What Is Flow?
Designed from scratch, Flow (FLOW) is a fast, developer-friendly, and decentralized blockchain that allows for the easy creation of next-gen games, decentralized applications (dApps), and digital assets that power them. In this article, we’ll look at what Flow is and how Flow works to ship applications quickly.
The blockchain’s beta mainnet was launched in June 2020 by Dapper Labs, a Canadian company that is also behind other popular blockchain-based products like NBA Top Shot, Dapper Wallet, and CryptoKitties. The Flow was designed to provide exceptional experiences right from the word go at a mainstream scale. As of writing, the blockchain is being used by some of the leading brands and developers in the world.
The blockchain is powered by its native token FLOW, which serves multiple purposes within the Flow ecosystem — a means of value exchange, transaction fees, staking, future protocol governance, and account storage deposits.
To completely understand what Flow is, we should look into what it aims to accomplish. The Flow blockchain aligns with Dapper Labs’ mission to make the world more trustworthy and open with the help of blockchain technology, fun, and games. Created for the open worlds and designed from the ground up, Flow aims to be always developer and user friendly, modular, and future-proof.
What Is Flow - Key Points
- Multi-role and multi-node architecture to overcome Scalability Trilemma
- Use of highly efficient native Cadence programming language
- Easy on-ramping of starting crypto/blockchain users
- A buzzing ecosystem of multi-billion-dollar brands
- Founded by a team that assisted in creating Ethereum’s revolutionary ERC-721 NFT standard
- Provision for upgradeable smart contracts
How Flow Works
After learning what Flow is, let’s dig a little deeper and understand how Flow works. The Flow blockchain is based on a unique multi-role architecture that gives it immense scalability without the need for sharding. As a result, the blockchain can witness massive improvements in its throughput and speed while preserving its developer-friendly, shared-execution environment. The smart contracts created and deployed on Flow can be managed like Lego blocks to power applications catering to billions of people. Its uniqueness stems from the four pillars that make it stand out in a crowded blockchain market. These are:
Multi-Role Architecture
Flow has a unique and innovative design that allows it to scale up significantly and serve billions of users without ever having to reduce the decentralization of consensus or use sharding.
Resource-Oriented Programming
All smart contracts on Flow are written using the Cadence programming language, one of the safest and easiest languages for creating dApps and crypto assets.
Developer Ergonomics
The blockchain is made for developers focused on results and interested in delivering valuable products to their community. Features such as built-in logging support, upgradeable smart contracts, and Flow Emulator help developers ship applications quickly.
Consumer Onboarding
Positioned toward mainstream users, Flow facilitates easy, low-friction, and safe on-ramping from fiat to crypto and optimizes users’ experiences in all possible ways.
Flow is secured with a Proof of Stake consensus algorithm called ‘HotStuff’, which uses a unique validation mechanism. The validators’ jobs are separated vertically (rather than horizontally, as in the case of shards) into four different roles: Collection, Consensus, Execution, and Verification. It allows for massive scaling, lower cost, and higher throughput. Furthermore, unlike other Layer 1 blockchains, Flow provides upgradeable smart contracts featuring specified sections that can be transparently and securely upgraded and patched for bugs, even after deployment.
How Flow Tackles the Scalability Trilemma
Our understanding of how Flow works will remain incomplete if we don’t delve into how Flow blockchain tackles the popular ‘Scalability Trilemma’.
Scalability Trilemma is an essential and famous conjecture made by Ethereum co-founder Vitalik Buterin. According to it, a blockchain cannot simultaneously accomplish security, scalability, and decentralization. While it isn’t formally proven, it continues to be almost always correct for all homogenous blockchain designs. Hence, if every node in the blockchain is assigned the same role, there’s no choice but to compromise on at least one of these three aspects.
Although Flow doesn’t disprove the scalability trilemma, it has found a clever way to dodge around it. In a conventional blockchain, every node is required to maintain the entire state of the blockchain at all times and perform all transaction processing. However, in the case of Flow, it lets different nodes take care of different roles, and by doing so, it can choose the right trade-offs for each part of the system. In other words, although every validator node in Flow takes part in the validation of every transaction, it participates in only one of its stages. As a result, each node specializes in and dramatically improves the efficiency of the particular stage it is responsible.
Even though all validator nodes require staking, they are separated vertically based on their jobs as follows:
- Consensus nodes - These nodes decide the transactions’ presence and order in the blockchain.
- Execution nodes - These nodes are responsible for performing computations related to every transaction.
- Verification nodes - These nodes are responsible for keeping the execution nodes in check.
- Collection nodes - These improve the data availability and network connectivity for decentralized applications.
Flow maximizes the decentralization and security aspect of the Consensus nodes, as this area of the system is most vulnerable to attacks. Although doing so limits the scalability aspect of the Consensus nodes, that isn’t much of a problem because these nodes aren’t expected to handle computationally expensive tasks. Instead, those tasks are reserved for the Execution nodes.
The Execution nodes are meant to be highly scalable and are expected to deliver extremely high computational throughput. While this compromises their decentralization and security, the problem is addressed by ensuring that highly decentralized and secure Verification nodes confirm each transaction.
In a nutshell, even though the scalability trilemma still holds good in Flow, the overall system can dodge it by offsetting the weaknesses of one part with the strengths of others.
Where Is Flow Used?
Now that we have familiarized ourselves with what Flow is and also learned in good detail how Flow works, let’s look into some of its essential use cases:
For In-App Payments
FLOW token serves as the native currency for the smart contracts, games, and apps running on the Flow blockchain. Users and developers need it for processing any transaction on the network. The compatibility for the FLOW token can be built directly into the apps, allowing for in-app purchases, service charges, peer-to-peer payments, and more.
To Run a Validator Node
People holding FLOW tokens can also use them as a security deposit to run validator nodes on the Flow blockchain and thus contribute to its security. In return, they earn more FLOW tokens as block generation rewards and a small percentage of the network’s transaction fees - both of which combined are referred to as staking rewards. Flow relies on transaction fees as the primary rewarding resource for node operators, supplementing it with inflation.
To Earn Staking Rewards
You can stake your FLOW tokens right here on OKX, through your native web wallet, without dealing with any technical complexities. Visit our staking page, where you can earn anywhere from 3% to 6.7% APY for staking terms varying from 30 to 90 days at press time.
To Pay for Storage
The storage space of Flow is mainly associated with individual user accounts and not so much with the smart contracts. Flow covers this storage cost by requiring all respective user account holders to maintain a minimum token balance (a small fraction of FLOW) as a locked deposit. It’s never spent and only held out of circulation. If a user creates an account through an app running on Flow, the developer usually provides this balance on the user’s behalf.
To Participate in Flow Network’s Governance
All on-chain governance on Flow will be done through FLOW tokens in the future. These governance mechanisms haven’t been finalized yet. However, according to the project’s whitepaper, holding FLOW will allow users to participate in governance decisions related to ecosystem developments, protocol parameters, and protocol upgrades.
Flow’s ecosystem, as of writing, comprises some of the top-rated VC-backed startups, development studios, crypto exchanges, Web3.0 builders and entertainment brands like: Warner Music, UFC, Ubisoft, Sumo Digital, nWay, Animoca Brands, Opensea, Ballerz, Genies, Huobi, Binance, Gate.io, Coinbase, Samsung, Dr. Seuss, CryptoKitties, La Liga, and more. Over 7000 developers are building 1000+ active projects on Flow at the time of writing. Over 11 million wallet accounts are hosted on the blockchain. The blockchain also boasts an ecosystem fund that amounts to $725+ million. The Flow Ecosystem Fund is reportedly the most significant joint commitment made for boosting growth and innovation in any blockchain ecosystem to date.
Flow Founders / History
Born out of the need for a better and more efficient blockchain for its projects, Dapper Labs created Flow and launched its beta mainnet in June 2020.
Dapper Labs was founded in March 2018 in Vancouver, BC, Canada, by three individuals named Mack Flavelle, Dieter Shirley, and Roham Gharegozlou. This team assisted in the creation of Ethereum’s revolutionary and widely-used ERC-721 non-fungible token (NFT) standard. Even before Dapper Labs was conceptualized, their first project was an NFT series of collectible cartoon cat characters named CryptoKitties. The project became an instant hit in late 2017, which can be gauged from the fact that one of the CryptoKitties fetched $140,000 during an art auction in May 2018.
However, CryptoKitties' rapid popularity almost broke the Ethereum blockchain, rendering it temporarily unusable at one point in December 2017. When faced with such scalability problems on the Ethereum blockchain, Dapper Labs decided to create their own blockchain, which was ideal for NFTs and microtransactions, and named it Flow.
Flow Tokenomics
Flow’s genesis block was created in June 2020, with a total of 1.25 billion FLOW. Of these, 32% were allocated for ecosystem development, 20% to Dapper Labs, 18% to the project’s development team, and 10% to community sales. The remaining 8.9% and 11.1% were allocated to the project’s small and large backers. The development team’s allocation is scheduled to be unlocked over three years. As learned from the project’s whitepaper, Dapper Labs intends to hold its 250 million tokens as a part of its long-term treasury.
As of writing, the total supply of FLOW stands at 1.39 billion tokens, implying that an additional 140 million tokens have been generated and distributed as validator rewards since its TGE. The circulating supply as of writing is 1.036 billion.
How Is Flow Created/Mined?
New FLOW tokens are generated and distributed amongst the Flow blockchain’s validator nodes. As discussed earlier, while understanding how Flow works, the validator nodes are segregated into four different types – Execution nodes, Verification nodes, Collection nodes, and Consensus nodes - based on the stage of transaction processing that they specialize in. They must stake a certain amount of FLOW tokens and have the technical know-how and infrastructure to perform the validation job. In return, they are rewarded by Flow through a combination of new token issuance (inflation) and transaction fees. Combined together, these two incentives are referred to as the ‘total reward’.
To incentivize validators to take up node roles that are most urgent at any given time, the FLOW rewards are assigned to them accordingly. The protocol automatically adjusts these values from time to time. The initial split (based on an optimum security model) between these node pools is depicted in the graphic below:
Flow Competition and How It Fares
Any blockchain network that aspires to solve the scalability trilemma with a unique solution can be considered a good competition of Flow. However, whenever people talk about Flow, they instantly compare it with Ethereum.
Ethereum, which as of writing, is transitioning from Proof of Work to Proof of Stake consensus mechanism and will soon adopt a 64-chain sharding model (to make it more scalable), may prove to be an ideal competitor of Flow going forward. However, because Flow was born out of Ethereum’s inefficiencies, this comparison may be unjustified as of writing, especially when the latter is in a transitional phase.
Other emerging dApp and Web3.0 development blockchains like Polkadot and Cosmos make attractive competitors for Flow. Both these blockchains currently adopt a sharding model wherein they horizontally separate the labor between their nodes. In contrast, Flow divides the nodes’ labor vertically into different validation stages.
Whereas Polkadot’s transactions throughout can go up to 1 million (in ideal conditions), Cosmos has a throughput of 10,000 TPS. Talking about Flow, it, too, is capable of accomplishing 10,000 TPS. Furthermore, each block takes around 6 minutes to get created on the Polkadot’s Relay Chain. In comparison, Cosmos has a 1 second block creation time, while Flow’s block creation time is around 2.5 seconds.
Flow Partnerships & Investors
Regarding Flow investors, there are all kinds of individual and institutional entities invested in the Flow blockchain and in its native token. Some of Flow’s noteworthy investors include American basketball players Andre Iguodala and Aaron Gordon, Andrew Chan, Carlos Kronen, Chris Sheng Jia Ye, Bellgarde Capital, BlockTower Capital, Accomplice, Coinbase Ventures, SNZ, LD Capital, Sky Group Limited, Version One Ventures, a16z Crypto, Warner Music, and Novel TMT Ventures.
Since its launch, the platform has grown tremendously and has created fruitful partnerships with world-renowned brands to expand its ecosystem continuously. A few well-known names that constitute Flow’s ecosystem are UFC, NBA, NFL, Samsung, Warner Music Group, La Liga, Ubisoft, Animoca Brands, Instagram, Mattel, Shopify, and Youtube.
Flow Strengths, Weaknesses, Opportunities, Threats
Strengths
Flow’s biggest strength lies in the multi-node architecture that efficiently works around the scalability trilemma and serves dApps that cater to millions of users. With Cadence as its primary programming language, the blockchain is highly developer and user-friendly. Having been extensively battle-tested in dynamic production environments, it enables devs to easily create apps that people can use. Another of its pluses is its upgradeable smart contracts that allow developers to go back and make changes if something doesn’t work as expected, without having to start all over again.
Flow is also backed by the same team that was instrumental in creating Ethereum’s ERC-721 NFT token standard. Its ecosystem is already buzzing with multi-billion-dollar brands, giving it a significant edge over its competitors.
Weaknesses
Flow still has some way to go when offering a transparent and entirely decentralized on-chain governance environment. In addition, with around 32% of its validation nodes run by a single entity, its transaction processing is not entirely decentralized yet, making it vulnerable to attacks.
Opportunities
While Flow does an excellent job at vertical scalability, allowing it to function as a super-efficient and independent blockchain for dApps and smart contracts, it must do much more in the blockchain interoperability department if it wants to excel and continue growing in a constantly evolving blockchain industry. Blockchains like Polkadot and Cosmos are already way ahead of others in this area.
The gradually increasing adoption of blockchain tech and cryptocurrencies in different parts of the world also provides Flow a great opportunity to improve its share in a market that Ethereum largely dominates as of writing.
Threats
The biggest threat to Flow is its competition. Although it's a unique and innovative project, other popular platforms like Solana, Cardano, Avalanche, Polkadot, Cosmos, and others have their vast user bases and are continuously introducing innovative upgrades and improvements to expand their market shares. Other than that, there’s still plenty of ambiguity and uncertainty in the regulatory treatment of crypto projects in different parts of the world. Any negative development in this regard can negatively impact Flow’s future growth.
Flow Roadmap
The Flow had grown tremendously from when it was initially conceptualized amid the CryptoKitties debacle to its beta mainnet launch in June 2020 to where it stands at the time of writing. Although there’s no clear future roadmap provided on Flow’s official website, if regular updates posted on its official blog are anything to go by, the Flow team is quite proactive in terms of keeping the community updated about all project-related developments, and seems to be well on its way to build the future of community and culture in Web3.
Flow Updates, News, Highlights
In a significant development for the Flow ecosystem, the blockchain announced in October 2021 that it had made Filecoin its official storage collaborator. The move was meant to ensure that the NFT assets of issuers and users could be made securely available everywhere. With this partnership, users of the Flow blockchain can easily mint NFTs and utilize Filecoin’s Interplanetary File System (IPFS) to store these tokens in the latter’s decentralized storage facility.
In more recent Flow news, the Dapper Labs team announced via a blog post on the project’s official website starting July 5, 2022, that permissionless smart contract deployment has been made live on the Flow blockchain. It marks a significant milestone for the project as it implies that anyone can deploy a smart contract on Flow mainnet without needing to review it.
Where To Buy Flow?
It’s highly recommended that you buy FLOW only from a recognized and established cryptocurrency exchange like OKX. We allow quick and hassle-free FLOW purchases in a fiat currency of your liking. Moreover, you can pay with various options, including credit/ debit cards, bank transfers, third-party processors, e-Wallets, and even cash. Creating an OKX account is easy and can be done in a few minutes.
How To Store Flow?
You can use your native OKX wallet to store your purchased FLOW tokens for as long as you want. This wallet comes equipped with industry-leading security protocols that ensure the maximum safety of your crypto funds. That said, you’re free to transfer your FLOW tokens to an external crypto wallet too. Some of the recommended ones on the Flow website are Blocto, Dapper Wallet, Finoa, Lilico, and Ledger wallet.
How To Stake Flow
If you don’t want to deal with the technical know-how of validating blockchain transactions but still want to earn passive income through staking rewards, you can stake your FLOW tokens on a validator node and receive a share of the staking rewards.
You can stake your FLOW tokens to either run a validator node on the Flow blockchain or to delegate your stake to a node interested in doing that job. The returns are in the form of staking rewards which are a combination of freshly minted Flow tokens and transaction fees collected across the network.
To stake FLOW, you can use the Flow Port, a platform for interacting with the Flow blockchain, managing your assets, stake, and more. However, please note this platform works only with Blocto and Ledger wallets.
Alternatively, the easier way to go about it is through our native OKX Staking platform. Simply access our ‘Staking’ page from under the ‘Grow’ header menu option and look up FLOW in the search bar. As of writing, you can earn handsome annual yields ranging from 3% to 6.7% on staking terms ranging from 30 to 90 days.
FAQ About Flow
How Is Flow Different From the Other Blockchains?
Flow is different from the other blockchains in the manner that it addresses the scalability trilemma by dividing the performance and security-related work between different specialized nodes. It allows it to scale significantly and efficiently as compared to its counterparts. In addition, it offers upgradeable smart contracts that allow for transparent and secure patching of bugs and modifications in pre-specified portions of the deployed smart contracts.
What Is the Transaction Fee on Flow Blockchain?
There’s a flat transaction fee of 0.00001 FLOW per transaction on the Flow network.
Does Flow Have Any Block Explorers?
Yes. There are two block explorers available for Flow as of writing. These are Flowscan and BigDipper.
What Applications Can Be Built on Flow?
Flow is a blockchain that has been specifically designed for developing Web3.0 apps that promise excellent user experience, whether they’re to do with decentralized finance (DeFi), Metaverse, gaming, or NFTs.
