Flare: All for Data, One for Data

TL;DR

• Flare is a next-generation blockchain. It embeds oracles into its core protocols to ensure data reliability and integrity.
• Flare builds a data-driven blockchain ecosystem. It uses three core protocols: FTSO for decentralized price feeds, Data Connector to link Web2 and Web3, and FAssets to utilize non-smart contract assets.
• Flare started as a data infrastructure. With the launch of FAssets, it aims to become a liquidity hub. This hub will connect ecosystems, including assets like Bitcoin, Ripple, and Dogecoin.

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1. Data: The Achilles' Heel of Blockchain Technology

Blockchain creates a trustless system based on the principle of “Code Is Law.” This system provides security and trust by executing processes automatically through code. It removes the need for third-party intermediaries. However, there is a catch—the system relies entirely on the integrity of 'trusted data.'

Second-generation blockchains like Ethereum and Solana enable diverse functionality through smart contracts. These contracts, however, depend entirely on the accuracy and reliability of input data. Even a perfectly designed smart contract cannot function properly if the input data is incorrect or manipulated. In such cases, the execution's outcome becomes unpredictable, putting the entire system at risk.

To address this issue, the blockchain industry introduced decentralized data providers known as oracles. However, oracles operate outside the blockchain, which limits their ability to match the blockchain's security and integrity. Their external data provision structure creates risks, such as single points of failure. Additionally, some oracles lack sufficient decentralization as they could rely on a small number of nodes.

Data is both essential to blockchain and its Achilles' heel. Addressing this limitation requires a new approach to verify and manage the authenticity and integrity of external data directly on-chain. Flare offers a solution to this challenge.

2. Flare: All for Data, One for Data

Source: Flare

Flare is a blockchain infrastructure focused on “data” (All for Data). Most blockchains rely on external oracles to access data. This setup still ensures the security of the blockchain. However, it does not guarantee the reliability of the data from the oracle.

Flare solves this issue by embedding oracles into the blockchain’s core protocols. This ensures the oracle benefits from the blockchain’s security. Hacking the oracle would require compromising the entire blockchain network. This structure guarantees reliable and secure data. Flare integrates the blockchain and oracle into a single system (One for Data). This approach removes the security risks of external oracles. The embedded oracle is free to use. Developers can build Web3 services with rich data without relying on external oracles.

Flare offers three core protocols built on its embedded oracles. 1) FTSO(Flare Time Series Oracle) provides decentralized price feeds.2) Flare Data Connector(FDC) integrates external chain and Web2 data into Flare. It validates and secures the data within the blockchain. 3) FAssets enable non-smart contract assets like Bitcoin, Ripple, and Dogecoin to be used in DeFi. This expands their functionality within the blockchain ecosystem.

2.1. FTSO: Providing Decentralized Price Feeds

Flare’s FTSO provides time-series price data in a decentralized way. This data includes asset prices updated at specific intervals and is crucial for many Web3 services, especially DeFi. However, most services still depend on centralized data providers. Manipulation or errors in this data can compromise the reliability and stability of the entire system.

The limitations of centralized data providers have already been evident in real-world cases. In March 2023, Berkshire Hathaway’s stock price dropped by about 99% due to a computer error. This incident highlighted the vulnerability of centralized data systems to single points of failure. Such errors can cause significant disruption and losses for investors, especially in an automated Web3 ecosystem.

FTSO, Source: Flare Systems Explorers

To address this issue, Flare uses a decentralized price feed system through FTSOs with over 100+ independent validators. Validators collect time-series price data from various sources and submit it to the blockchain. A consensus mechanism determines the most accurate value from the submitted data. Validators providing inaccurate or manipulated data are flagged as outliers and excluded. They do not receive rewards and may face financial penalties. This system ensures the reliability and integrity of the data on Flare.

Source: Flare

The key differentiator of FTSO is the participation of all 100+ validators in every price feed. Many oracles face inconsistent validator participation, where some feeds receive ample validation while others rely on only a few validators. Flare ensures uniform validator participation across all feeds. This minimizes data variation between feeds and enhances system-wide reliability. FTSO data aligns closely with prices on major exchanges and remains within a standard deviation, objectively proving its accuracy and reliability.

In May 2024, Flare released FTSO v2, enhancing the speed and scope of data processing. Previously limited to cryptocurrency prices, the price feeds can now support a wide range of Web2 data, such as stocks and commodity prices. The update cycle was reduced from 180 seconds to 90 seconds. The number of price feeds increased from 18 to over 50, with infrastructure capable of scaling up to 1,000 feeds.

2.2. Flare Data Connector(FDC): Bridging All Your Data

Blockchains are naturally isolated from the outside world, creating challenges when integrating real-world data. Flare Data Connector links external chain and off-chain data to the Flare ecosystem, enhancing scalability and usability.

For instance, Web3-based insurance services need reliable real-world data, such as weather and airline delays. Without it, these services may face severe limitations or become unfeasible. Prediction markets like Polymarket also depend on reliable data, such as sports scores. If they cannot fetch this data securely, their usability decreases, and risks increase. Interoperability with other chains is essential for blockchain ecosystems. Without connections to other networks, blockchains remain isolated. This isolation limits the growth and development of the entire ecosystem.

Flare Data Connector addresses these challenges. Flare’s “Paris 2024 Olympic Prediction Market Game” demo demonstrates its functionality. The service reliably fetches Olympic event results. It rewards users who successfully predict the outcomes of events.

Flare Olympics Prediction Market Game Demo, Source: Flare

Let’s break it down. A service requests Olympic event results through Data Connector. A set of verifiers (independent Attestation Providers) collect data from multiple external sources, including the official Olympic API. They validate the data and confirm its authenticity through a consensus mechanism. After confirmation, the service can use the data. This method solves reliability issues in prediction markets. Existing services rely on centralized providers or manual entry. This makes them vulnerable to manipulation and errors. Flare's Data Connector minimizes these risks with consensus-based validation.

The uses of Data Connector are endless. The protocol can integrate any deterministic internet data into the blockchain through an API. For example, they can import item transaction histories from online games or social media likes. Data Connector also enables interoperability between blockchains. They can verify data from external blockchains like Bitcoin, Ripple, and Dogecoin or track balance changes at specific addresses. This functionality unlocks new use cases. For instance, NFTs issued on the Flare network can be traded natively using Dogecoin or Ripple.

2.3. FAssets: Flare Builds a Multi-Ecosystem Liquidity Hub

Source: Flare

FAssets is a protocol that enables non-smart contract assets to be used in the DeFi ecosystem. It is built on Flare’s core technologies, FTSO and Data Connector. This implementation unlocks new possibilities for non-smart contract assets like Bitcoin, Ripple, and Dogecoin.

What to do with FAssets, Source: Flare

This technology is important because it overcomes the limitations of first-generation blockchains like Bitcoin, Ripple, and Dogecoin. Unlike Ethereum, which achieved explosive growth through DeFi, first-generation blockchains had no smart contract functionality. This absence restricted their growth and made it impossible to implement complex features beyond simple transfers. FAssets address these limitations by enabling non-smart contract assets to access DeFi services. This is expected to greatly expand the utility and scope of existing assets.

FAsset issuance process works as follows. To issue Bitcoin as an FAsset, the user sends Bitcoin. Data Connector verifies the transaction was executed on the Bitcoin chain. After validation, $FBTC, an ERC-20-based FAsset, is minted on the Flare network. This token can then be used in Flare’s DeFi ecosystem or bridged to other chains.

FAssets connects and transfers assets across multiple chains, so reliability is critical. Flare ensures reliability through several technical mechanisms. Real-time price feeds from FTSO respond to price fluctuations. Flare's consensus mechanism maintains the integrity of the system. Flare also uses an overcollateralization model. This model holds collateral assets with a higher value than the issued assets. It addresses trust issues found in traditional centralized bridge solutions.

Source: ClearPool

USDX, Flare's native stablecoin, is central to the stability and liquidity of the FAsset system. Users stake USDX to earn cUSDX, which acts as collateral for DeFi use of non-smart contract assets. Staking USDX also provides stable returns from short-term US Treasury Bill (T-Bill) yields. This approach strengthens the system's collateral base, ensures stability during market volatility, and expands asset utilization.

3. How Flare Will Advance the Web3 Industry

3.1. Expanding Utility for Non-Smart Contract Assets

Non-smart contract assets form a significant part of the Web3 industry. Bitcoin, Ripple, and Dogecoin together account for over 70% of the crypto market capitalization. Flare positions itself as a liquidity hub. It connects these large markets to the Web3 ecosystem.

FAsset Songbird, Source: Flare

At the center of this vision is FAssets. On December 18, 2024, FAssets launched on Flare’s canary network, Songbird. Remarkably, within just one hour of its launch, $FXRP, a Ripple-based FAsset, was minted with a value of approximately $2 million. This highlights strong market demand and high expectations for leveraging non-smart contract assets.

Source: Dune

It is also noteworthy that Flare is expanding its ecosystem through various DeFi services. Its total value locked (TVL) currently stands at $50 million. Active services include Kinetic, a lending platform; SparkDEX, a decentralized exchange; and Sceptre, a liquidity staking solution. The introduction of FAssets is expected to create synergies with these services and non-smart contract assets. Flare also runs a rewards program to encourage ecosystem participation. This program is expected to boost its growth momentum in the future.

3.2. Expanding Blockchain Use Cases

Flare is expected to expand the practical use of blockchain technology. Its Data Connector links Web2 and Web3. This connection accelerates industrial applications. The Web3 ecosystem has struggled to trust Web2 data. Web2 companies have hesitated to share data due to security and privacy concerns. Flare's embedded data oracle solves these problems. It enables secure on-chain use of off-chain data. It also verifies the authenticity and integrity of the data.

Source: Red Date Technology

In November 2024, Flare gained recognition for its technology by partnering with China's national identity system, RealDID. Together, they launched a cross-border KYC solution. This marked the first use of Flare's data infrastructure in the highly regulated identity sector. These achievements highlight Flare’s potential in industries where data reliability is critical. Its technology is expected to accelerate blockchain adoption by enterprises.

4. Flare Innovates Industries Beyond Blockchain

Flare aims to create industry-wide change beyond blockchain data infrastructure. It drives this change through technological innovation. Recent announcements and developments reveal two main objectives. The first is to address Web3’s technical limitations and create a new service environment. The second is to advance artificial intelligence technology using blockchain.

4.1. Addressing Technical Limitations in the Web3 Industry

Currently, the Web3 ecosystem struggles with limited data utilization and high computational costs. These challenges make it difficult to develop data-intensive consumer services like Instagram or X. Flare is addressing these issues with a range of technical solutions.

Flare provides up to 1,000 real-time data feeds through continuous infrastructure expansion. It ensures data reliability with decentralized verification. This approach supports the development of diverse services using rich, verified data.

Putting the Decentralization in DeFi: Addressing the Critical Problem of Data in Crypto, Source: KBW 2024

Flare is also building a stable and efficient computing environment based on its experience in operating data infrastructure. It is conducting research on Trusted Execution Environment (TEE) technology to enable secure, high-performance computations.

By combining these technical capabilities with operational expertise and R&D, Flare is expected to overcome Web3’s current limitations. It aims to lay the foundation for large-scale data processing and complex computation.

4.2. Advancing AI Technology with Blockchain

Hugo Philion of Flare interviewed by the Defiant at ETH Denver 2024, Source: Flare

Flare showcases how blockchain consensus mechanisms can advance artificial intelligence technology. AI relies on quality data to produce meaningful results, but bad data often causes unreliability. Flare is expected to provide reliable data, improving AI model quality and reducing bias.

Flare’s reward-and-penalty-based consensus mechanism encourages responsible data generation. This approach addresses the issue of depleting high-quality data. By supporting sustainable AI development, Flare combines blockchain and AI technologies to unlock new possibilities for innovation.

5. Closing Thoughts

How High Will Bitcoin Go? Here's the Better Question, Source: EO

Flare has a clear vision to solve problems beyond blockchain. “A lot of projects are just focused on money and finance, but we need to put more resources into advancing the technology,” says Flare founder Hugo Philion. This reflects Flare’s philosophy of valuing technology’s intrinsic worth over short-term results.

Source: Hugo Philion

Flare’s development process shows this philosophy in action. Reliability and stability come first. Flare releases major features only after thorough preparation and validation. Hugo highlights the importance of “building the future methodically and not being swayed by market conditions.” Flare focuses on long-term trust and stability, not quick gains.

This approach drives Flare’s goal to create a trusted data infrastructure beyond blockchain. Flare’s future as a key data infrastructure provider is one to watch.

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This report was partially funded by Flare. It was independently produced by our researchers using credible sources. The findings, recommendations, and opinions are based on information available at publication time and may change without notice. We disclaim liability for any losses from using this report or its contents and do not warrant its accuracy or completeness. The information may differ from others' views. This report is for informational purposes only and is not legal, business, investment, or tax advice. References to securities or digital assets are for illustration only, not investment advice or offers. This material is not intended for investors.

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