FAssets V1.1: Bridging to V2

FAssets V1.1 is an upgraded version of Flare’s original FAssets protocol, introduced to boost liquidity and usability before the deployment of FAssets V2. One of the key features of V1.1 is the removal of minting caps, allowing users to generate FXRP without arbitrary limits. This change significantly enhances the flexibility and accessibility of synthetic assets on the network. FXRP serves as a trustless representation of XRP on Flare and is the first asset deployed under this model.

A major structural improvement in V1.1 is the introduction of the Core Vault. This new component centralizes liquidity, enabling agents to operate more efficiently while supporting large redemption volumes. With the Core Vault managing a shared pool of capital, the risk of liquidity fragmentation across multiple agents is reduced. This design supports more stable operations, especially in volatile market conditions where redemptions may spike.

In V1.0, agents were required to reserve 100% of the asset value in collateral, which created barriers to entry and restricted overall liquidity. V1.1 addresses this by reducing the capital requirement and enabling idle assets to be re-used through a common vault system. As a result, more participants can take part in the protocol, and FXRP can scale more effectively. The release of FAssets V1.1 represents an important step in the transition to a more scalable and widely adopted protocol under V2. While V2 will introduce fully decentralized minting and additional asset types, V1.1 lays the groundwork by addressing liquidity, capital efficiency, and agent participation.

In terms of real-world application, the FAssets V1.1 protocol has shown measurable traction during its testing phase on the Songbird network. According to Flare’s published data, from December 2024 to February 2025, over 11,800 FXRP and FXDOGE minting transactions were processed. This activity resulted in the bridging of approximately 676,000 XRP and 8.9 million DOGE, highlighting growing user participation. More than 1,200 unique wallets interacted with the protocol during this period, and liquidity agents facilitated redemptions without slippage across multiple market conditions. These early figures suggest that the protocol’s structural upgrades—such as centralized liquidity via the Core Vault and improved capital efficiency—have effectively lowered participation barriers and improved usability ahead of the broader V2 deployment

Trusted Execution Environments (TEEs)

Trusted Execution Environments (TEEs) are secure sections of modern processors that isolate data and operations from the rest of the system, including the operating system and any malicious code that may reside there. This hardware-based security model allows sensitive tasks to be carried out with protection against tampering or surveillance. On Flare, TEEs play a key role in enabling secure, automated, and decentralized management of external blockchain assets.

Flare integrates TEEs to enable protocol-governed control over blockchain wallets on other networks. These environments allow private keys to be securely managed and transactions to be signed without exposing sensitive information to external systems. When combined with Flare’s validator-based consensus, TEEs enable precise execution of cross-chain transactions while maintaining the transparency and reliability required by decentralized applications.

In practical terms, TEEs can execute scripts or logic only when validated by the Flare network. This means that they serve as verifiable execution nodes, acting only when a smart contract or governance process on Flare authorizes an operation. This is essential for secure asset movements across chains, confidential computations, and enforcing rules in multi-party processes.

The ability to combine TEE functionality with Flare’s enshrined data protocols expands the types of applications that can be built on the network. Use cases involving conditional payments, automated cross-chain swaps, or off-chain data verification become possible without relying on external bridges or custodians.

Protocol Managed Wallets (PMWs)

Protocol Managed Wallets (PMWs) are externally held blockchain wallets—such as on Bitcoin or Ethereum—that are governed by rules defined on the Flare Network. These wallets are not controlled by individual users but instead by a network of TEEs that execute signed operations when approved by the Flare consensus mechanism. This structure allows the Flare Network to securely interact with other blockchains at the protocol level.

Each PMW is associated with a set of conditions and logic enforced on Flare. For example, the Flare protocol might authorize a transfer of BTC from a PMW based on a smart contract trigger or a vote by token holders. Once the condition is validated, a group of TEEs signs the transaction, and it is broadcast to the external chain. This creates a bridge between Flare-based applications and non-smart contract environments.

PMWs eliminate the need for centralized custodians or traditional bridges, both of which have been major security risks in the broader blockchain ecosystem. Because private keys are never exposed or held by any single party, and because all actions are verified on-chain, PMWs significantly reduce the attack surface for cross-chain operations. This creates a more reliable way to manage value across ecosystems.

Addressing TEE’s Potential Risks

While TEEs introduce powerful capabilities, they are not without potential risks. One of the most critical concerns is the reliance on hardware security. If a vulnerability is discovered in the TEE of a specific chip manufacturer, the entire trust model could be compromised. To minimize this exposure, Flare proposes a consortium model in which multiple TEEs from different vendors are used in parallel, spreading risk across the system.

Another concern involves side-channel attacks, where sensitive information might be leaked through unintended channels such as power usage or timing variations. These types of attacks are difficult to execute but have been demonstrated in academic settings. Flare’s approach includes selecting hardened environments, applying strict verification logic, and maintaining constant audits to detect unusual behavior across the TEE network.

There is also the issue of governance and validator accountability. TEEs must only act when valid instructions are received from the Flare protocol, and this requires careful design of coordination logic. Validators and TEE participants must follow defined rules and cryptographic proofs to ensure that no unauthorized action is taken. This structure helps maintain trust even in the presence of adversarial conditions.

Use Cases

The combination of TEEs and PMWs unlocks a wide range of cross-chain and data-driven applications on Flare. In decentralized finance (DeFi), applications can now interact with external assets like BTC or DOGE without using centralized bridges. Protocols can create lending markets, liquidity pools, and synthetic assets backed by external tokens managed directly through PMWs.

Beyond DeFi, TEEs support confidential computing, enabling private transactions, secure identity verification, and protected data handling. For example, applications could verify a user’s off-chain credit score or identity without revealing the data to third parties. This allows regulated financial products and compliance-driven solutions to be built on Flare.

Flare’s architecture also supports automation for cross-chain workflows. For instance, an insurance contract could automatically issue a payout based on external weather data, verified through a TEE, and then executed by a PMW on another chain. This kind of setup brings real-world automation into smart contracts without human intervention or external oracles.

Highlights

• FAssets V1.1 removes minting limits and introduces the Core Vault, improving capital efficiency and laying the groundwork for a smooth transition to FAssets V2.
• Trusted Execution Environments (TEEs) enable secure off-chain computations, key management, and cross-chain operations governed directly by Flare protocols.
• Protocol Managed Wallets (PMWs) allow smart contracts on Flare to control external blockchain wallets, enabling cross-chain actions without centralized bridges or custodians.
• Risks associated with TEEs are mitigated through multi-vendor support, layered validation, and on-chain enforcement, ensuring that execution remains secure and verifiable.
• The integration of TEEs and PMWs unlocks advanced use cases, including decentralized cross-chain DeFi, confidential data processing, and verifiable AI-powered applications.