How The FAssets System Works | Flare Network

Why Are FAssets Needed?

Over 70% of the overall worth of blockchain assets lack smart contracts, rendering them incapable of engaging in the decentralized economy. When you convert these tokens without smart contracts into FAssets, you gain the ability to make them productive by earning yields or rewards within decentralized applications on the Flare network. Once these FAssets are integrated into the Flare network, you can seamlessly transfer them to other networks using LayerCake.

How Does It Work?

The FAssets system relies on Flare's data acquisition protocols, specifically, the State Connector and the Flare Time Series Oracle (FTSO). The FTSO is responsible for providing decentralized price feeds for all participating tokens, while the State Connector ensures the verification of necessary actions on different blockchain networks.

Every FAsset will have its value supported by a combination of on-chain collateral held by an agent and contributions from the community pool. This collateralization encompasses three distinct asset types: the underlying asset, a stablecoin or ETH collateral, and collateral in the form of Flare's native tokens, either FLR or SGB. The minting and redemption processes will be facilitated by multiple agents, and their role in the system is guaranteed through an over-collateralization mechanism, ensuring a trustless system.

To mint FAssets, an individual begins by selecting an agent and paying a nominal fee to secure the required collateral. Subsequently, the minter transfers the underlying asset to the chosen agent, with the assistance of the State Connector to validate the transaction on the other blockchain. After the payment is confirmed, FAssets are minted as ERC-20 tokens on the Flare network, making them available for use within Flare's DeFi ecosystem or for bridging to other blockchain networks.

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