Dogecoin has been one of the biggest crypto stories of the last 12 months. The memecoin has been pumped by the world’s richest man and rose 1000% in value, but because of its design its holders can't easily access all the opportunities within the hugely popular world of DEFI. That is changing with the launch of the Flare Network offering passive income streams for holders of Dogecoin and several other popular coins built in a similar way.
Dogecoin was essentially a fork of Bitcoin, with key modifications around the supply of coins and speed at which new blocks are created. Bitcoin is deflationary, with a hard cap of 21 million - ensuring scarcity - and a schedule that rewards miners with 6.25 BTC for producing a new block roughly every 10 minutes until that cap is reached.
By contrast, Dogecoin is inflationary which means an unlimited supply. 10,000 more Dogecoin are issued every minute of every day, equating to nearly 15 million doge per day or over 5 billion doge per year.
By copying Bitcoin’s design Dogecoin is one of a handful of the most popular cryptocurrencies that are what are known as ‘Turing Incomplete’ - the other main ones being Bitcoin (BTC), Ripple (XRP), Litecoin (LTC) & Stellar (XML). Together they represent a huge proportion of the crypto holdings.
But what does that mean in simple terms for the average Dogecoin holder. A computer system is described as Turing Complete if it can solve any problem that can be defined in code. The term takes its name from Alan Turing, one of the world’s most famous mathematicians, especially known for his work in breaking the code used by the Nazis in World War II. [Watch the movie ‘The Imitation Game’ if that sounds interesting.]
Being Turing Complete is the principle design feature of Ethereum. The Ethereum Virtual Machine (EVM) is described as the world’s computer because it can compute pretty much anything that can be described in a Smart Contract - a set of rules and conditions.
The most common use of smart contracts is DEFI - Decentralised Finance - enabling passive interest (APY), lending, staking and rewards for providing trading liquidity for Decentralised Exchanges (DEX).
Smart Contracts run on top of the Ethereum Network - and other layer 1 platforms with similar Smart Contract capability - with users paying fees measured in Gas to execute the particular DEFI function.
Dogecoin isn’t Turing Complete - nor is XRP, BTC, BCH, LTC or XML - which means they don’t support Smart Contracts and can’t natively be part of that DEFI ecosystem. The word natively is key here, because as ever with crypto, if there is a demand innovation finds a way.
The solution is described as wrapping coins to enable them to work within a different ecosystem. This works by essentially creating a synthetic version of a coin, pegged 1:1 to the native coin.
So there is wrapped BTC, wBTC which follows the Ethereum standard (ERC20) which means that Bitcoin holders can generate returns from their holdings within Defi on Ethereum, or any other EVM supporting system but only after going through a convoluted conversion process, paying fees and trusting the issuers behind it.
The Flare Network is a new project that is specifically targeting this huge pool of untapped liquidity. It will be powered by the Ethereum Virtual Machine, so will allow a lot of existing projects/developers to switch over from Ethereum.
Flare’s native token is Spark which was airdropped 1:1 for anyone who held XRP as of December 12th, 2020, as XRP - with such a large user base - is targeted as the initial use case. Ever since the so-called XRP Army have been waiting for the Spark token to go live.
What is very different about Flare is that it doesn’t rely on Proof of Work (Miners) or Proof of Stake (stakers). That huge compromise means that it is going to be fast and cheap, though critics will point to the compromise on true decentralisation.
If you are happy to accept that compromise Flare will support wrapped versions of Turing Incomplete coins, such as Dogecoin, XRP, LTC and XLM. They are called F-Assets, and will give holders of those coins easier access to a world of DEFI opportunities for earning passive income as well rewards in the Spark token, which will give voting rights for future changes to the Flare system.
Further development is already taking place with supporting wallets (Bitfrost) and DEFI providers, without the network even being live.
Flare was due to release around the end of July 2021, but there has been a lot of uncertainty around exactly when that will happen which has eroded some of the initial excitement. Many XRP holders are simply wanting to cash-in on their airdrop, but judging from social media and forums there are plenty of crypto holders eager to take advantage of the unique use case Flare offers.
A Canary network, called Songbird, which you can think of as a test network for Flare is live, with its own token, also airdropped to XRP holders. This does at least show that the wheels are in motion.
Assuming there are no major problems expect a whole raft of applications to spring up enabling you to turn your Dogecoin into F-DOGE then start lending, staking or providing liquidity and in return earning a new income stream.