Fantom is a blockchain network with smart contract functionality whose scalability surpasses that of any other blockchain. The protocol uses a special consensus model combined with a Directed Acyclic Graph (DAG) blockchain to deliver a faster transaction throughput. Fantom does this all while scaling with demand and charging the lowest fees possible.
Today’s article discusses the tokenomics behind Fantom and how the project succeeds in bringing scalability to smart contracts. But before diving into the tokenomics, let’s have a quick reminder about what the project is and how it works.
What Is Fantom?
Fantom is a layer-1 blockchain providing fast and low-cost transactions for DeFi dApps. The protocol supports smart contracts and is completely EVM-compatible, allowing developers to quickly deploy dApps created on Ethereum on Fantom. At the height of the last bull run, Fantom represented the most formidable layer-1 solution for the DeFi ecosystem.
You can think of Fantom as an alternative to Ethereum. When network congestion is high and investors can’t be bothered to pay hundreds of dollars in fees, investors temporarily switch over to Fantom. You can use AAVE, Uniswap, and other popular dApps on Fantom just like you would on Ethereum. The fees and transaction speed are noticeably lower.
Fantom’s power stems from two factors: Directed acyclic graph (DAG) and Lachesis consensus mechanism.
Directed acyclic graph is a form of a pseudo-blockchain based on distributed ledger technology that functions similar to traditional decentralized blockchains. DAG helps facilitate decentralized, public, and anonymous transactions in a much more efficient way.
In contrast to blockchains, DAGs process transactions simultaneously. They share sets of transactions to neighboring nodes who confirm the accurate state of the ledger. Not only one node processes a block of transactions, multiple nodes participate in this process in a parallel way.
Then there’s the Lachesis consensus mechanism. Lachesis represents a way for nodes to achieve consensus among themselves regarding the state of the ledger. The model represents an asynchronous Proof of Stake mechanism based on staking tokens, rather than mining them.
Lachesis removes the limitations imposed by traditional blockchain technology. It helps the protocol be leaderless, asynchronous, final, and byzantine fault-tolerant. Transactions don’t rely on being validated by a single node. Instead, nodes reach consensus independently and execute smart contracts at different times.
Fantom Tokenomics Explained
Fantom’s capabilities must be supported by an equally powerful tokenomics model. The following two sections explain Fantom’s distribution model and the use cases that it’s designed for. Let’s first start with the token supply and token distribution.
Fantom’s token supply was fully premined prior to the protocol’s mainnet launch. Roughly half of the token supply was sold to private investors who helped contribute to the project’s development. The remainder went to token rewards, airdrops, team members, advisors, and other entities.
Here is a collection of funding rounds that took place prior to the token’s launch:
- Seed sale: Sold 100 million FTM tokens at a price of $0.016 per token in February 2018, raising $1.6 million in total.
- First private sale: Sold 805 million FTM tokens at a price of $0.031 per token in May 2018, raising a total of $24.8 million.
- Second private sale: Sold 371 million tokens at a price of $0.035 per token in June 2018, raising a total of $12.9 million.
- Public sale (ICO): Sold 50 million tokens at a price of $0.04 per token in June 2018, raising a total of $2.65 million.
The initial token supply involves a total of 3,175,000,000 FTM tokens. The supply was distributed through numerous private sales, as well as the ICO crowdsale. The supply was distributed in the following way:
- Premined rewards and airdrops: 32.75%
- Founders and project: 25.49%
- Investors: 41.76%
At the time of writing, CoinMarketCap ranks Fantom at 62th place. The project has a market cap worth $591 million. The token is priced at $0.23 per token.
The token has a max supply of 3,175,000,000 tokens, out of which 80% are in circulating supply. The circulating supply involves 2,545,000,000 tokens in total.
Fantom has achieved an all-time-high at $3.46 on October 28th, 2021. The token hit an all-time-low two years ago at a price of $0.0019.
Fantom Use Cases
The Fantom protocol is primarily used in the world of decentralized finance to provide a boost to various applications by helping them scale. The technology behind Fantom, notably DAG and the Lachesis consensus model, is what helps the protocol achieve lighting speed at incredibly low costs.
The FTM token itself has several use cases. For one, it is used to reward investors who secure the network by staking their tokens. Because Fantom is a Proof of Staking protocol, it requires users to lock tokens. Doing so prevents malicious actors from performing 51% attacks, submitting malicious proposals, and attacking the network in other ways.
Investors who stake receive staking rewards in the form of an annual yield. The yield is distributed throughout the year. The interest rate depends on the number of tokens being locked and other factors.
FTM is also used in the sphere of governance. Investors can submit governance proposals and bring changes to the protocol. They can influence Fantom’s direction, edit protocol parameters, and invite developers to introduce new features. Investors must have a certain number of FTM in order to submit proposals – the limit prevents proposal spam.
Lastly, the protocol uses FTM to charge fees. Every time a user issues a transaction, he must divert a portion of his FTM to pay for the transaction. The system works similarly to Ethereum’s gas system. Because of Fantom’s scalability, the network’s gas fees are incredibly cheap.
Fantom is an ingenious blockchain network with smart contract capability that features impeccable scalability. The protocol combines several technologies in order to offer cheap and fast transactions – mainly supported by DAG and the Lachesis consensus mechanism.
Fantom’s tokenomics is geared towards incentivizing investors to stake their tokens and stabilize the network. An equally important number of tokens has been sold in private funding rounds to help the team grow and develop the project.
Being a Proof of Stake network, Fantom’s tokenomics revolve around securing the network. The technological aspect of the project pushes users to invest in the network and own tokens either for speculative purposes or for paying gas fees when interacting with dApps.
Fantom has had a great run in the previous bull run. But for it to reclaim its adoption level and establish a foothold in DeFi yet again, it must think of different ways of incentivizing investors to use their protocol.
If you want to learn more about Fantom, I recommend reading the following articles: