibility, and faster processing than other oracle systems on the market. It is a key element of the Flare network because it enables integration with other platforms and the creation of new applications. The State Connector, together with the Flare Time Series Oracle (FTSO) protocol, provides reliable and decentralized data. The State Connector provides a consistent state of the other blockchains.
The key strength of the State Connector is its ability to verify the validity and history of transactions, while reducing the risk of reorg attacks on connected blockchains.
This level of interoperability is achieved without needing a central authority, resulting in a highly secure and decentralized protocol.
The State Connector , Source: https://docs.flare.network/tech/state-connector/
State Connector uses data obtained from independent providers called Attestation Providers. It essentially performs consensus over data that relates to a single source of truth. This mechanism allows it to determine whether a transaction has been executed on another blockchain.
Developers can use this potential to create dApps on the Flare network that will have access to value from multiple connected blockchains.
Due to the State Connector protocol, the Flare Network has a number of advantages, including:
- Increased interoperability: State Connector enables the Flare network to integrate with other platforms.
- Increased consistency: State Connector provides a consistent state between different blockchains, preventing errors and conflicts.
- Increased security: State Connector integrates with FTSO, which provides reliable and decentralized data. As a result, State Connector offers a higher level of security than other protocols.
State Connector is a powerful tool that can revolutionize the way we build and use blockchain. With State Connector, blockchain networks can easily and securely interact with each other, enabling the creation of new utilities and applications.
Here are some specific examples of State Connector applications:
- Decentralized exchanges that connect different blockchains.
- Decentralized financial applications that offer services on multiple platforms.
- Decentralized gaming applications that connect different platforms.
- Decentralized government applications that provide services to citizens on multiple platforms.
Although the introduction of smart contracts was a significant step forward for cryptocurrencies, they would not constitute a solution without the ability to obtain data from the outside world. Today, oracles play a key role in the blockchain space, connecting real-world data with the blockchain. For DeFi applications to function effectively and provide value to users, they require reliable and accurate data from the real world, such as price data.
The DeFi market still largely relies on solutions that are not fully decentralized and do not provide 100% security. Solving this problem for oracles is not easy, especially if new solutions are built on top of existing architecture, as an additional layer of infrastructure that is slow and difficult to improve.
In this case, it is not possible to change the fundamental way that oracles function. The creators of Flare approached the problem differently and decided to build the entire solution from scratch, incorporating protocols into the first layer of their blockchain.
One of the challenges for oracles is to create an economic incentive for data providers to ensure that the prices they provide are accurate and precise, while also preventing the temptation to falsify that data. When billions of dollars flow through the DeFi market, there is a risk that “bad actors” will emerge, seeking to exploit the situation to harm the network. However, if oracles are financially incentivized to continuously provide accurate and precise data, they will continue their work without succumbing to the temptation of fraud, as it will not bring them financial benefits.
One of the primary objectives of Web3 is decentralization, striving to minimize reliance on intermediaries and central authorities, thereby transferring power and control back to the users. This paradigm shift pledges enhanced privacy, security, and ownership of data and digital assets for individuals. Within this context, the solution from the Flare network is an ideal fit.
The Flare Network sets new standards for both current oracle systems and the way interoperability between blockchains works by introducing full decentralization and eliminating the need to trust the other party, all of which is achieved in a safe, fast, and cost-effective manner.
With solutions like the Flare Network, Web3 will undoubtedly be adopted more rapidly in a world where everyone has control over their data, security, and trustlessness are crucial.
Flare Network’s unique and revolutionary approach to oracle technology represents a significant breakthrough in the blockchain space. By providing a more secure, reliable, and efficient platform for executing smart contracts and processing data, Flare Network has the potential to substantially improve user experiences and increase the adoption of decentralized applications (DApps).
The creators of Flare Network are ahead of the curve, innovating to develop new protocols, enabling new use cases to emerge. Its ease of adaptation, flexibility, clear and consistent documentation, and the features described in this blog post make this blockchain one of the best choices for developers to build on.
Flare’s vision is to “Connect Everything” by building a blockchain for data and trustless interoperability. With their cautious and step-by-step approach, they have a good chance of success.
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