As always I am going to start off this post with a disclaimer stating that this is a theoretical example of how earnings are doled out from the FTSO. This comes at no risk to your actual FLR token as the vote for the FTSO is detachable thanks to advances in programming. I hope everyone enjoys and finds some value.
For the Flare Network to drive value through its ecosystem and scale over time, an incentive structure has been created to introduce inflationary Spark (FLR) tokens through the Flare Time Series Oracle (FTSO). The FTSO awards participants on the Flare Network for delivering accurate price data feeds to maintain decentralized on-chain pricing for the entire network. As this task can be a highly technical, many retail users will want to delegate their detachable FLR votes through a signal provider with the capacity to scrape the financial landscape for the best pricing data. Signal providers will have to put in time, effort, and capital to achieve this, so they will take a haircut for any FLR votes delegated through their signals that qualifies for a reward. It is too early to know what the fee structure will look like for signal provider services, so we will be taking a guess for the sake of our scenario detailed in this post.
Billy is going to be the name of our FLR owner who is excited to participate in the FTSO and earn daily compounding yield. We will assume that Billy is moderately well-off and holds 21k FLR, which will all be delegated through signal providers to the FTSO. As the network is just launching, Billy is unsure of which parties are the best signal providers to delegate his detachable FLR votes to, so he decides to spread out those votes to three different signal providers evenly.
Billy has successfully delegated 7k FLR detachable votes across three different signal providers. All Billy now has to do is sit back and let the signal providers get to work and hopefully earn him FLR rewards via the FTSO rewards system. However, Billy may not receive rewards for every closure of the FTSO, which happens every few seconds. Based on the FLR inflation schedule featured in Flare Network’s Spark (FLR) Token Distribution, we are fairly confident that ~27M FLR will be delivered daily through the FTSO inflation rewards. Additionally, it looks like around 8.25B FLR will be eligible on Day 1 of the Flare Network for the FTSO rewards, which stems from the 15% of FLR supply being delivered to XRP holders who claimed their FLR airdrop and the Flare Limited firm made up of the Flare Network dev team.
We can see above the theoretical examples of fee schedules and success rate for these three signal providers. The fee rate will be the portion of Billy’s FLR rewards that the signal provider takes as compensation with the success rate being the percentage of FTSO closures that the signal providers’ price data feeds are within the median 50% of all estimates which is required to earn FTSO rewards for each closure. Billy can see that there are tradeoffs between a signal providers’ fee and success rates. However, it is the first day of the Flare Network, so he needs to see how everything works in action to determine how to delegate his detachable FLR votes in the future.
Based on the performance on Day 1 from our signal providers above, Billy earned the best rewards by delegating his detachable FLR votes through FTSO.EU with Towo Labs and Pac Global finishing up next, but not entirely too far behind. Also, we assumed that since it was Day 1 of the Flare Network that many FLR owners were not ready to participate so only 25% of 8.25B eligible FLR votes were providing price data feeds to the FTSO. This resulted in Billy netting 209.3 FLR on the first day of the Flare Network. Billy’s daily returns equal out to roughly 1%, which Billy is pleased with as he will be able to compound these returns daily moving forward. The best part about the Flare Network is that users like Billy will be able to compound their FLR via multiple avenues like the minting of f-assets, participation in liquidity pools, and collateralizing of stablecoins.
I hope everyone found some use in this blog post and it at least helps a few looking to understand the mathematics behind earning rewards through the FTSO. Please pop in the comments below if you have any questions or suggestions for future material. Additionally, check out F-Asset Rewards Pool Walkthrough, which is the first post in this Flare Network rewards series.
Patty XRP
thedefistandard@gmail.com
Super organized presentation Patty – you’ve got a talent for bringing clarity to complexity. Thank you!!!
My initial question is, if I was to mint eg. 100 FXRP would that cost me 100 XRP?
At what price would it cost me to mint FXRP?
Thank you for your support and assistance.
Cheers.
At max the creation fee will be 5% but probably lower. If you mint 100 FXRP then you have to pay 5 XRP as a fee.
5% of your 100 XRP you wish to mint into FXRP which will be 5 XRP. You will have 95 FXRP.
It’s 5% fee after you choose the amount you wish to mint as FXRP so minting 100 FXRP costs you an additional 5 XRP along with the 100 XRP you deliver to the agents collateralizing the position.
thanks…if XRP goes to the moon or further (ie $125 or more) would we still have to pay 5 XRP as a fee? Just wondering again
Hey so the fee is 5% for creation of FXRP but Hugo recently said it will be lower than that and they used it as an example for your blog. As the system matures and so to the asset prices, governance can always vote to lower the fee structure. In this instance, you would be better off minting before that happened as your fee would have been lower.
Great job Patty
You made it eaasy to understand and cut to the chase.
Patty this is awesome information as always. You have made the this very understandable, but do we know what delegating our votes into these signal providers will look like? Do you know when the steps or procedure to delegate our votes be explained or laid out?
I do not but this should be very simple. Basically click a few buttons and bam your good. No time frame on that info. I feel like one day a bunch will just randomly come out.
I don’t think the formula is right in the diagram. You start off with a tiny number due to dividing by the reward distribution, and then make that number smaller twice by multiplying it by two %ages
Alright so it’s user FLR divided by the eligible FLR supply * participation rate then I multiply that by the success rate and fee removal then multiply all that by the available rewards.
Let me know if you still think it is wrong based on that explanation.
Edit: I definitely left out the multiplication by the total rewards now that I took a second look. Thanks I will update when I get a chance.
No worries. Sorry I could only tell it was missing something, I wasn’t able to say what as I’m groggy as hell from pain meds, one day post ankle surgery 🙂 Really appreciate the effort you guys are putting in on these topics, so thank you
Honestly thanks it will probably help with confusion going forward. The diagram is now updated if you want to take another look. And yeah I hear that man I had two shoulder surgeries in high school. Its no fun. I hope you recover well!
Nailed it
Actually, just checking, should the 27M rewards be divided by the number of signal providers, or is it 27M per signal provider?
Basically everything else is figuring out the percentage of the rewards you should be receiving then you multiple that by the rewards distributed to get your allotment.
So 27M for everybody participating in the FTSO rounds per day.
Very good scenario with Billy’s play. I think choosing several signal providers is what i will do as well. Equal parts to have an performance indicator.
Love it Karl – I am hoping that either the signal provider or some entity keeps statistics on the signal provider performances.
Thank you, just getting into it. Your work , Mickeys and others is so beneficial, I can’t thank you enough
Ok
I’m an amateur!
Q1. If I was to mint eg. 100 FXRP would that cost me 100 XRP at the current price of XRP?
Q2. Is the price of FXRP the same price as XRP at all times? Or does FXRP have it’s own value on the markets?
FXRP price is pegged 1:1 to XRP price. And the creation fee is 5% so it would cost you 5 XRP in that situation.
Nice work, good general model, but I don’t think you can use success rate like that…if FTSO.EU at one-time has lower success rate, where do the remaining reward goes? I thought if one FTSO get nothing because they were too high or too low, the 27M is distributed to the 2 other FTSO based on % of accuracy. In your case, rewards are lost in all 3 FTSOs. Also, for individual…don’t the FLR Reward then distributed by the volume of delegated vote for each FTSO? So you might not get 70.38 FLR if 80% of the people delegated to that FTSO? Yes, it is complex…I built a model to support that.
I am using the success rate as an average of how often the sp is within that median 50% throughout the day as the FTSO closes every few seconds. It’s not perfect for sure. Also on your last part that is why I used the total eligible FLR across all the signal providers.
This is great! Thank you so much! I would assume that taxes (US based) would be determined by the daily earned FLR that are dropped/deposited into the wallet and the value of those tokens on that date?
I am know tax expert but that makes sense as I imagine that would be considered income.
I likewise believe so , perfectly pent post! .
Patty
Thanks you for presenting this complex scenario in such a clear concise and simple illustrative manner.
It makes it so much easier to actually understand some of the intricacies involved with this whole new to me DeFi world.
I was looking at a quiet retirement but now I find myself reading, studying and watching videos to learn about something that didn’t even exist a few years back. Go figure….
Patty XRP,
Is this a walkthrough and example relating to the video from today, “8th wonder of the world…,” with the spreadsheet example you went over?
I want to be ready to set up for day one.
Do I need the Probity app, and a wallet like MetaMask to deposit XRP and FLR, in order to be ready, participate, and facilitate a setup like the scenario you went over in the YouTube video today?
I’m basically looking for the “step by step” needed to begin compounding.
Thanks in advance.
Its an older version of what I did but generally the same. And we don’t have the exact steps as far as what applications and buttons to press yet.
Hi, and thank you in advance trying to understand this. if on day one i have 145,000 spark tokens (15% of total) and I want to participte fully.
How would I decide which goverance will yield the best rates?Do we know this before hand thru each agency?When I give my vote I can still utilize that spark token in another way?
Also the F assests to stake is the 5 xrp to 1 fxrp correct? is the ratio the same for XLM?
Appreciate your help Christine
Hi Christine,
There is no ratio for minting F-Assets. You just have to pay the fees and deliver your underlying asset to the agents.
You will be able to delegate your votes across 3 different signal providers. As there will be no data on Day 1, we have to decide this based on a number of factors. Check out this page to see some considerations I have put forth.
https://www.thedefistandard.com/flare-network/flare-time-series-oracle/signal-providers/
You can utilize your Spark tokens in dApps like Flare Finance and Trustline simultaneous. However, on Day 1, you will probably only be able to delegate your Spark votes as not everything will be fully launched.