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2nd DogeMilitia Hugo Interview (long and detailed)


Seoulite
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34 minutes ago, Ripley said:

clarification on being your own agent through a largely wallet based mechanism

He emphasised that if you were your own agent then you would need to keep track of the collateral levels, etc. So there is risk involved. But he said he expects entities will be created that offer agent services, taking on the risk management for a cut of the rewards. 

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Posted (edited)
1 hour ago, Seoulite said:

He emphasised that if you were your own agent then you would need to keep track of the collateral levels, etc. So there is risk involved. But he said he expects entities will be created that offer agent services, taking on the risk management for a cut of the rewards. 

Absolutely. 

Using an Agent Service

Pros

  • No need to put up your own collateral, and so can potentially move all of your XRP to FXRP if you want. Access to more FXRP => access to more FLR rewards. Not letting go of your own FLR as an XRP holder => even more FLR rewards.

Cons

  • Unclear Tax Treatment. I believe wrapping is usually considered a personal transfer because the intent is to transfer the assets on to another blockchain, but it's possible that Flare's system is sophisticated enough to be considered otherwise. Especially because Agents can do with XRP whatever they want as long as they fulfill collateral obligations. I'll be keeping an eye on this.
  • 5% fee, though you'll likely make a lot more through FLR rewards.

Being your own Agent

Cons

  • Managing your own collateral obligations. Participating in Flare Finance or other applications in Flare (like Trustline) become a lot more complex. Edit: This is likely programmable, so over time it should be a lot simpler (as in automatic)

Pros

  • You retain almost all your funds across both XRPL and FLR. You can do whatever you want (technically) with your funds across both blockchains and their applications as long as you maintain collateral.
  • Clear Tax Treatment. It's transfer of funds among your personal wallets.
Edited by Ripley
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Posted (edited)

This is what he says about agents and f-assets:

"The agent can discharge their obligations in any particular number of ways, so it may be that the agent never actually ends up paying that XRP directly back out, they may simply buy FXRP on Flare and then net that off against their position in the smart contract. That may sound a bit complex but it's really not, it's very simple. [...] It's the agent's asset at the point at which it's created, the agent just has these obligations that are very draconian in order to keep the system running."

Thinking out loud:

So we've learned a couple of things here. Hugo is expecting the price of the F-asset to basically be pegged closely with the original asset. He is also expecting F-assets to be traded. So let's say:

I want to mint 100 FXRP with 100 XRP. The minting fee is 0.5% (Hugo used this as an example) so now I have 99.5 FXRP. Apparently there will be a redeeming cost too, so If I redeem this I might be out another 0.5%. So if I go back to XRP I am at 99.01 something XRP. If I sold the FXRP directly, then I wouldn't be the redeeming cost. I guess that might be one incentive to sell it directly. The agent will always be on the hook for that collateral until a time when the FXRP is redeemed back into XRP and the FXRP effectively disappears. 

Presumably if the XRP price went up then the FXRP price would also go up, and then people might want to sell it. So will we end up with a marketplace for FXRP that is roughly analogous to the XRP market, since the prices are pegged? 

The price of FLR will have to rise to cover the F-assets minted. This could start getting insane. The network will launch with 4 F-assets. Right now that combined market cap is 42,731,132,581 + 40,124,395,197 + 10,695,069,195 + 7,915,733,192 = $101,466,330,165. Let's say 1% of this is made into F-assets. That's an F-asset value of 1,014,663,302 which would need 2.5 times the FLR to cover it. So that's $2,536,658,254 worth of FLR. If 25% of all FLR was staked as collateral, of 100b spark that would need a spark value of around 10 cents to cover it. 

So if just 1% of the potential F-assets were minted, and 25% of holders put their FLR up as collateral (seems like a lot considering you can put it in lots of other places too) then you need a 10 cent FLR token to cover it.  2% would need a 20 cent spark. 2% F-assets and 10% FLR collateral needs a 50 cent spark. 

Let's say, just for fun, that add BTC. That's 648,759,268,334 + 101,466,330,165 = $750,225,598,499. 1% of that in F-assets is 7,502,255,985. At 25% spark collateral that's a 75 cent spark. 

I don't see any way that the price of spark can be single digits unless no one mints F-assets or a very large percentage of people put their spark up as collateral. The latter is possible, but that doesn't account for spark on exchanges, in apps like Probity, in FF LPs, in any Flare Finance product.

I am also assuming a very low rate of minting, which may be so at first although there are incentives built in to encourage it. As more applications are built and more F-assets added, there is more incentive for people to mint. Also minting fees are dynamic and will become more attractive if fewer people mint. 

edit: I've also realised that this pressure on spark price is just one of many that could exist, because there will be natural market forces, FTSO inflation, the locking of FLR as collateral itself (what are the ratios of staking on ADA? Isn't it like 70% or something?)

Oh damn, just realised too that I am talking as if the full circulating supply is there, but it's not. It's gonna be 15%, then 18%. Recalculating...

edit 2: OK so let's say F-assets goes live 8 weeks after launch, and the airdrop is 3% a month, plus 15 that is 21% after 12 weeks. 21 billion spark. At 25% total collateral and 1% F-assets without BTC is a 50 cent FLR. Add BTC and it is a $3.70 FLR....

Would exchanges and/or funds want to mint F-assets with at least some of their holdings? We are talking about entities that hold billions and billions of tokens... Hugo said Flare is starting its marketing push towards these people. 

Wow.

Edited by Seoulite
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OK let's have fun.

Let's say it's one year from launch. 48% of the airdrop has happened. Plus 10 billion FTSO inflation, that's 58 billion spark. 

Let's assume that the obvious candidates for F-assets have been added: ALGO, BCH, VET, ADA (doesn't have EVM capability). Let's leave BTC aside for now. At today's prices that is a market cap of 179,362,412,294. Let's say 1% F-assets minted and 50% of FLR is collateralised. That's a 15 cent spark. That seems like a low amount of F-assets minted but it could be a realistic FLR collateral, given how easy they might make it if you can do it from a wallet.

It's hard to gauge how much collateralization there will be. A certain percentage of people are just not going to bother, but they will be at the lower end of the holdings. Entities with much larger holdings are more likely to be putting it in the system. However, the same is true of large holders of F-asset coins. They may want to utilise their holdings for yield. Say you have 100 million XRP. At the moment that is doing nothing except appreciating or depreciating. You mint FXRP, you get daily FLR rewards plus you could put it in a FF LP and get YFIN up the wazoo. You could put it in probity as collateral and get interest in real time. 

Needless to say, numbers start going up fast if you increase the percentage of F-assets minted, or if you add BTC. Given that adding BTC only has upsides for FLR holders, it makes sense that this would be added sooner rather than later. Ditto with ADA. 

50% of the total FLR being used for collateral at once seems like an upper limit, considering that a fair amount of it will need to be in motion for exchange, or being used in FF or Trustline, or being kept on hand for gas fees on the network. I dunno, it's late here and my brain is hurting. 

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54 minutes ago, Seoulite said:

OK let's have fun.

I haven't looked at your math yet, but I do agree with the potential of Flare. Here's another way to look at it.

Flare is to crypto currencies, as XRP is to fiat currencies. Their play is to effectively become a bridge currency for blockchain platforms. With the ability to support smart contracts and native oracles, it effectively frees the other teams from having to somehow support smart contracts or integrate with oracles as table stakes. Instead, the other platforms can focus on executing their specific business goal, knowing fully well that they can get plenty of liquidity and interoperability through Flare. 

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3 hours ago, Seoulite said:

This is what he says about agents and f-assets:

"The agent can discharge their obligations in any particular number of ways, so it may be that the agent never actually ends up paying that XRP directly back out, they may simply buy FXRP on Flare and then net that off against their position in the smart contract. That may sound a bit complex but it's really not, it's very simple. [...] It's the agent's asset at the point at which it's created, the agent just has these obligations that are very draconian in order to keep the system running."

Thinking out loud:

So we've learned a couple of things here. Hugo is expecting the price of the F-asset to basically be pegged closely with the original asset. He is also expecting F-assets to be traded. So let's say:

I want to mint 100 FXRP with 100 XRP. The minting fee is 0.5% (Hugo used this as an example) so now I have 99.5 FXRP. Apparently there will be a redeeming cost too, so If I redeem this I might be out another 0.5%. So if I go back to XRP I am at 99.01 something XRP. If I sold the FXRP directly, then I wouldn't be the redeeming cost. I guess that might be one incentive to sell it directly. The agent will always be on the hook for that collateral until a time when the FXRP is redeemed back into XRP and the FXRP effectively disappears. 

Presumably if the XRP price went up then the FXRP price would also go up, and then people might want to sell it. So will we end up with a marketplace for FXRP that is roughly analogous to the XRP market, since the prices are pegged? 

The price of FLR will have to rise to cover the F-assets minted. This could start getting insane. The network will launch with 4 F-assets. Right now that combined market cap is 42,731,132,581 + 40,124,395,197 + 10,695,069,195 + 7,915,733,192 = $101,466,330,165. Let's say 1% of this is made into F-assets. That's an F-asset value of 1,014,663,302 which would need 2.5 times the FLR to cover it. So that's $2,536,658,254 worth of FLR. If 25% of all FLR was staked as collateral, of 100b spark that would need a spark value of around 10 cents to cover it. 

So if just 1% of the potential F-assets were minted, and 25% of holders put their FLR up as collateral (seems like a lot considering you can put it in lots of other places too) then you need a 10 cent FLR token to cover it.  2% would need a 20 cent spark. 2% F-assets and 10% FLR collateral needs a 50 cent spark. 

Let's say, just for fun, that add BTC. That's 648,759,268,334 + 101,466,330,165 = $750,225,598,499. 1% of that in F-assets is 7,502,255,985. At 25% spark collateral that's a 75 cent spark. 

I don't see any way that the price of spark can be single digits unless no one mints F-assets or a very large percentage of people put their spark up as collateral. The latter is possible, but that doesn't account for spark on exchanges, in apps like Probity, in FF LPs, in any Flare Finance product.

I am also assuming a very low rate of minting, which may be so at first although there are incentives built in to encourage it. As more applications are built and more F-assets added, there is more incentive for people to mint. Also minting fees are dynamic and will become more attractive if fewer people mint. 

edit: I've also realised that this pressure on spark price is just one of many that could exist, because there will be natural market forces, FTSO inflation, the locking of FLR as collateral itself (what are the ratios of staking on ADA? Isn't it like 70% or something?)

Oh damn, just realised too that I am talking as if the full circulating supply is there, but it's not. It's gonna be 15%, then 18%. Recalculating...

edit 2: OK so let's say F-assets goes live 8 weeks after launch, and the airdrop is 3% a month, plus 15 that is 21% after 12 weeks. 21 billion spark. At 25% total collateral and 1% F-assets without BTC is a 50 cent FLR. Add BTC and it is a $3.70 FLR....

Would exchanges and/or funds want to mint F-assets with at least some of their holdings? We are talking about entities that hold billions and billions of tokens... Hugo said Flare is starting its marketing push towards these people. 

Wow.

Its a money minting algorithm? As it spins it gains assets, as it gains assets it goes up in price, as it goes up in price it spins faster and gathers gravity that calls in more assets that push up the price.  Is that the sort of thing you are describing?

Quote

Flare is to crypto currencies, as XRP is to fiat currencies. 

Love your nutshell comment @Ripley

 

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I haven't listened yet, but I have a question about being your own agent. Can you put collateral into the pool and use that to mint F-assets without taking on the obligations of being an agent (basically having to fill orders on demand).

If you can, this is basically like an interest-free loan like you would get from Celsius or Nexo. You put up FLR as collateral and your can take out a loan for up to 40% of its value in FXRP.

If you can a still earn voting rewards while putting up your FLR as collateral (which Flare claims, but we've yet to see how it will be implemented), you should almost certainly mint F-assets up to your acceptable risk level that you've got enough collateral to avoid liquidation. Then you'll be earn voting rewards on your FLR in the collateral pool and F-asset rewards on the F-assets you've minted for yourself.

This should be the default mode for using Flare: 1) vote with your FLR to get voting rewards, 2) Put it up as collateral, 3) Mint F-assets for yourself to get F-asset rewards. If you're not going to do anything else, you should do that. The only risk you're exposing yourself to comes from the Flare Network itself. After that, if you think you can earn more by giving your funds to an agent, or Flare Finance, or Trustline, etc. (and I think you will) instead of steps 1-3, go for it. But those options expose you to additional risk.

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Posted (edited)
3 hours ago, Seoulite said:

I want to mint 100 FXRP with 100 XRP. The minting fee is 0.5% (Hugo used this as an example) so now I have 99.5 FXRP. Apparently there will be a redeeming cost too, so If I redeem this I might be out another 0.5%. So if I go back to XRP I am at 99.01 something XRP. If I sold the FXRP directly, then I wouldn't be the redeeming cost. I guess that might be one incentive to sell it directly. The agent will always be on the hook for that collateral until a time when the FXRP is redeemed back into XRP and the FXRP effectively disappears. 

You've hinted at the arbitrage game that's going to happen. An agent can only take on new transactions if the amount of FXRP he's minted is less than 2.5x his collateral. At the start the flow is going to be primarily from XRP to FXRP. So agents are going to end up with a bunch of XRP on the XRPL that they've got to get back into FXRP on Flare to redeem the F-assets that they've minted. And they've got to be able to do it for less than than fees that they earned while collecting all that XRP.

The main way to do this from what we know know would be to send the XRP to an exchange, trade for FLR, send the FLR to Flare, and swap it for FXRP in the Flare Finance Swap. Flare has talked about trustlessly issuing F-assets on the XRPL. If this happens, the pathway becomes a lot simpler, just trade XRP for FXRP (IOU) on the XRPL and send it back over the bridge to Flare.

Whatever pathways there are there's going to be this constant pressure between the two. If the agent fees are too high, people will use these other pathways to get F-assets rather than going through the agents. But the fees need to be high enough to support the agents. And the agents are going to have to reallocate their funds unless the direction of traffic across ledgers is perfectly balanced. There will be this constant flow and exchange of funds.

Hugo comes from the world of derivatives. He's come up with this crazy system where stable prices are maintained by a flurry of transactions. I suspect that the native ledgers of all F-assets will see a noticable increase in transaction volume.

Edited by brianwalden
P.S. let's get this thing launched and use it to finally finish off Jed's sales
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47 minutes ago, brianwalden said:

I haven't listened yet, but I have a question about being your own agent. Can you put collateral into the pool and use that to mint F-assets without taking on the obligations of being an agent (basically having to fill orders on demand).

The system enforces a collateral ratio. You'll still have to fill orders on demand because of that, even if your obligations are only to yourself. If the collateral ratio is not maintained, you'll have to pay penalties in FLR to the system. I don't remember the exact % but those penalties can sting. Your original assets still get back to you, so they're not at risk. 

I hope to see a "do this in case of a collateral ratio breach" feature in supported wallets where depending on your liquidity in Spark and other assets, you can choose among "try to buy more F-assets and maintain the ratio", "add more spark collateral", "pull back original assets into their native blockchain", etc. That would be mighty convenient. 

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3 hours ago, brianwalden said:

I'm still trying to get through this, but man the DOGE community is skeptical.

I feel the mood here about Flare is either apathy or F-assets? F-Yeah!

It’s good to have skeptics.

The way Flare’s system works is complex even by blockchain standards, and documentation so far has been… academic in style. Hell, even Avalanche developers think Flare is just a fork of Avalanche.

  1. Take the most liquid of the top crypto currencies (XRPL) and give away Flare for free.
  2. Instead of passive participation (staking, as in PoS), incentivise active participation feeding into built-in oracle and agent systems, which in turn protect the exchange rate. Furthermore, provide second order incentives by holding F-Assets. And third order incentives by deploying assets into applications built on Flare. And by the way, applications built on Ethereum are highly compatible with Flare. Just have to recompile them and deploy. Mind blown :) 
  3. Add as many highly liquid / ‘meme’ top currencies into the system with similar rewards. People get attracted because who doesn’t want free money?
  4. Here’s the best part. With this much liquidity, now you have a network that doesn’t need centralised exchanges :) A sufficiently motivated community can directly use the decentralised governance system.
  5. And all of this happens through the spark token, maintaining a value floor through utility, powered by high liquidity among the top crypto currencies, slowly transitioning FLR as a potential bridge currency for crypto currencies.
  6. One last thing: Flare is currently the only way for most currencies to participate in DeFi without giving up their keys to a centralised (Coinbase, Binance) or semi-centralised (Nexo, Celsius) services and earn yield. 

Assuming Flare can execute, it is extremely compelling as a network. It might take time for people to understand the potential but they’ll catch on soon enough.

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25 minutes ago, Ripley said:

Here’s the best part. With this much liquidity, now you have a network that doesn’t need centralised exchanges :) A sufficiently motivated community can directly use the decentralised governance system.

This. This is the part Ripple could never figure out how to do. They had a freaking DEX way back in 2013 when DeFi wasn't even a thing. And to this day they haven't figured out how to get anyone to use it. They never figured out how to prime the pump to suck in enough liquidity to be able to keep attracting more liquidity on its own.

In contrast to Ripple, Flare has us lined up like shoppers waiting for a Black Friday sale looking to rush in as soon as the doors open.

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8 hours ago, Julian_Williams said:

Its a money minting algorithm? As it spins it gains assets, as it gains assets it goes up in price, as it goes up in price it spins faster and gathers gravity that calls in more assets that push up the price.  Is that the sort of thing you are describing?

The spins don't necessarily cause a rise in assets, although higher and increasing prices will increase demand. I'm more pointing out what Ripley said below: there is a utility floor to the FLR price. Even assuming there are no new F-assets, and assuming the amount of minting is very modest, FLR is not in single digits. That also doesn't take into account any of the other drivers of demand. 

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