Fantom is a blockchain project with smart functionality that offers a brand new dApp ecosystem to crypto natives. Fantom is designed to compete with Ethereum and other smart contract platforms by delivering far higher scalability and security thanks to its DAG (Directed Acyclic Graph) blockchain.
Smart contracts are what drive crypto markets. Without them, DeFi wouldn’t exist in the first place. As blockchain protocols evolve and users strive towards decentralization in all facets of crypto life, smart contracts become the focal point of all activity.
One problem remains: smart contracts aren’t 100% effective yet. Projects fail to juggle decentralization, security, and scalability at the same time. Some opt to optimize existing technologies, some switch to proof of stake, and some create something entirely different.
In this article, I’ll introduce you to one of the most innovative smart contract platforms as of yet: Fantom. You’ll learn how Fantom works, what the FTM token is used for, and how the project compares to other smart contract ecosystems.
What Is Fantom (FTM)?
Fantom is a smart contract platform that uses a DAG-based distributed ledger combined with Byzantine-fault tolerant rules to achieve consensus on a Proof of Stake blockchain. Some of the project’s technical highlights include:
- Facilitates smart contracts on a pseudo-blockchain by using DAGs and Lachesis consensus
- Sorts and records transactions using Lamport timestamps
- Allows nodes to work independently, without requiring feedback or awareness of other nodes
Fantom calls itself a “fast, high-throughput open-source smart contract platform for digital assets and dApps.” The project seeks to deliver unprecedented speed, security, and reliability through its aBFT consensus protocol - offering instant transactions at low fees.
More than 200 dApps exist on the Fantom ecosystem. These include decentralized exchanges, cross-chain bridges, lending and borrowing protocols, yield optimizers, NFT platforms, GameFi projects, tools, and wallets. You might have heard of several Fantom dApps such as:
Fantom has successfully raised around $40 million during several public and private ICOs held in 2018. As of September 2022, the protocol is ranked 67th on CoinMarketCap’s leaderboard and possesses a market cap of $585 million. The FTM token has a circulating supply of 2.55 billion tokens.
Who Founded Fantom?
South Korean computer scientist Ahn Byung Ik founded Fantom in 2018. Previously, he was the president of the Korea Foodtech Association and had a role in creating SikSin – a Korean product similar to Yelp.
In 2019, the Fantom Foundation took over the protocol and effectively replaced Ahn. The Fantom Foundation is a registered entity located in the Cayman Islands that has a team made of 28 scientists, researchers, software engineers, and designers.
Fantom sold up to 40% of its total token supply in June 2018, raising $369 million by selling three billion tokens.
How Does Fantom (FTM) Work?
Fantom’s foundation is based on two core features: Directed acyclic graph (DAG) and Lachesis consensus mechanism.
Directed acyclic graph allows Fantom to issue a tokenized digital currency that functions similarly to a cryptocurrency created on the blockchain. DAGs are another version of distributed ledgers that facilitate decentralized, anonymous, and public transactions.
The difference between the two is that DAGs process transactions simultaneously, sharing sets of transactions to neighboring nodes who in return confirm them on the ledger. So rather than having one node mine and confirming a block of transactions, DAG allows all nodes to do the process in parallel. This makes it more efficient and powerful compared to standard blockchains.
Lachesis consensus mechanism represents the Fantom’s blockchain system for achieving consensus among nodes. To dumb it down, Lachesis is basically Fantom’s native version of an asynchronous Proof of Stake consensus model.
The Lachesis mechanism is applied on top of the DAG in order to remove some of the common limitations imposed by traditional blockchain technology. These limitations are commonly referred to in the blockchain trilemma, which seeks to make sense of balancing decentralization, security, and scalability.
The novel consensus model allows Fantom to be leaderless, asynchronous, byzantine fault-tolerant, and final. Transactions do not rely on the validation of a single node, nodes reach consensus independently and execute smart contracts at varying times. Only 66% of Fantom’s nodes are needed to validate a transaction, and the transactions themselves are final, or immutable as we like to call them.
Keep in mind that Fantom’s Lachesis is fully integrated with the Ethereum Virtual Machine (EVM). This means that a developer can write, deploy, and execute smart contracts on Fantom as they would on Ethereum. This allows blockchain developers to easily switch to Fantom and convert existing dApps to Fantom if they wish.
The Fantom DeFi Ecosystem: Opera
Opera is Fantom’s smart contract ecosystem that allows users to participate in DeFi and interact with dApps. Opera is completely compatible with EVM, which means that:
- Developers can deploy Ethereum dApps on Fantom
- Developers can write Fantom dApps just like they’d write Ethereum dApps
EVM-compatibility enables Fantom users to use Ethereum dApps such as Curve and AAVE without exiting their native ecosystem. They’re also incentivized to participate in Opera because of the fUSD - a stablecoin tied to the USD dollar on a 1:1 ratio. Fantom provides various incentives to users using fUSD on protocols such as decentralized exchanges and lending protocols.
As of September 2022, Fantom holds a total of $485 million worth of TVL across all of its dApps.
What is the FTM token used for?
The Fantom (FTM) token has a function in three key areas: governance, staking, and transaction fees.
Holders can spend FTM on creating and voting on governance proposals. An active governance community is highly important for establishing decentralization, pushing the protocol forward, and creating incentives for existing and new investors.
FTM investors can stake their tokens to secure the Fantom network. Improving security through staking is one of the main necessities of establishing a working Proof of Staking network. That’s why Fantom rewards its stakers and provides them with up to 13% APY for a one-year staking commitment.
Stakes can decide how long they want to stake and whether they wish to lock their tokens. They also compound staking rewards (rewards are unlocked every few hours). They can also use a synthetic FTM derivative (sFTM) to participate in Fantom’s DeFi ecosystem while staking.
Fantom is an ingenious smart contract platform that delivers lighting-fast transactions at extremely cheap prices. Users can deploy and write dApps written in EVM-friendly code, which allows the protocol to quickly integrate millions of users from Ethereum’s ecosystem without moving a finger.
During the initial DeFi wave in 2020, Fantom has successfully attracted many investors to its ecosystem. However, the project failed to hold onto its success as users quickly switched back and forth between competing DeFi ecosystems and L2 protocols.
If Fantom manages to create incentives for both holders and developers that will outweigh the benefits found on dominant smart contract platforms – mainly Ethereum and Solana – the project will reclaim its glory. But if it fails to do so, it will suffer the same fate of AVAX, Polygon, Harmony, and several other dead ghost chains.
If you want to learn more about smart contract platforms, I recommend reading the following articles: