Kraken is pleased to announce our support of the Flare network and Spark (FLR) token airdrop for XRP holders. The first thing to understand about this airdrop is that it is unusual because there is a very large gap of time between the snapshot of XRP balances and the launch of the Flare network and gradual distribution of Spark (FLR) tokens.
Due to the unusual nature of this airdrop, we urge all XRP holders and traders to read this announcement carefully and learn what to expect.
When is the snapshot of XRP balances?
The snapshot of XRP balances takes place on December 12 2020 at approximately 12 am UTC (the first validated XRP ledger with a timestamp greater than or equal to 00:00 UTC on December 12 2020).
Anyone with an XRP balance on Kraken at this time will, once the distribution of FLR is complete, receive an amount of FLR proportional to their XRP balance. The exact proportion is a bit complicated – see here for an explanation.
Clients do not need to do anything beyond having an XRP balance on Kraken at the time of the snapshot – Kraken will handle all other details.
When should I deposit my XRP on Kraken to be included in the snapshot?
We recommend that clients deposit their XRP at least one hour before the snapshot to allow plenty of time for the deposit to credit (no later than 11 pm UTC on December 11).
Reminder: XRP deposits to Kraken require a destination tag (the destination tag is generated when you create an XRP deposit address in your account).
What is the expected schedule for the launch of the Flare network and the gradual distribution of FLR?
The launch of the Flare network and start of the gradual distribution of FLR tokens is not expected until around May of 2021.
After the network launch, Kraken accounts that had an XRP balance at the time of the snapshot described above are expected to receive 15% of the total FLR for which they are eligible. The remaining FLR is expected to be distributed over the next 25 – 34 months. The plan is to distribute a random percentage between 2% and 4% each month.
For more details on the Flare launch and FLR distribution plan, please see the Flare blog.
This announcement only covers how the airdrop will be handled on Kraken’s spot exchange (https://www.kraken.com/). It does not cover how the airdrop will be handled by Kraken Futures (https://futures.kraken.com/).
For information on how the airdrop will be handled by Kraken Futures see here.
XRP trading and funding
- XRP trading will continue without interruption across the balance snapshot
- XRP funding will also continue without interruption across the balance snapshot
FLR trading and funding
- FLR trading and funding will not be possible until the Flare network launches and FLR tokens become available (expected around May 2021)
- We are unable to confirm whether Kraken will support FLR trading – it is possible that we may only support FLR funding when the network launches, without trading
Leveraged XRP margin long spot positions held across the balance snapshot will result in FLR credits
If you hold a leveraged XRP margin long spot position across the balance snapshot, it will carry over and can be closed at any time in the usual way. However, you will later also receive FLR credits corresponding to the position.
These FLR credits will be subject to the same distribution schedule described above.
Leveraged XRP margin short spot positions held across the balance snapshot may result in an FLR debit
If you hold a leveraged XRP margin short spot position across the airdrop, it will carry over and can be closed at any time in the usual way. However, please note that you may also receive an FLR debit at a later time. The debit could result in a negative FLR balance in your account that must be corrected by either buying or depositing FLR.
Why the debit? An amount of XRP was provided to you to support a spot transaction (e.g. the sale of XRP in exchange for USD). To close the position, you must return the same amount of XRP, but you are also responsible for returning any proceeds resulting from a network fork or airdrop that occurred during the time the XRP was provided to you.
Important note for clients with leveraged XRP margin short spot positions: Given the unusually large gap of time between the balance snapshot and the time when FLR tokens will exist on the Flare network and have price discovery in open markets, this may create a difficulty in debiting FLR or giving clients a negative FLR balance.
We highly recommend that clients with XRP short positions close them ahead of the balance snapshot. For clients that maintain their XRP shorts across the balance snapshot, Kraken will make an effort to help rectify the FLR debits in a way that does not result in an unreasonable burden. Clients with XRP shorts should not assume, however, that they will have no obligation whatsoever to rectify the negative FLR balance.
What is the Flare network?
Flare is a new blockchain network based on the Flare protocol. The protocol is described by the Flare team as the first “Turing Complete Federated Byzantine Agreement protocol.” To unpack this a little bit, Flare is similar to Ethereum in being able to support programmable smart contracts. However, unlike Ethereum and many other familiar blockchains, Flare uses a different form of consensus that does not involve mining or proof of stake.
The Flare team explains that the main reason they went with Federated Byzantine Agreement (FBA) is that FBA does not rely on money or economic incentives to secure the network. The network is not secured by expensive mining equipment, or by capital allocation (staking). According to the Flare team, consensus models that rely on economic incentives are ultimately not as scalable or as useful as models that don’t, and this is one of the primary advantages they see in the Flare network.
Project website: https://flare.xyz/
Warnings and Disclaimers
Traders using margin for XRP spot positions should be very cautious across the balance snapshot
Traders using leveraged XRP margin short spot positions are advised to be very cautious across the snapshot, by either reducing their position sizes or closing out positions entirely before the snapshot.
Although the balance snapshot is less likely to produce market volatility as compared to a hard fork, traders using margin should plan for the possibility of extreme volatility and unfavorable forced liquidations surrounding the balance snapshot. As always, traders using margin are strongly encouraged to set limit stops.
Kraken is not responsible for the loss of airdropped funds for any reason
Kraken makes no promises, guarantees or warranties on the outcome of the airdrop. We will make our best effort to handle things in a way that benefits the most clients, but clients should manage their own wallets/coins if they want perfect control.
Kraken will not be held responsible for any circumstances that result in the loss of FLR. In the event that some FLR is lost, we would need to distribute the loss in a suitably equitable fashion.