If you mint your XRP on flare and it moons what will happen?
I was listening to a video by Micky B Fresh and Patty XRP and patty said that if you mint your XRP into FXRP and we pump up to 10+ then you will get screwed out of all that price arbitrage...
So is that right? If you have FXRP minted and it moons that you will get screwed out of all that money. What happens when you sell at that higher price would you just get less XRP back then what you put into Flare network?
Posted Sep 8, 2021, 6:57 PM UTC
1715
I don't know the context behind the video you were referring to. F-Assets are effectively stablecoins issued on Flare against the original assets with Spark (FLR) as the collateral.
FLR:XRP is fixed so if XRP goes up, so will FLR. However FLR is pegged to several assets at a time (XRP, XLM, DOGE, LTC) so it will be interesting to see how this is going to manifest. Because as soon as FLR goes up (assuming XRP goes up), the assets pegged to FLR are forced to go up (XLM, DOGE, LTC).
And finally, the risk. It's always possible that by the time you sell your FXRP to get back XRP, the price action is gone. I don't think anyone knows exactly what happens if XRP pumps that hard.
Ultimately, not your keys, not your coin. You are giving up (even if temporarily) something when you park your XRP with an Agent in exchange for FXRP. It might prove to be a better solution than Nexo/Celsius, for example in terms of rewards.
When you mint your XRP is given to an agent who can then use it however they want and they collateralize it with 3 times the FLR if I remember right. So if the agent spends all your XRP on the project they are working on and then they cant give you the XRP back then you get paid back in FLR. But if its going in the range of 10-20 dollars and they only have collateral for 3 times what you put in with flare then that seems like a problem. They will just make you wait till you can get any XRP or flare back hoping the price comes back down so they can pay you back. But we dont know if the price is gonna drop back to a dollar again. That is all speculation. Seems all very risky.
That’s not how it works. When XRP price goes up, the Agents will need to put up more collateral to maintain the 3:1 (or whatever that is at the time) ratio. If they fail to provide collateral, they are liquidated. They have a very short period of time to provide that liquidity (eg 3 seconds) and that’s it. If the price increase is that big, it will immediately reflect in FLR price.
Also, it’s not a 1:1 relationship between you and the Agent. At any time, the Agent is holding funds from a lot of users and a rug pull isn’t really possible.
IMHO, I am not going to mint F-assets until price action is a bit more stable. Even then it will be only enough to get more LPT's.
They aren’t enabling FAssets until the price is stabilised either.
I learned from Hugo that F-Asset System can go live much sooner after launch of Flare Network due to the testing that will be done on Songbird Network. He went as far as to say that it could go live immediately after Flare does.
K