We develop a model of the fluctuation dynamo in which the magnetic field is confined to thin flux ropes advected by a multiscale model of turbulence. Magnetic dissipation occurs only via reconnection of the flux ropes. This model can be viewed as an implementation of the asymptotic limit R_{m}-->infinity for a continuous magnetic field, where magnetic dissipation is strongly localized to small regions of strong-field gradients. We investigate the kinetic-energy release into heat mediated by the dynamo action, both in our model and by solving the induction equation with the same flow. We find that a flux-rope dynamo is an order of magnitude more efficient at converting mechanical energy into heat. The probability density of the magnetic energy release in reconnections has a power-law form with the slope -3 , consistent with the solar corona heating by nanoflares.