Many of our clients have reached out asking if we plan to support the XRP – Spark Token allocation for the upcoming Flare Network. In order to provide greater insight into how we are thinking about this allocation, please read below.
The Flare Network and the Spark Token
Flare is touted as the world’s first Turing complete Federated Byzantine Agreement (FBA) network. It integrates with the Ethereum Virtual Machine (EVM) and does not derive safety from a token.
Spark is the network token, which will be created through what may be the first ever XRP utility fork. There will be 100 Billion Spark tokens created at the outset of the Flare network, of which 45 Billion will be claimable by existing XRP holders excluding Ripple Labs.
While this type of allocation seems novel, it has been done before by Cosmos and other projects. This type of allocation is typically considered to be a Hard Spoon.
“Hard Spoon: a new chain that takes into account state from an existing chain; not to compete, but to provide broad access.” — Jae Kwon
While those holding XRP in their own personal wallet will have no trouble claiming tokens, those who hold their assets in custody will find the situation to be much different.
While in theory it may sound easy to simply claim the Flare tokens for all iTrustCapital customers, there is much more at play that has to be considered.
In order to support the network and hard spoon, these are a few things we would like to see within 90 days of the Flare network launch.
- Network Stability – We want to see the network achieving network consensus with no downtime or network attacks, this means the network can be trusted to send and secure value.
- Spark Value – We want to see the Spark token holding a reasonable value. While it’s hard to put an arbitrary value point on it, we consider it holding at least a 1% value compared to XRP to be sufficient. This means that for every customer that holds $10,000 in XRP, their Spark tokens would be worth around $100.
- Wallet Infrastructure – We want to see a secure self custody wallet option that our customers can receive their Spark token to, if they decide to take distribution.
- Exchange Support and Liquidity – We want to see exchange support and sufficient liquidity from a Top 10 exchange located in the United States. Since these are retirement accounts, we can only allow clients to trade on regulatory compliant exchanges domiciled within the United States. If Spark cannot be traded compliantly and with sufficient liquidity, we cannot support it.
Important Note: All client funds are held within their Individual Retirement Accounts (IRA’s). This means that if we support the Spark token, and clients want to withdraw onto their personal wallets – it will trigger an early distribution penalty for most. This not only creates a taxable event, but an early withdraw penalty as well. These are not our policies, but are the laws and regulations around retirement accounts decided by the IRS.
Please stay tuned as we continue to track the progress of the Flare Network. We wish them and their community great success!