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Analysis
TABLE OF CONTENTS

Fantom & FTM Token Explained: Why Is It So Unique?

4.5 | by Khor Win Win

During the aftermath of the crypto crash of May 2021, we witnessed the rise of various EVM-compatible blockchains such as Binance Smart Chain and Matic, pulling more users than ever before with incredibly fast transactions and even lower transaction fees. Fantom is no exception, attracting veterans and newbies alike to its blockchain with its various Halloween-themed dApps.

fantom price chart coingecko

Since the announcement of their 370 million FTM incentive program in August last year, worth approximately $850 million at current prices, builders and innovators alike have flocked to the Fantom blockchain, with many more interesting projects mushrooming to cater to the wide range of existing users. Andre Cronje, the founder of Yearn, has also made his proclivity towards Fantom well-known, launching multiple projects there such as the NFT marketplace Artion as well as his upcoming collaboration with Daniele Sestagalli of Abracadabra.

Granted that Cronje is currently part of the team at the Fantom Foundation, there clearly must be something else that has helped Fantom become the behemoth of a blockchain that it is today. So what exactly is Fantom, what makes it so special and how does it stack up against other decentralized networks?

 

What is Fantom and Why Is It Special?

Fantom is a scalable and decentralized smart contract platform that utilizes a Proof-of-Stake model to secure the network. Founded in 2018 by the Fantom Foundation, the protocol uses its proprietary Lachesis consensus mechanism, which can support multiple other blockchain layers on top of it. Made up of a team of dedicated engineers and researchers, the foundation plans to introduce a more scalable, secure, and decentralized infrastructure through Fantom and to support its adoption. Based on the Foundation’s experiments, the consensus engine could process up to 10,000 transactions per second, without taking into account the execution speed for confirmed transactions. 

The Lachesis protocol allows the network to achieve consensus using asynchronous Byzantine fault tolerance, or aBFT. In other words, it is similar to a network that adopts Byzantine fault tolerance, where even if one-third of the nodes are malicious, the network can still be trusted to validate and produce blocks with the correct order and timing. 

The ‘asynchronous’ part means that nodes can process and convey information at different times. As such, ABFT networks allow for some messages to be lost or indefinitely delayed. Although it is much more challenging to identify bad actors if messages can be delayed indefinitely, it showcases the network’s reliability and practicality in a more realistic setting.

As mentioned previously, many different networks and execution layers can be built on top of Fantom with Lachesis at its core to provide consensus and security. The first of these layers, known as Opera, was launched on 27th December 2019, a Layer 1 smart contract platform that is compatible with the Ethereum Virtual Machine (EVM). This allows developers to create various decentralized applications or port them over from Ethereum or other EVM-compatible networks such as Polygon or Binance Smart Chain. As of 9th February, the Opera mainnet holds over $8.7 billion dollars and hosts more than 150 different applications.

fantom tvl defillama

Source: DeFiLlama

Similarly, Opera uses a Proof-of-Stake model and transactions can often be completed within 1 to 2 seconds.  In traditional Proof-of-Stake blockchains, some validators will dictate which transactions are valid, where they are chosen either through random selection or based on their total stake, but this is not the case for Opera. The network is designed to be completely leaderless thus transaction validity is not completely controlled by any specific group of validators.

 

What is the FTM Token Used For?

Like most Layer-1 blockchains, Fantom features its own FTM token, which serves a variety of purposes in the ecosystem. For instance, every transaction performed on the Opera mainnet, whether it is minting an NFT or deploying a smart contract, requires users to pay a network fee in the form of FTM. However, these fees are typically small and a simple swap transaction could cost as low as 0.02 FTM. So, what else can we use the FTM tokens for?

ftm token utility flowchart

Securing the Network

FTM token holders can choose to delegate their tokens to a validator or become a validator themselves to secure the network. Before delegating your tokens, you need to first stake it. To begin staking, you would only need a minimum of 1 FTM and you may choose to lock up your tokens for a fixed period of time, anywhere from 2 weeks up to 365 days. The longer the lock-up period, the higher the rate of return. Stakers can then choose which validator to delegate their tokens to, but there is a fixed delegation fee of 15% that is paid to that specific validator.

To become a validator, you will need to stake at least 500,000 FTM tokens, as well as have the necessary hardware required to operate a validator node. To be exact, you would need at least 4 virtual CPUs running at 3.1 gigahertz and 3 terabytes of storage. However, there is an ongoing proposal to lower the amount of FTM tokens required. In addition to receiving rewards based on their own staked amount, validators will also receive an extra 15% of returns from their delegators.

Even after the FTM tokens are staked, users are still able to fully utilize their assets on the network via Fantom’s Liquid Staking solution. FTM stakers can mint an equal amount of staked FTM (sFTM), which can be used on other applications on Fantom which support it. Furthermore, there are no minting and redemption fees involved.

Voting For Change

Like most native tokens for decentralized protocols, FTM is a vital part of the governance process, where FTM stakers can propose and vote on changes to the network. However unlikeother applications, voting is done entirely on-chain, where 1 FTM is equivalent to 1 vote and is only available to delegators and validators. Stakers can also submit on-chain proposals at the cost of 100 FTM, which will be burnt upon submission. 

Fantom offers a more flexible approach for voters, where they can respond with a simple yes or no, or they can choose the degree of agreement for each solution in the proposal. In other words, voters can choose to agree with all of the proposed options, but with varying levels of agreement based on a scale of 0 to 4. ‘0’ means complete disagreement while ‘4’ represents full agreement.

DeFi

FTM can be traded on most major centralized and decentralized exchanges such as Binance and Uniswap. Moreover, FTM is also available on both Ethereum and Binance Chain, as ERC-20 and BEP-2 tokens respectively. As such, it is highly liquid and commonly supported by many native applications on the Fantom blockchain as well as on other blockchains. 

For example, token holders can overcollateralize their FTM tokens on Geist to borrow other assets. Additionally, FTM is also used as a base asset for different liquidity pools on many of Fantom’s native exchanges. Holders can provide liquidity in conjunction with another asset to earn token rewards from these platforms.

spookyswap lp farm fantom

 

Fantom Ecosystem

Although the projects currently launched on Fantom are often associated with ghostly elements, Fantom is far from being known as a ‘ghost chain’. With more than 100 projects launched and over $10 billion in Total Value Locked (TVL), Fantom has a robust ecosystem of permissionless applications for DeFi, NFT, and GameFi enthusiasts.

Although most of these platforms are native to Fantom, characterized by their names being associated with the occult such as Spookyswap and Spiritswap, projects from other alternative chains have bridged their services over to attract even more liquidity and users. Popular examples are Sushiswap and Curve, both DeFi applications that have risen to prominence on Ethereum first. In this section, we will take a closer look at some of the more popular live and upcoming projects on the Fantom blockchain.

Scream

scream lending borrowing interface

Evoking memories of the popular horror movie franchise, Scream is a decentralized lending protocol that allows users to lend out their tokens to earn rewards. Depositors can also obtain leverage in the form of other assets by using their deposits as collateral.

Similar to other existing lending protocols such as Aave or Compound, lenders will receive interest-bearing scTokens such as scBTC or scUSDC to represent their share of the total deposits for that particular asset. Based on the quanitity and type of scTokens received, users can then borrow up to a specific amount of another asset.

Besides lending and borrowing, users can stake the protocol’s governance token, SCREAM, to earn even more rewards. Staked SCREAM, or xSCREAM rewards holders with the 0.5% fees from farm deposits as well as a 10% harvesting fee, which is redistributed in the form of more SCREAM. In short, stake some SCREAM, earn more SCREAM.

SpookySwap

spookyswap exchange user interface

In keeping with Fantom’s ‘spooky’ vibes, SpookySwap is one of the network’s first few decentralized exchanges (DEXs). Much like Sushiswap or Uniswap on Ethereum, it operates using an automated market maker (AMM), allowing users to seamlessly exchange their tokens via liquidity pools. For each swap transaction, users pay a 0.2% transaction fee, where 0.17% are paid to liquidity providers and the remainder is forwarded to stakers of the platform’s governance token, BOO.

Liquidity providers, or LPs, receive spLP tokens based on their share of the deposits for a particular liquidity pair. While providing liquidity, not only can they earn trading fees but they can also stake their received spLP tokens on Spookyswap’s very own farms, earning even more BOO rewards.

As mentioned previously, BOO can also be staked and converted into xBOO, where it will continue to accrue more BOO by using the trading fees for buybacks. But that’s not all, as your xBOO can also be further staked into other pools to earn various tokens of your choice.

Yearn Finance

yearn finance fantom interface

As one of the original DeFi protocols that experienced immense popularity on Ethereum in late 2020, Yearn Finance has found its second wind on Fantom as one of the top 3 protocols on the network, with over $1 billion in Total Value locked. For the uninitiated, Yearn is primarily a yield aggregator that seeks to provide the highest yields to depositors using automated strategies for various tokens. However, the platform also boasts other products such as the Iron Bank, allowing users to lend and borrow assets.

Yearn’s core product is their yVaults, which seeks to automatically generate the highest yield based on the current opportunities in the market. A summary of each vault’s strategy is available and varies depending on the asset. For example, a typical strategy would be to supply funds to other lending platforms to earn tokens rewards. The earned tokens would then be sold back for more of the original asset and added back into the vault. 

Normally, these strategies require many transactions to be done manually, incurring transaction costs for each step of the process. However, the vaults are now doing all the work, allowing yield farmers to socialize gas costs and shift between more profitable strategies.

Upon deposit, users will receive yVault tokens depending on which pool they have entered. For example, depositors in the USDC vault will receive yvUSDC tokens. These tokens represent the users’ share of the yVault, and as long as the pool remains profitable, it can be used to claim an increasing share of the underlying asset. In other words, depositors can just sit back as their assets continuously compound over time.

Solidly

solidly cover image

From the mind of Andre Cronje of Yearn, Solidly is a newly released DEX on Fantom which aims to facilitate low slippage trades on both stablecoins and other tokens. The platform is slated to include various new features that aim to align emissions with incentives provided by other existing DeFi protocols.

Solidly introduces the concept of ve(3,3) lockers, where lockers are the parties responsible for voting on which liquidity pools receive more incentives. Fees earned by the chosen pools are redirected to ve(3,3) lockers, but only to participants who voted on those particular pools. In short, rewards from the liquidity pools are fully distributed to the actual supporters instead of getting diluted by non-aligned participants.

As DEXs become the new hotbed for protocols to bootstrap and incentivize liquidity, it is apparent that the current AMM model requires a few additional features to accommodate this user base. Some of these features include the permissionless support of gauges and bribes, similar to what is seen in the Curve ecosystem, as well as allowing third parties to add token incentives for their own liquidity pools.

Although the exchange's token, SOLID, has not been launched yet, Andre had planned to take a snapshot of the top 20 protocols on Fantom with the highest TVL as its primary recipients. As soon as the announcement was made, users from other chains rushed back into Fantom while multiple projects from across various aspects of DeFi, rallied their communities to ensure their spot as one of the chosen few. 

In the midst of all the chaos, protocols such as veDAO and 0xDAO were even set up with the sole intention of making the cut. When the dust settled, 25 protocols were finally chosen and they were each given a veNFT, representing their portion of locked SOLID tokens to allocate to users. According to Andre’s latest update, token emissions will begin on the 17th of February.

While these are just some of the many protocols on Fantom, there are still a great number of notable projects on the network, each catering to a specific set of users or even just for casual crypto enthusiasts. Here are some of them:

PaintSwap

PaintSwap is a DEX and NFT marketplace where users can create and sell their own creations for FTM or the platform’s native token, BRUSH. Sales fees on the platform are used to buy back and burn BRUSH.

 

Ancestral Umans

With a spiritual and somewhat ethereal aesthetic, Ancestral Umans is a collection of 3000 NFTs on the Fantom blockchain, featuring various members of the titular species. Based on the lore established by the creator, they are considered the ancestors of the Umans that are currently on Ethereum. 


Fantums

Featuring 10,860 ghostly avatars, Fantums is an NFT collection on Fantom where owners can participate in duels with their Fantums to earn the project’s FOO token. Each player wages 100 FOO before combat and the spoils go to the victor. But beware, for most Fantums that are killed in battle will be lost forever!

 

Fantom vs. Solana vs. Ethereum

Now that we’ve dived into the Fantom blockchain’s inner workings, it becomes apparent that the Opera mainnet doesn’t seem to be just any ordinary EVM implementation. It has attracted its fair share of maximalists due to its unique features and explosive growth during the multi-chain hype in 2021. But in reality, how does it measure up against other smart contract platforms such as Ethereum and Solana?

 

Fantom Opera

Ethereum

Solana

Programming Languages

Solidity, Vyper

Solidity, Vyper

Rust, C, C++

Consensus Algorithm

Lachesis Proof-of-Stake

Proof-of-Work

Proof-of-History

Time-to-finality

~1 second

~1 minute

~13 seconds

Total Value Locked 

(based on DefiLlama as of 7th February 2022)

~$9.2B

~$134.2B

~$8.5B

Pros

  • High throughput

  • Low transaction fees

  • EVM-compatible

  • Most popular blockchain for dApps

  • High composability between different platforms

  • High throughput

  • Low transaction fees

Cons

  • Fairly centralized, low number of validators

  • Slow transaction speed

  • Extremely high fees

  • Non-EVM compatible

- Prone to outages

Native dApps

  • SpookySwap 

  • Geist Finance

  • Tarot              

  • Curve Finance 

  • Aave                

  • Uniswap                

  • Raydium  

  • Orca        

  • Saber           

Source: CoinGecko Research

While Solana and Fantom are both comparable in terms of speed and TVL, Fantom’s EVM approach through their Opera mainnet makes it much easier for users to bridge over and use the native applications. Additionally, existing projects with a solid reputation and following could easily port over their applications onto Fantom, allowing users to have a similar experience to Ethereum but with much lower transaction costs. This opens up many more opportunities to avid yield farmers who do not have much capital. 

Although the number of validators securing the Fantom blockchain should be a cause for concern, having too many, especially those with equipment that is not up to par, will only degrade the network's performance. Even though Solana has more than 1,400 validators, the network has suffered multiple outages, some even lasting as long as 48 hours.

 

Closing Thoughts

From its humble origins, Fantom has quickly become one of the most popular blockchains in the space. Powered by its proprietary Lachesis consensus mechanism and its generous incentive programs, their Opera mainnet now hosts a plethora of dApps across multiple disciplines in a continuously expanding ecosystem. However, the ability of Fantom’s consensus algorithm to also accommodate for the Cosmos SDK means that its long-term goal still stands; to become the network of networks.

With a combination of lightning-fast transaction times and incredibly low fees, it's not hard to see why Fantom, as well as other alternative chains, are quickly becoming the networks of choice for many newcomers. Imagine being able to try out different Ethereum-based applications such as Sushiswap or Yearn but without any of the exorbitant gas fees!

Yet, the recent rise of Layer-2 rollups such as Optimism, Arbitrum, and even zkSync may cast some doubts about the longevity of alternative Layer-1 Chains. Will Fantom fade into obscurity as these new scaling solutions take off? Well, if more interoperable networks are built on top of Fantom, it can very well solidify Fantom as the hub for many different projects, each with its own blockchain to cater to the masses.

For now, point your Metamask towards the Opera Fantom network and bridge over some of your assets to have a taste of some spooky dApps!

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Khor Win Win
Khor Win Win

Win Win is an avid gamer, interested in navigating the vast world of NFTs and the cryptoverse. Follow the author on Twitter @0x5uff3r

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