Building the future of DeFi with Flare’s data-driven ecosystem: AMA recap

Oracles are a cornerstone of Web3,  acting as intermediaries that fetch real-world data and feed it into blockchain environments. This connection is crucial for smart contracts, which are self-executing contracts with the terms of the agreement directly written into code.

By bridging the gap between smart contracts and external data sources, oracles empower a diverse array of decentralized applications (DApps) to function effectively. However, while they unlock tremendous potential, oracles also introduce unique vulnerabilities and challenges that must be navigated carefully.

“The first generation of oracles, such as Chainlink and Pyth, have been quite successful. They provide data in a similar way to Web2, but with the same drawbacks: there’s a lot of centralization,” said Hugo Philion, co-founder of Flare and CEO of Flare Labs, during the recent Cointelegraph AMA. His project, however, offers an alternative.

Empowering next-gen interoperable DApps with decentralized data access [Brought to you by Flare] https://t.co/NInivEhrI2

— Cointelegraph (@Cointelegraph) July 22, 2024

Flare positions itself as a “layer 1 like Ethereum, with added data capture functionality” and provides decentralized access to high-integrity data in an affordable way. This is made possible, in particular, by the oracles embedded in the Flare blockchain. It starkly contrasts similar platforms like Chainlink, which operate offchain networks of computers to agree on prices and then send proofs to a blockchain.

“That’s incredibly important because it gives developers the confidence to use the data, which is less the case with a lot of other oracle projects in the space, especially the newer ones,” Philion noted.

Behind the data layer for Web3

Flare offers two data protocols : Flare Time Series Oracle, or FTSO, and Data Connector. The protocols are both enshrined in the network, which means they inherit the decentralization and security of the layer-1 blockchain.

FTSO enables Flare to provide real-time, fluctuating price data. Philion explained that it allows prices to be tracked for up to a thousand different “time series” — rapidly changing data points such as crypto, stock, bond or forex prices.

The complex system relies on all the network’s validators, each with their own stake and community support, to collectively validate prices. By trimming extreme outliers in the submitted prices, the FTSO forms a median that can be updated with each new block for thousands of time series simultaneously.

The Data Connector, on the other hand, focuses on fetching proofs for data from Web2 and Web3 sources. This process includes verifying information from platforms such as Twitter and Facebook, essentially any source with an application programming interface that the Data Connector can come to a consensus on. Similarly, for Web3, the Data Connector can provide proof of events occurring or not occurring on various blockchains such as Bitcoin, Dogecoin, XRP, Ethereum, Solana and more.

Both the FTSO and the Data Connector are characterized by their high stakes and the significant number of entities involved in their operation, maximizing decentralization. As Philion pointed out, this is in stark contrast to many other data networks in the space, which often involve fewer entities and significantly lower stakes, potentially compromising their security.

In addition, applications can cross-check data from Flare against centralized sources, further enhancing trust and reliability.

Decentralized cross-chain asset integration

Another unique feature of Flare is FAssets, a protocol that allows tokens from other networks, such as Bitcoin, Dogecoin or XRP, to be used on the Flare network. Unlike wrapped tokens , which often depend on trust in a group of people managing a shared control system (multisig or threshold signature schemes), FAssets operate in a more decentralized and trustless manner.

With FAssets, trust is placed in the overcollateralized system and the network’s ability to maintain its integrity. Philion explained that “it uses overcollateralization on Flare with a mix of stablecoins and Flare ( FLR ) tokens so that if there’s a particular run on Flare or a particular rally in a particular token, then there’s a mix of collateral.”

FLR functions like any other layer-1 token, serving as the transaction currency for the chain and securing the network. But it doesn’t just secure validators; it also secures data providers. Data providers who stake FLR tokens reward tokenholders with a portion of their validator rewards and data rewards.

To encourage early adoption, Flare has an emission program called FlareDrops, where all FLR holders receive a monthly distribution of tokens. FLR tokens are also used as collateral in FAssets and for governance decisions within the ecosystem.

New era of data-driven DApps

Philion mentioned several hundred projects built on top of Flare, including Raindex, a permissionless decentralized exchange (DEX) . Raindex uses intents that allow users to specify desired actions under certain scenarios, which are then executed by bots. The DEX incorporates Flare’s pricing data feeds to enhance its trading capabilities.

Sparkdex also announced its migration to Flare and intends to build both v2 and v3 Uniswap-style DEXs, along with perpetual futures markets. The platforms will use Flare’s price feeds to offer perpetual contracts on a wide range of assets, including forex, commodities and cryptocurrencies. Other adopters that are using Flare’s data in innovative ways include LayerZero, Stargate’s Hydra Bridge, XDEX, Bifrost Wallet, Kinetic and Spectre.

Flare works with various partners, including Anchor, Figment, A41 and Blockdaemon, but its most prominent partner outside the traditional Web3 space is Google . Flare Labs plays a key role in the Flare network as the research and development team responsible for the data protocols.

According to Philion, Flare’s long-term vision is to transcend the current tribalism in the blockchain space and become the leading provider of affordable, high-quality data in the decentralized world. He believes that users will prioritize functionality over specific blockchains as mass adoption occurs.

“They’re going to build their application on the chain that serves their purposes, that provides the protocols that they need. And when you’re talking about mass adoption, the protocols that people need to use will be data,” he concluded.