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Are Flare/Songbird rewards a scam?


Seoulite
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I do not think there is such deep liquidity to maintain this $80k monthly for 1m dollar investment. 

The only way these prices maintain is if people are stupid enough to invest such amount of money to get such high returns. Until everything falls apart. Is this a pyramid or just a bubble popping?

When flare network goes live and we pass EXFI snapshot we might see the real value of SGB. I am bullish on FN and fully bearish on SGB.

Edited by Kiwi
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@Seoulite great post!

I'll add that the FTSO rewards create value for the Flare Network sort of like miners but better. I say "better" because unlike miners, FTSO providers are making the Flare Network a "Hub" by connecting it to other networks.

So when I think about the topology of all of Crypto, I mostly see individual isolated networks. Sure you can do smart contracts on x network, but the real power and genius of ILP is the fact that these networks need to be networked together.

The FTSO rewards system, pays for the work of maintaining Flare Network's connection to "the outside world". Therefore I recognize FTSOs economic value creation, thus a rational reason for compensation. Its not a "too good to be true" situation. It makes Flare Network, a network of networks, aka a Complex Adaptive System of sorts.

The economic design of Flare Network is impressive. I'm honestly embarrassed I never realized the inherent problem with having the value of the token (ETH) providing the basis for the network's security. Once I read that, I was hooked. It's an uncommonly sound insight to solve that problem, and simultaneously replace it with the FTSO mechanism connecting the network to other networks.

Edited by KarmaCoverage
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6 minutes ago, KarmaCoverage said:

 

The economic design of Flare Network is impressive. I'm honestly embarrassed I never realized the inherent problem with having the value of the token (ETH) providing the basis for the network's security. Once I read that, I was hooked. It's an uncommonly sound insight.

I do not understand this?

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14 minutes ago, Julian_Williams said:

I do not understand this?

So the inter-net is a bunch of inter networked networks. A network of networks, is called a Complex Adaptive System. 

The FTSO's function within the Flare Network is that they connect Flare to any other network. They onboard data flows to Flare. This process connects Flare to the outside world, making Flare NOT an isolated network.

To contrast that to XRPL'S Gateway system and issued assets which forces the Gateways to generate revenue from non-onledger business activities... the FTSO methods allow the inflation of Spark to be paid to those running the computation/mining that connects Flare to data streams which makes Flare able to become a Hub, like making it "an influencer" in social network terms.

I'm just saying there is real economic value being created by FTSOs, so compensation for that work does not add up to a scam.

Edited by KarmaCoverage
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14 minutes ago, Skippy said:

There will be downward pressure to the price of SGB. 

There is always downwards pressure on any asset. The idea is that this will be offset by an equal or greater deflationary (upwards) pressure coming via the f-asset integrations (locked collateral) and users holding to earn rewards. Whether it will be successful or not, is to be seen.

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2 minutes ago, thinlyspread said:

There is always downwards pressure on any asset. The idea is that this will be offset by an equal or greater deflationary (upwards) pressure coming via the f-asset integrations (locked collateral) and users holding to earn rewards. Whether it will be successful or not, is to be seen.

But does this apply to SGB or FLR ? 

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20 minutes ago, Skippy said:

But does this apply to SGB or FLR ? 

I think @thinlyspread has made a valid point. Thank you, I hadn't really considered that, but it makes sense. I guess that's simi the same thing Hugo said.

---

Also, as much as I think it's total b*ullshit when BTC people talk about bitcoin Halving and how BTC has to go up because the cost of mining a BTC will cost more and more computation & energy over time.

A related and more valid point is that these FTSO operations do cost money to run. So either Flare will die, or the inflation rewards will have to cover the cost of multi FTSO operations at a minimum.

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4 hours ago, KarmaCoverage said:

The FTSO's function within the Flare Network is that they connect Flare to any other network. They onboard data flows to Flare. This process connects Flare to the outside world, making Flare NOT an isolated network.

No. All the FTSO does is provide price feeds. It is the job of the state connector to take proof of payment from one network onto flare so that chains can interoperate 'trustlessly'

5 hours ago, KarmaCoverage said:

I'm just saying there is real economic value being created by FTSOs, so compensation for that work does not add up to a scam.

No value creation going on there.

3 hours ago, thinlyspread said:

There is always downwards pressure on any asset. The idea is that this will be offset by an equal or greater deflationary (upwards) pressure coming via the f-asset integrations (locked collateral) and users holding to earn rewards. Whether it will be successful or not, is to be seen.

Thankyou @thinlyspreadAt least someone get's it - but It's not the locked collateral that will add value - it is the fees charged for minting those F-Assets. This is the only way that value can really enter the system. 

FTSO rewards are produced by inflation, which sucks value away as (or if) people sell continuously. F-Assets rewards (and I cannot find details that make sense on where they actually come from or at what rate) will be paid to people to hold f-assets  (because lets face it why would anyone lock up all their collateral unless they were being paid to do so) - and these will suck value out of the system. The only value going into the system is the fees paid to mint those F-assets.

With 10% inflation, plus f-asset rewards (please someone tell me how much and if they are included in the 10%) - then the input to the system has to be greater than 10% per annum - that means that if the system has value currently at (say 5 billion - which is roughly the SGB network as I write this), then people must generate fees worth >$500million by minting assets to drive value upwards. 

With the fees on minting being (we're told in the whitepaper, but do we actually believe anything in that document?) at 5% of the amount minted, that means that 20*$500million worth of f-assets must be minted ($10billion) - which in turn means the valuation of FLR itself has to be much higher to support that in the form of collateralization.

Now the question is - who is going to want to mint $10billion and pay $500million in fees for F-assets? The people who want to use the network of course. Now when the queue of people wanting to mint assets forms, that's when you know it's a good investment, so far, I'm only seeing flare finance, and they are just minting more coins out of thin air, not generating any actual value through economic activity).

The purpose of Flare is to unlock all that locked up capital on (smart contract free) blockchains - but it has to lock up 2.5x the value to do it. Slightly ironic. So to get that $10billion of f-assets locked up, FLR will need to be worth in excess of $25billion to do it. Anything less than this and the system leaks value, but it's more complex than that because there is feedback in (at least) two places. The f-assets system is collateralized by FLR and the inflation rate decreases value of FLR, which decreases the collateral value - which affects the baseline of our deflation assumptions - and now I've forgotten what I wanted to add about the second feedback loop. I'm writing this of the top of my head, so it's all probably wrong anyway - it not like anyone cares about this stuff anyway.

If everyone wants to lock up their valuable tokens and get F-tokens in return, and pay 5% (on each lockup), then all is well, but if the system has to pay out %10 annually to make them do it, then it's going to take a lot of "economic activity" to make that pay net positive (that's a lot of crypto kitties).

You can't simply assume that (say) $50billion worth of BTC and XRP locked up, drives the FLR price rise to match the collateral, because the cashing out will constantly drive down the price. (there's a feedback loop there, as dropping price requires more FLR locked as collateral and rising, requires less). (If someone wants to generate $50billion worth of f-assets, but there isn't enough FLR to do it ...)

I think a proper simulation of the price dynamics is in order, cos it's all a bit much to assess without a formal analysis. If nobody uses the system and needs F-assets, then the value goes to zero. If the system becomes popular and lots of f-assets are minted, then fees (and indirectly collateral) add value. What else have I missed?

Please someone check my maths, because I must have missed something obvious. And, yes, I'm quite aware that none of this matters anyway, because it's crypto and everyone can only see free $$$ tokens and this is enough to drive the price to the moon as they anticipate their boundless rewards.

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50 minutes ago, jbjnr said:

No. All the FTSO does is provide price feeds. It is the job of the state connector to take proof of payment from one network onto flare so that chains can interoperate 'trustlessly'

No value creation going on there.

Thankyou @thinlyspreadAt least someone get's it - but It's not the locked collateral that will add value - it is the fees charged for minting those F-Assets. This is the only way that value can really enter the system. 

FTSO rewards are produced by inflation, which sucks value away as (or if) people sell continuously. F-Assets rewards (and I cannot find details that make sense on where they actually come from or at what rate) will be paid to people to hold f-assets  (because lets face it why would anyone lock up all their collateral unless they were being paid to do so) - and these will suck value out of the system. The only value going into the system is the fees paid to mint those F-assets.

With 10% inflation, plus f-asset rewards (please someone tell me how much and if they are included in the 10%) - then the input to the system has to be greater than 10% per annum - that means that if the system has value currently at (say 5 billion - which is roughly the SGB network as I write this), then people must generate fees worth >$500million by minting assets to drive value upwards. 

With the fees on minting being (we're told in the whitepaper, but do we actually believe anything in that document?) at 5% of the amount minted, that means that 20*$500million worth of f-assets must be minted ($10billion) - which in turn means the valuation of FLR itself has to be much higher to support that in the form of collateralization.

Now the question is - who is going to want to mint $10billion and pay $500million in fees for F-assets? The people who want to use the network of course. Now when the queue of people wanting to mint assets forms, that's when you know it's a good investment, so far, I'm only seeing flare finance, and they are just minting more coins out of thin air, not generating any actual value through economic activity).

The purpose of Flare is to unlock all that locked up capital on (smart contract free) blockchains - but it has to lock up 2.5x the value to do it. Slightly ironic. So to get that $10billion of f-assets locked up, FLR will need to be worth in excess of $25billion to do it. Anything less than this and the system leaks value, but it's more complex than that because there is feedback in (at least) two places. The f-assets system is collateralized by FLR and the inflation rate decreases value of FLR, which decreases the collateral value - which affects the baseline of our deflation assumptions - and now I've forgotten what I wanted to add about the second feedback loop. I'm writing this of the top of my head, so it's all probably wrong anyway - it not like anyone cares about this stuff anyway.

If everyone wants to lock up their valuable tokens and get F-tokens in return, and pay 5% (on each lockup), then all is well, but if the system has to pay out %10 annually to make them do it, then it's going to take a lot of "economic activity" to make that pay net positive (that's a lot of crypto kitties).

You can't simply assume that (say) $50billion worth of BTC and XRP locked up, drives the FLR price rise to match the collateral, because the cashing out will constantly drive down the price. (there's a feedback loop there, as dropping price requires more FLR locked as collateral and rising, requires less). (If someone wants to generate $50billion worth of f-assets, but there isn't enough FLR to do it ...)

I think a proper simulation of the price dynamics is in order, cos it's all a bit much to assess without a formal analysis. If nobody uses the system and needs F-assets, then the value goes to zero. If the system becomes popular and lots of f-assets are minted, then fees (and indirectly collateral) add value. What else have I missed?

Please someone check my maths, because I must have missed something obvious. And, yes, I'm quite aware that none of this matters anyway, because it's crypto and everyone can only see free $$$ tokens and this is enough to drive the price to the moon as they anticipate their boundless rewards.

Thanks for trying to make sense of this. Honestly I still miss the point. I need a lot of examples to figure this out. Am I alone here? I would make a guess that this Flare thing is yet to make sense to anyone. 

edit: well actually I started reading the flare network "whitepaper" a bit more thoroughly so we'll see where this leads me.  

Edited by Skippy
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1 hour ago, jbjnr said:

With the fees on minting being (we're told in the whitepaper, but do we actually believe anything in that document?) at 5% of the amount minted, that means that 20*$500million worth of f-assets must be minted ($10billion) - which in turn means the valuation of FLR itself has to be much higher to support that in the form of collateralization.

I believe Hugo did confirm, as many of us suspected, that the 5% was only an example figure for the sake of simple math in the paper (and blog post, which had 5% too) and in reality the fees will be much smaller (probably less than 1%, but don't quote me on that).

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1 hour ago, jbjnr said:

You can't simply assume that (say) $50billion worth of BTC and XRP locked up, drives the FLR price rise to match the collateral, because the cashing out will constantly drive down the price. (there's a feedback loop there, as dropping price requires more FLR locked as collateral and rising, requires less). (If someone wants to generate $50billion worth of f-assets, but there isn't enough FLR to do it ...)

 

You got it. I call this Flare's ability to "breathe" in and out, or be "elastic" to the supply and demand of f-assets relative to Spark. 

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