- The asset issuing and redeeming mechanism on XRP Ledger will be trustless and based on a smart contract.
- Flare’s CEO proposal will allow the tokenization of different asset classes.
The launch of the XRP Fork Flare Networks continues to make headlines. In a publication titled “Closing the circle on XRP <> Flare Interoperability” Flare Networks co-founder and CEO Hugo Philion describe a proposal to redeem assets on the XRP Ledger. Philion’s proposal is decentralized and trustless.
According to Philion’s publication, few assets on the XRP Ledger can be considered trustless. In fact, the proposal states that assets on the XRP Ledger except for XRP are called Issued Currencies (IOUs). According to Philion, these assets are highly dependent on their issuer and users need to trust that they will not default. Therefore, Flare’s CEO’s proposal aims to solve the above problem while directly using XRP and the XRP ledger.
Flare Networks brings DeFi to the XRP Ledger
To describe the proposal, Philion gave as an example an amount of the XRP in Flare (FXRP) that is allocated in a collateralized debt position (CDP). The FXRP in that position can be used to issue a stablecoin anchored to the dollar using Flare’s oracles. To issue the new token, called US Dollar Flare (USF), Philion states:
The objective is then to the issue an IC on the XRP Ledger representing USF such that there is no reliance on a centralized third party when trading and redeeming back to Flare. IE A trustless issuance and redemption of USF IC’s on XRP Ledger. Let’s call this IC, USFX.
To deploy the stablecoin, an issuer will need to complete a series of steps: open an issuing and receiving account on the XRPL, then allocate an amount of USF in a smart contract on Flare’s network. The contract will serve as an incentive for issuers to properly comply with the token deployment process and as insurance for the users. Finally, the issuer will be required to complete 6 additional steps that conclude in the following:
Flare’s state connector will observe the actions taken by (the entity’s) issuing account and if all the steps above are completed correctly the smart contract system on Flare will add (the entity’s) XRPL issuing address to the list of valid addresses.
To redeem the token on the XRP Ledger, a user must only send it to the issuing account with the Flare address to which they want to credit the funds, according to Philion. Then, the state Connector on Flare monitors the transaction that is executed by the smart contract on Flare. Philion’s proposal will be crucial to expand the utility of the network that supports Flare. That way, stablecoins, commodities, bonds, securities, and other assets can be issued and tokenized.
As reported by CNF, the first DeFi protocol for Flare Networks recently entered its testing phase. The Flare Finance project will launch a decentralized exchange called FlareX. However, the crypto community has questioned the legitimacy of the project. In a publication via Twitter, Flare Networks stated that they “have spoken with Flare Finance” and called it an “interesting” project.
