Questions and answers about how Flexa enables instant, fraud-free cryptocurrency payments using Flexacoin as collateral
Now that Flexa is available in two of the largest cryptocurrency markets in the world, we’d like to share more information about the token mechanics that make the Flexa network secure, fraud-resistant, instant, and efficient—and specifically, how Flexacoin-based collateral is key to ensuring that Flexa can support significant volumes of cryptocurrency spending across any blockchain and into any fiat currency around the globe.
We’ve structured this primer in a question-and-answer format, in an attempt to directly respond to five of the most common questions we’ve received about Flexacoin staking since we launched the network in early May of this year:
1. Why does Flexa need collateral in the first place?
The primary goal of the Flexa network is to bring greater freedom of choice to commerce by enabling people and businesses to transact with each other freely, securely, and instantly using their individually preferred currencies. Over the last ten years, we’ve seen blockchain-based cryptocurrencies consistently prove themselves a reliable means of settlement, and indeed, we believe that cryptocurrencies are the inevitable evolution of payments. But today’s merchants operate in a fiat world—with fiat costs and margins.
If we want to enable merchants to receive payment in local fiat while their customers pay using cryptocurrencies, we need a solution for the problem of decentralized consensus (and specifically, the fact that no consumer is going to wait thirty minutes in the checkout line for the merchant’s required blockchain confirmations before they walk out of the store with their purchase). Failing the invention of reliable time travel, what we really need is to authorize merchant transactions prior to final blockchain confirmation—and the only way to do that without risk of loss or volatility is to require each transaction to be collateralized with a commensurate amount of value.
We designed Flexacoin to serve exactly this purpose—functioning as a reliable, neutral, and scalable token that collateralizes every payment on the Flexa network, regardless of input or output currency. When someone pays with Flexa, the corresponding amount of Flexacoin is locked against their payment until confirmation is achieved on both sides of the transaction, after which the Flexacoin is released and can be used to collateralize additional payments.
2. How can someone help collateralize Flexa payments?
Flexa payments originate from apps, which means that app developers are ultimately in control of ensuring that a spender’s requisite cryptocurrency is remitted to Flexa after every transaction authorization. With that in mind, it’s unsustainable and inefficient to rely on app developers themselves to stake an amount of Flexacoin equivalent to the payment volume expected from their userbase. Rather, the Flexa network enables the entire cryptocurrency community to participate in collateralizing payments made with Flexa-enabled apps by opening up the Flexacoin staking process to everyone.
Stakers don’t collateralize Flexa payments purely out of the goodness of their hearts (although the virtue doesn’t hurt). Rather, as incentive for deploying their Flexacoin as collateral—and to compensate the risk that they incur when collateralizing unproven apps on the network—stakers earn the network reward generated after every successful payment confirmation.
To collateralize a Flexa-enabled app payment, stakers simply send an amount of their Flexacoin to a corresponding Flexa contract address on the Ethereum network. Stakers can then allocate Flexacoin to collateralize specific Flexa-enabled apps, and track their current stake using the Flexa network staking dApp (pictured above). To withdraw their Flexacoin, stakers simply sign a withdrawal transaction against any unallocated Flexacoin and the Flexa contracts will automatically process the transfer.
3. How do stakers choose where to stake Flexacoin?
We’ve left the strategy for staking Flexacoin tokens and collateralizing Flexa payments to individual stakers themselves. Generally, the greatest network reward will come from staking Flexacoin against apps that are relatively less collateralized versus their peers and have the greatest ratio of transaction volume to collateral.
The Flexa network collateralization index showcases the relevant metrics for each Flexa-enabled app alongside the contract addresses to which Flexacoin stake can be sent for collateralizing payments. We’ll be sharing more mockups of the network index in the coming weeks, so stay tuned to our Telegram community for the chance to provide feedback.
4. What do the collateralization economics look like?
Once a staker collateralizes a particular Flexa-enabled app, they will earn network rewards corresponding to the payment volume enabled by the collateral they’ve contributed. For example, if a staker is the only contributor to the collateral for a particular app, they’ll receive 100% of the network rewards processed for that app. Alternatively, if a staker’s contribution only accounts for half of an app’s collateral at all times, they’ll receive 50% of the app’s network rewards for the duration of their stake.
In order for a given app to be enabled on the network at all, the stake contract for that app must have at least 100,000 FXC worth of collateral committed.
5. When can I stake my Flexacoin and start earning rewards?
The Flexacoin network contracts have been deployed to the Ethereum testnet, and will be audited and launched on mainnet over the course of the next six weeks. As always, we’ll be posting updates on Twitter and Telegram, so make sure to subscribe for updates if you’d like to know exactly when you can start contributing your Flexacoin stake.
Launching Flexacoin staking will be the largest step we’ve yet taken toward making cryptocurrency spendable everywhere, because it will open the door for any app to enable payments on the Flexa network entirely within their own ecosystem. We have an incredible set of wallets ready to launch with Flexa-enabled payments, and we can’t wait to share more with you as we continue to open the network to everyone.
As we develop the Flexa collateralization contracts in preparation for release at the end of Q3, we’ve been very appreciative of all of the feedback we’ve received from the Flexa and Flexacoin communities on Twitter, Telegram and Reddit. If you have additional questions, please reach out and we’ll cover the answers in a future update. Beyond that, we thank you for your support, and look forward to seeing how Flexacoin staking can enable greater adoption of cryptocurrencies for—and by—everyone.
