Beta testing of FAssets has commenced on Flare’s Coston testnet

Flare Labs has commenced a private beta of FAssets on the Coston test network. Initial tests will cover all major components and key user scenarios.

The FAssets system allows non-smart contract tokens such as BTC, XRP & DOGE to be used trustlessly with smart contracts on Flare. By minting these non-smart contract tokens into FAssets it will be possible to put them to work earning yield or rewards in decentralized applications on the Flare network.

Once the FAssets are on Flare, they can also be bridged to other networks using Flare Labs’ trustless bridge for smart contract networks, LayerCake, or any other third party bridge built on Flare for this purpose.

Flare Labs will run an initial phase of testing before opening the system up for wider community experimentation. During this first phase, Flare Labs and initial partners will adopt all required roles within the system and provide the necessary infrastructure. As the testnet beta progresses, external participants will be able to join.

The tests will cover the fundamental operations of the system: minting, redeeming, liquidation and challenging. Test assets will allow the simulation of market volatility to assess the system’s robustness under stress.

Hugo Philion, CEO of Flare Labs, comments: “More than 70% of the total value of all blockchain assets do not have smart contracts and therefore can’t be efficiently deployed in DeFi. FAssets are formally a Delta neutral synthetic with multi collateral backing. They enable these legacy assets to be represented on a smart contract chain without requiring a centralized third party. For developers, it will be a new and trustless means to access new potential users and a large amount of currently untapped value.”

While initial testing of the FAsset system will be conducted on the Coston testnet, a subsequent implementation will follow on the Songbird canary network before it is fully integrated into the Flare mainnet.

Once FAssets are live on Flare mainnet, in addition to earning DeFi yields, users and dapps will be able to earn FLR tokens from the cross-chain incentive pool as a reward for bringing sustainable value to Flare.

Testnet beta process

Code deployed on Coston (complete).
Private beta phase 1 – onboarding part A (in progress). Flare Labs is the only entity involved at this stage, performing initial tests and acting as all roles (minter, redeemer, challenger, liquidator, agent).
Private beta phase 2 – onboarding part B. Selected 3rd parties are invited to join the private beta (including existing FTSO data providers & Flare dapp builders) to provide additional feedback on the onboarding process.
Private beta phase 3 – scenario tests. During this phase, the mechanics of the FAssets system will be tested in a non-competitive and non-volatile setting using pre-defined test scenarios.
Private beta phase 4 – competitive tests. In this phase it is everyone looking out for themselves with no pre-set scenarios and increased volatility. The aim is for all participants to try to game or break the system. A leaderboard will be created and bounties awarded based on performance.
Private beta phase 5 – feedback & updates. Following the competitive tests, any required updates will be made and validated.
Completion of the private beta. Once the Flare Labs team is satisfied with the robustness of the FAssets system within the private testnet beta, a graphical user interface will be launched enabling the commencement of an open beta program. Learnings from this open beta will lead to the finalization of the launch candidate for Songbird. The aim is for the private testnet beta to be completed in Q1 next year.

Roles and responsibilities within the FAssets system

There are four main roles within the system: minter/redeemer, agent, liquidator, challenger. Each has different responsibilities in ensuring smooth operation.

Minter and Redeemer: The minter is the customer of the FAssets system. They initiate the minting of FAssets, providing the underlying token to an FAssets agent, and ultimately receiving freshly minted FAssets in their Flare wallet. The same person can also be a redeemer if they choose to return their FAssets and claim the underlying tokens they represent.

Agent: Agents facilitate the minting and redemption of FAssets. To render the system trustless, the amount of FAssets mintable by an agent is dependent on the collateral they have locked up. They provide three types of backing for the FAssets they mint: the underlying assets such as BTC, highly liquid stablecoin or ETH collateral, plus Flare native token, FLR, collateral.

Liquidator: If the value of collateral held by an agent becomes too low to support their minted FAssets, they are automatically put into “liquidation mode”. Liquidators spring into action redeeming FAssets with the agent in order to bring the agent’s collateral ratio back into balance.

Challenger: Agents are required to hold the underlying assets. If they make a transaction using these funds which was not permitted, a Challenger can use the State Connector to detect the unpermitted transaction and provide proof to the protocol of this action. With proof, the Agent will be disabled from minting and their backed FAssets will be put into liquidation.

Technology

To securely represent these assets on a smart contract chain without requiring a centralized third party, the FAssets system relies upon Flare’s native data acquisition protocols.

The State Connector enables information from other blockchains to be used securely and trustlessly with smart contracts on Flare. In the FAssets system, it verifies transactions have completed on the underlying chain before minting can proceed.
The Flare Time Series Oracle (FTSO) delivers highly-decentralized price feeds to the network, enabling collateral ratios to be accurately monitored without relying on centralized providers.

The minting process

To mint FAssets, the minter must first select an agent and pay them a small fee to reserve the required collateral. The minter then sends the agent the underlying asset, with the State Connector used to prove the transaction has taken place on the other chain. With the payment verified, the FAssets are then minted as ERC-20 tokens on Flare. These tokens can be used within DeFi on Flare or bridged to another chain.

Example use cases

FAssets enable non-smart contract tokens to be represented on a smart contract chain without using a centralized third party. This allows large ecosystems like BTC, DOGE and XRP to use their tokens in decentralized applications on Flare.