Use an Ethereum protocol on a particularly congested day and you'll surely balk at the fees, which can easily surpass the value of your trade if you are, say, swapping crypto worth no more than the change in your pocket. Help is at hand in the form of alternative layer-1 blockchains like Solana, Avalanche, and the subject of today’s lecture: Fantom.
Fantom is a smart contract-supporting blockchain, powered by its native FTM token. Following a $40 million raise, Fantom launched its mainnet in December 2019. Its blockchain is fast and cheap, and in 2021 proved that it could support its own decentralized finance (DeFi) industry.
The price of FTM rose from $0.17 in July 2021 to highs of $3.3 by January 2022—suggesting that there is an appetite for alternatives to Ethereum.
How does Fantom work?
The Fantom blockchain partly achieves its speed through a directed acyclic graph (DAG), where blockchain transaction histories are displayed as a “hashgraph”—a graph of blockchain hashes. It’s similar to the technology that powers Hedera Hashgraph.
Another innovation is Fantom’s “leaderless” consensus mechanism, Lachesis. The mechanism is a variant of proof of stake, called asynchronous byzantine fault tolerant (aBFT). The advantage is that it can operate without a hitch even if a third of transaction data is fraudulent.
This means that Fantom’s blockchain nodes can validate transactions independently (the “asynchronous” in aBFT), without having to work through a queue of transactions. While it can take several minutes to clear a transaction on Ethereum and Bitcoin, transactions should take just two seconds on Fantom.
Unlike Solana, Fantom is compatible with the Ethereum virtual machine (EVM). That makes it easy to port decentralized applications built on Ethereum right over to Fantom. (Avalanche, Binance Smart Chain (BSC) and Polygon are also EVM compatible). To that end, FTM is available as an ERC-20 token and a BEP-20 token—meaning there’s a version of the token that conforms to the Ethereum and Binance Smart Chain token standards.
What's so special about Fantom?
Fantom’s success is best understood in the context of the so-called L1 wars. Ethereum is slow and expensive to use, and will remain so (assuming activity remains the same) until upgrades to the protocol are implemented. That could take a couple of years. This is too late for people who want to make the most of decentralized finance protocols today, but who find ETH native DeFi apps too expensive to use.
Some developers, like those building Loopring, Abritrum and Optimism, opted to build layer-2, or L2, solutions to speed up the Ethereum experience without getting rid of Ethereum’s security.
Other blockchains decided to replace Ethereum entirely—Ethereum is known as the base layer, L1 or layer-1. Solana, Avalanche, Polkadot, Terra (technically a Cosmos appchain) and Fantom are the leading horses in this race—although all native coins have dipped considerably from their all-time highs. Of these L1 protocols, Terra’s coin, LUNA, is the largest with a market cap of $29 billion as of March 2022, followed by Solana with a market cap of $26 billion. FTM trails behind at $3.4 billion.
Each of these blockchains is host to their own DeFi cottage industry. According to data on DeFi Llama, Terra’s DeFi market is the largest after Ethereum. As of March 2022, Ethereum has $111 billion in total value locked (TVL) and Terra has $22 billion. Fantom, at fifth place, has $7.25 billion. That’s larger than Solana’s $6.69 billion.
Who’s building on Fantom?
- 💸 Fantom Finance: allows for synthetic minting, liquid staking, decentralized lending and trading.
- 🧙♀️ SpookySwap: A decentralized automatic market maker. Think Uniswap but on Fantom. Its token, amusingly, has the ticker “BOO”.
- ⛓️ Multichain: a cross-chain router protocol.
- 💱 Solidly: A decentralized exchange with little slippage. Solidly was created by Andre Cronje, the inventor of Yearn Finance. It operates on a (3,3) model, like OlypmusDAO.
- 👻 Geist Finance: A decentralized lending protocol.
Where to buy Fantom
You can buy Fantom from a decentralized or centralized exchange. According to CoinMarketCap, the largest markets for FTM are Binance, KuCoin and FTX. FTM is supported by cross-chain bridges like Wormhole and Multichain, and because it’s issued as an ERC-20 and BEP-20 token, you can trade it on Ethereum’s Uniswap and Binance Smart Chain’s PancakeSwap.
The future of FTM
The future of FTM will be determined by the victor of the L1 wars. Right now, Ethereum is losing ground to emergent rival Layer 1 blockchains, like Solana, Fantom and Avalanche.
Time will tell (sorry) whether the crypto industry becomes a winner-takes-all market where a single blockchain dominates, or if crypto will indulge in a multi-chain future where blockchains become application-specific.
That said, it is noteworthy that FTM’s market cap is about seven times lower than SOL’s—perhaps the victor has already been decided.
“Although I’ve decided to move away from crypto and DeFi, the Fantom team has been honorable throughout my engagement with them.
I believe they are on the right technology path, and I have no doubts that they will continue to succeed.”
— Fantom Foundation (@FantomFDN) March 11, 2022
In March 2022, Fantom was one of a number of decentralized finance projects rocked by the decision of developers Andre Cronje and Anton Nell to leave the DeFi space. Cronje served as chair of the Fantom Foundation's Technology Council between 2018 and 2019, and as a technical advisor to the project from 2018 onwards; Nell was a senior solutions architect at the Fantom Foundation.
With the price of FTM dropping by double digits in the wake of their announcement, the Fantom Foundation issued a statement stressing that neither were “core developers” of Fantom and claiming that technology development on the project "is continuing as normal."