The Songbird Network kicked off on 9/16/21 with a soft launch in a reversible “observation mode.” XRP airdrop participants were able to receive their SGB on a couple different exchanges and all self-claim participants are able to access their SGB at this point. Additionally, the first reward epoch started on 9/25/21, where we saw roughly 700M WSGB delegated to around 20 different signal providers. Songbird Network users were able to realize returns from their FTSO delegations utilizing WSGB that ranged between 2 – 4% in a single week. Signal providers like ScandiNodes, A-FTSO, Alpha Oracle, and Bifrost Oracle have been leading the pack in reward rating through the first week and a half of FTSO inflation rewards.
The price of the SGB token on Bitrue has come as the biggest surprise to me early on. We have seen the price of SGB rise to $0.90 on the first day of trading on 9/27/21. It now currently sits around $0.55 at the time of this writing. It seems like a confluence of factors have contributed to the success of the token price early on. The appetite for new smart contract networks is clearly still there especially in the XRP community, who has largely been neglected for years. Additionally, the rather low circulating supply compared to what should be expected had the exchanges decided to release the airdrop has certainly played a role in this price appreciation as well.
Utilizing the data from flaremetrics.io, the estimates on the SGB distribution supply are as follows. XRP airdrop participants are allocated 5.65B SGB. Approximately 35% of those SGB have been distributed to XRP holders and the remaining 65% is held within exchange custody wallets. Flare Limited is allocated 25% of the total SGB supply which amasses to 3.75B SGB. Additionally, it does not look like Flare Limited has been a seller of SGB. In fact, they have been utilizing WSGB to delegate voting power evenly across all the signal providers (some speculation on my part). As there are no F-Asset incentive pools on Songbird Network, the SGB that would go to those has been allocated to the Flare Foundation. The total held by this entity is 5.6B estimated. This leaves us 3.6725B SGB that is with exchanges and really could come onto the market at any time. I will leave speculation around what the release of these SGB would do to the price of the token.
Much to my chagrin, Flare Finance decided to launch “ExFi,” which is a semi-audited experimental finance protocol, without much notice and start a liquidity rush with DFLR incentives to inject CAND (stablecoin for ExFi) liquidity into their DeFi ecosystem. This lead to a hectic couple of days in which the Flare Finance team worked to fix bugs within the smart contracts and user interfaces. Before the end of last week, the Flare Finance team opted to not continue the launch of their v1 modules. They now request that everyone close out any CDPs (or Nests) on their FlareLoans platform so they can update to v2.
Along with any bug fixes, v2 of ExFi will be much improved as it will have smart contract integrations working for the WSGB tokens. WSGB is the native SGB token wrapped in an ERC standards smart contract that can interact with other smart contract applications on the network. The real power in WSGB is that it utilizes a detachable voting function for the FTSO and governance functions of the network. This also means that users can deploy the WSGB token in DeFi protocols or elsewhere while simultaneously voting in governance and earning inflationary rewards in SGB on a weekly basis through FTSO delegations to signal providers.
This is one of the most powerful features behind the design of the Flare and Songbird Networks. Its also is made possible through the use of federated byzantine agreement (FBA) consensus used by protocols like the XRPL and Stellar. FBA does not require the native asset of the protocol to be locked up for security purposes and thus opens a wide-range of possibilities. Knowing how important derivatives and hence oracles are to the future of decentralized protocols, the Flare team decided to incorporate an inflationary mechanism akin to block or staking rewards into a decentralized, on-chain oracle system.
Often overlooked, oracles are one of the main mechanisms to bring data from off-chain onto a closed protocol. Many “hacks” that occurred in the budding smart contract industry have resulted due to insufficiently decentralized oracles. As FBA solves consensus through a different methodology than the lock up of value, a decentralized oracle can be incentivized sufficiently through the inflation of the network’s native asset. Additionally, the power of the detachable vote that comes with WFLR or WSGB means that liquid staking derivative mechanisms do not need to be created, which can bring systemic risks into an ecosystem.
In October, we will see much more launching on the Songbird Network including ExFi v2, F-Asset System, and the first iteration of Probity. The F-Asset System will be the main driver behind opening up the Songbird and Flare Networks to a future of interoperability. It also is a novel design for the transferring of value between two networks as it does not require the asset being transferred to be locked in a smart contract. It instead mints a derivative of the underlying asset (i.e. XRP) having its value moved onto the Flare Network by posting collateral in its native asset, FLR, at a 2.5x USD value of the underlying.
ExFi v2 will be launching shortly with built-in WSGB integrations. This allows users to earn yield from the FTSO and utilize their WSGB value in DeFi protocols. ExFi will include three separate modules in October including FlareX, FlareFarm, and FlareLoans. FlareX will allow users to swap between WSGB and CAND plus provide provide liquidity to this pairing, which requires a USD value 50/50 deposit of the two assets. User providing liquidity will be given LP tokens (FLRX) denominating their share in the underlying liquidity pool. Additionally, these LP tokens can be staked in the corresponding FlareFarm pools to earn DFLR all while the user accrues fees from swaps in their liquidity pool. FlareFarm will feature at least two other single token pools accepting WSGB and DFLR.
FlareLoans follows the design of Liquity Protocol on Ethereum in which users can take out interest rate free loans in Canary Dollars (CAND) when backing the debt position with collateral in the form of WSGB. This collateralized WSGB can still receive the inflationary rewards from the FTSO while locked up. The borrowing and repayment of CAND has an associated fee plus the borrower must maintain a collateral level of 110% or higher at all times. If a user is liquidated, they would keep the debt in CAND, but lose all of their collateral. All things equal this would result in a loss of roughly 10% for the user being liquidated.
Liquidations are conducted by owners of CAND that stake those stablecoins in the stability pool. CAND staked in the stability pool is used to repay bad debt that has a collateralization ratio of under 110%. This is what protects the system from becoming insolvent. As CAND in the stability pool is used to pay back bad debt during SGB price declines, the users who staked in the stability pool are earning the liquidated collateral and DFLR incentives. Any DFLR earned from FlareFarm or the stability pool can also be staked on FlareLoans to earn the fees paid in CAND and SGB in the debt opening and repaying process.
Matt Rosendin of Trustline recently announced that they will be launching their decentralized stablecoin protocol, Probity, on the Songbird Network sometime in October. Probity has a similar design to MakerDAO in that it takes collateral from suppliers and borrowers to mint and issue stablecoins. On Songbird Network, it would be expected that WSGB will be the collateral of choice. Once live on Flare Network, Probity will feature FLR and FXRP as premium collateral. Additionally, Aurei (AUR), stablecoin of Probity, can be issued on the XRP Ledger with the Flare and Songbird Networks as the decentralized counterparty.
It has been an exciting first few weeks for the Songbird Network and will be fun to participate leading up to the launch of the much anticipated Flare Network.