Flow blockchain and token: an L1 for NFTs and GameFi

05.10.2022

Intermediate

#Dapper Labs #Flow blockchain #sports #UFC

Key points

Flow is a blockchain platform designed for issuing NFTs and building gaming applications. The project lets developers create dapps, digital collectibles and metaverses.
Flow’s architecture is based on task separation: each node performs a distinct function. This approach lifts network performance by an order of magnitude. Support for the Cadence programming language when writing smart contracts simplifies issuing non-fungible tokens (NFTs).
The platform was created by Dapper Labs, the maker of the first popular blockchain game, CryptoKitties. The Flow blockchain hosts an ecosystem backed by leading sports organisations, including the NBA, UFC and NFL. Meta integrated Flow-issued NFTs into Instagram and Facebook.

Who created Flow and when

The Flow blockchain is a project by Dapper Labs, which became known for the blockchain game CryptoKitties. Its gameplay involved “raising” and bouts between characters tied to non-fungible tokens (NFTs) on Ethereum. CryptoKitties became the first popular blockchain game and, at the end of 2017, led to severe congestion on Ethereum and, as a result, a general rise in network fees.

Dapper Labs decided to build its own, more scalable blockchain, tailored to NFT operations. Flow’s mainnet launched in 2020. The project’s founder is Dieter Shirley, and the chief executive is Roham Gharegozlou. Shirley is known as the creator of the ERC-721 standard, and Gharegozlou previously headed one of the first venture funds for crypto projects, Axiom Zen.

In September 2020, via a public sale of FLOW tokens, the developers raised $19.5m. In May 2022, Dapper Labs attracted $725m to an ecosystem growth fund. Among its participants are Andreessen Horowitz, Coatue, Greenfield One, Liberty City Ventures and others. The fund provides grants and direct investments in the FLOW cryptocurrency. It supports gaming and infrastructure projects and helps content creators.

What problem Flow addresses

Many projects issue NFTs on Ethereum, but during periods of heavy load transaction costs can reach tens of dollars. The Flow blockchain tackles scaling and high fees without sharding.

Flow is intended for NFTs, gaming projects and other applications. It is suitable for users unfamiliar with blockchain technology: addresses are short, and participants can operate without managing private keys.

The platform targets large decentralised applications that use NFTs — mostly GameFi projects.

Flow has a native cryptocurrency, traded under the ticker FLOW, and an official wallet for storing it — Dapper Wallet. Dapper Labs builds its own projects on the platform, but the Flow protocol is open to third-party developers and companies.

Flow’s architecture

Flow uses a specialised design that delivers high performance without network fragmentation (sharding).

Nodes vary in computational power — something often ignored by other blockchains’ designers — which leads to inefficient use of resources. To optimise them, the architecture adopts task separation. Nodes are grouped by low and high performance to handle two classes of work. “Objective” tasks require high performance, while “subjective” ones can be handled with minimal compute.

Node groups handle different functions. Flow uses four types of nodes:

Collection nodes process and “package” transactions. They pass only hashes to validators, and full transaction data to other nodes.

Consensus nodes (validators) form preliminary versions of blocks via a Proof-of-Stake algorithm and resolve subjective tasks by voting. This type of node operates solely on transaction hashes and performs no other computation.

Execution nodes process transactions and smart contracts. They determine the network state and then produce final versions of blocks. They also perform objective computations with a single correct answer. To process transactions, they request data from collection nodes.

Verification nodes selectively check transactions. Their work helps eliminate conflicts of interest, which would arise if consensus nodes were to verify the very blocks they formed. The algorithm also excludes verification nodes that do no work or overload the network.

Flow also constructs blocks by splitting work into four stages, engaging each node type at a specific point. Consensus nodes only check new blocks and add them to the overall chain, while computation and transaction processing are handled by other node types. While results are being computed, consensus nodes are already forming the next block.

This approach enables more rational resource use and lifts throughput by more than 50 times compared with peers, say the authors of the Flow white paper.

Flow supports smart contracts. The environment lets developers test applications, keep logs and use a network emulator. The platform uses the Cadence programming language, which simplifies creating NFTs.

Node requirements and staking FLOW

Because Flow uses PoS, all nodes must stake a certain amount of FLOW to operate. The minimum depends on node type:

execution — 1.25m FLOW;
consensus — 500,000 FLOW;
collection — 250,000 FLOW;
verification — 135,000 FLOW.

These thresholds reflect differing node performance. An execution node needs high compute power, which requires greater investment. The most performant operators are best off taking this role. Splitting functions across nodes is an alternative to sharding and distributed data storage. The designers say the algorithm ensures reliability and long-term data durability.

FLOW tokenomics

FLOW is the native cryptocurrency of the eponymous blockchain. Coins are needed to pay fees, execute smart contracts and run the consensus algorithm. FLOW is also used as collateral for issued tokens.

Initially, Flow’s cryptocurrency was distributed to investors via a public token sale held at the end of 2020 on the CoinList platform. Dapper Labs sold 100m FLOW in total. A further 25m were distributed on 6 October 2020. The sold coins were locked for one year, preventing free resale.

At the time of writing, more than 1bn FLOW are in circulation, and the maximum supply is 1.39bn. The largest holder of this cryptocurrency is the Flow Foundation. It has 250m FLOW reserved for the project’s long-term development.

Transactions on the network can be tracked via the Flow block explorer. The resource offers analytics, including the amount staked, the number of nodes by type and staking parameters. It also provides up-to-date data on rewards. As of 22 September, according to Staking Rewards, staking yields 8.3% per year.

The largest projects on Flow

Flow is among the most successful and popular networks for NFTs. Dapper Labs achieved this by bringing into the project heavyweight partners such as the National Basketball Association (NBA) and Ultimate Fighting Championship (UFC).

After launch, the developers created the first NFT projects, notably the NBA Top Shot platform, created in collaboration with the NBA. It lets users release NFT collections linked to the league’s biggest basketball teams and their contests. The content of NBA Top Shot tokens is typically an image of a player or an interesting video clip from a match.

Example of NFT content on NBA Top Shot — Example of NFT content on the NBA Top Shot platform. Data: NBA Top Shot

NBA Top Shot served as effective advertising for Dapper Labs, drawing attention to the Flow blockchain from other major brands. The platform has long topped the ranking of the most popular digital-collectibles products by Dapp Radar. The success of NBA Top Shot also allowed Dapper Labs to conduct a major funding round in spring 2021.

In January 2022, the NFT platform UFC Strike went live — an official project by Dapper Strike and the famed mixed-martial-arts organisation, which reused many NBA Top Shot mechanics.

In August of the same year, the NFL All Day application went live on Flow, developed by Dapper Labs in partnership with the National Football League (NFL) of the United States. By the end of September, sales volume on the platform exceeded that of NBA Top Shot. According to the block explorer, as of 25 September 2022 more than 15m accounts had been created on Flow and over 1,700 smart contracts deployed. The ecosystem includes several dozen active NFT projects and surpasses Ethereum by the number of transactions with non-fungible tokens.

Governance and ecosystem development on Flow

In autumn 2021, Flow integrated a decentralised cloud file-storage solution from the Filecoin blockchain platform. At the same time, Dapper Labs signed a long-term collaboration agreement with Google Cloud to support Flow’s scaling.

One of Dapper Labs’ acquisitions was the startup Brud, whose solutions are designed to add tools for rapid creation of decentralised autonomous organisations (DAOs) to the Flow ecosystem. Flow has a bounty programme for this area. For now, the adoption and implementation of proposals takes place off-chain.

Flow has drawn attention beyond sport: in summer 2022 Meta announced imminent blockchain integration in Instagram. According to Mark Zuckerberg, support for non-fungible tokens is available in more than a hundred countries. A little later, Meta enabled native Flow support for NFT avatars in Facebook.

Back in 2020, Dapper Labs said it planned to move CryptoKitties from Ethereum to Flow. This would enable new gameplay features and allow the tokens to be used in other applications. The exact migration timeline is not yet known.