March 7, 2023
8 min read
Fantom is a cryptocurrency ecosystem with its own decentralized finance (DeFi). On its DAG-ecosystem, you can mint, borrow, stake, and earn, all while paying a fraction of a cent for fees and having to wait just 1 second. Andre Cronje, a prolific developer most known for building Yearn Finance, built most of its DeFi ecosystem.
Of course, the perfect cryptocurrency network doesn't exist. If it did, though, Fantom Opera would come close. It's no surprise its native token FTM has already made the investors 100x returns. If you want to know if it still has moonshot potential, come and join us as we share our research with you.
The company behind Fantom is the Fantom Foundation, a non-profit company registered in the Cayman Islands. In 2018, Dr. Ahn Byung Ik founded Fantom. He's a very capable computer scientist with a lot of experience. Mr. Ik then left soon after, and the current Michael Kong took over.
The team started in 2018 with an idea. They wanted to create an efficiently scalable blockchain that processes tens of thousands of transactions per second. Fantom aims to overcome Ethereum's challenges, all while doing better. The team put in the hard work in 2019 for that idea to come to fruition. While they"ve managed to achieve only 4500 transactions per second, it still makes for an extremely pleasurable user experience.
After much peer review and cooperation from top researchers worldwide, they"ve reached the main goal for 2019. On December 27, they debuted the Fantom Opera mainnet. That was their first showcase of a fully powered Lachesis consensus. Lachesis is a protocol of rules that the validators use to agree on what happened. We'll get into Lachesis in detail below.
2020 started without much hype in the crypto environment. Still, the team used this dull time to develop the platform's DeFi stack. At the end of 2020, Bitcoin finally broke its 2018 all-time high. That sparked the last wave of crypto excitement.
Fantom was perfectly positioned to take full advantage of all that excitement. Fantom started 2021 with only 5,000 unique wallet addresses and finished the year with over 1.5 million.
The trend so far had an upward trajectory, but many factors can make or break a project. That's why it's important to research the project yourself and make your own decisions. Let's start with the research part, shall we?
The Fantom Foundation's current CEO and CIO is Michael Kong. He's also the only remaining member of the original team. He has an Information Technology and Finance background. He assisted Fantom's rise in the first half of 2018 and became an integral part of the Foundation.
Fantom is more often associated with Andre Cronje. Kong actually introduced Cronje to the project initially. Cronje is a prolific South African DeFi developer, most renowned for building Yearn Finance. He's the DeFi Architect that built much of Fantom's decentralized finance.
The rest of Fantom's team is a mix of talented individuals with rich backgrounds and experience. The team also boasts strong connections with Central Asian governments. This puts Fantom in an exclusive club, as only a handful of crypto projects have managed to onboard governments so far.
Distributed Ledger Technology (DLT) is arguably today's most important financial innovation. It's a decentralized way to record and share transaction data. Among the different types of DLTs, two of the oldest contestants are the Directed Acyclic Graph (DAG) and Blockchain.
A DAG is a unique piece of data structure that combines different pieces of information. It can be an alternative to blockchain. It also reaches consensus in a very different manner.
In essence, it's a blockless distributed ledger that is scalable and lightweight. The consensus mechanism differs from one DAG project to another. Now, come with me as we look at how a DAG compares to the blockchain.
While Bitcoin was the first blockchain project that reached mainstream adoption, the first DAG arrived in 2015. Though many have touted the DAG as much more revolutionary, significant advantages come at some cost. Let's take a deep dive into each one's specifications.
The blockchain's quality is measured in three elements: speed, scalability, and security. That said, finding the balance between the three is more difficult than you may think. This problem is the blockchain trilemma, a term the Ethereum founder, Vitalik Buterin, coined.
The blockchain trilemma claims, that blockchain developers have to make some trade-offs that prevent them from achieving all 3 items listed below:
1. Decentralization: Decentralization has different levels. That's because a blockchain can have any amount of validators. When a network has more validators, it's harder to attack the network with fake transactions. That means the network's security would be better. Still, that also means consensus will take a long time.
2. Scalability: The network's scalability is determined by the number of transactions per second (TPS) it can process. The network must be scalable, otherwise, the gas prices can quickly rise beyond any rationale, making it all but useless.
3. Security: The network's security is arguably the most important. Since the code's nature is all open-source, it's publicly available. That means it must be robust to withstand any hacking attempt.
While the DAG's characteristics directly address the speed and scalability issues, it doesn't yet completely bypass the blockchain trilemma problem. Its consensus mechanism allows for high throughput, without having to sacrifice security. Yet, the requirements to become a validator must consequently be very high, making the network less decentralized compared to its competitors.
You can think of a DAG as a group of gossips fact-checking the storyline across time. To prevent the gossips from taking advantage of the situation, extremely harsh penalties are typically in place. Fantom uses a special Proof-of-Stake called Lachesis.
Lachesis protocol uses a DAG algorithm that is non-deterministic and asynchronous. It's Byzantine-Fault resistant up to a third of the validator nodes being malicious. That means it takes a third of the validators to successfully spread false transactions. To address that, the Lachesis validators must put up a large amount of FTM tokens as collateral.
The current minimum figure for becoming a validator is 500,000 FTM. At the time of writing, these are valued at a little over 1 million USD. If a node is malicious, the entire amount is taken away. That's why the network has only 57 active validators at the time of writing. That's considerably more centralized than some blockchain counterparts.
Still, you don't need to be a validator to earn rewards. You can delegate your FTM to a validator that you trust. They can participate in the DAG for you. The only requirement is to delegate at least 1 FTM.
The Fantom network is built for usability, focusing on speed and scalability. Here are more precise specifications:
As a trade-off for fast finality and high throughput, malicious validators need to face extremely high penalties. That's why validators need to put a large amount of FTM as collateral. That, in turn, makes the network have only a few validators.
The Fantom network is EVM-compatible by design. That means any decentralized application's code on Ethereum works on Fantom with only minor alterations. Besides the main DeFi hub of the network, Fantom Finance, you have many other applications to choose from. The list contains apps like Uniswap, Curve, and Cream.
The common denominator between all the above-mentioned applications is a MetaMask wallet. I'll assume you have it installed and safely stored the seed phrase on a piece of paper. The first thing we'll do is add the Fantom Opera network in 3 simple steps.
Network Name: Fantom Opera
New RPC URL: https://rpc.ftm.tools/ or https://rpcapi.fantom.network
Chain ID: 250
Currency Symbol: FTM
Block Explorer URL: https://ftmscan.com/
After you enter the network details, click Save. Then, you'll automatically connect to the network. Now, let's find out how we can add the FTM to the wallet.
You have two main ways of getting the FTM token on the MetaMask wallet via the Fantom Opera network. The first is the cheap way via centralized exchanges, most notable among them Binance. If you opt for Binance, make sure to select to send it via the Fantom network!
The second option is the decentralized way. You can alternatively also purchase the FTM token on the Ethereum mainnet and bridge it to the Opera network. However this process will include paying for notoriously high Ethereum fees, so you must have a good reason behind it.
While creating the Fantom wallet is an easy process, we'll still guide you through it step by step.
Once you have the funds on your MetaMask and connect to the Fantom platform, you can send the FTM to your fWallet. To get the address, go to the fWallet on your dashboard and click Receive. You can then send it there for a negligible fee.
Now that you have FTM in your fWallet, you can participate in the Fantom DeFi. Minting a stablecoin is one of the main pillars of decentralized finance. Essentially, it's a decentralized loan. Yet, instead of bringing in wrapped tokens from other blockchains, Fantom features synthetic assets (synths). You can buy these with fUSD, a synthetic stablecoin, backed by the wrapped FTM tokens.
You can mint the fUSD in the fMint. Yet, you first have to lock your collateral wFTM. The easiest way to obtain it is to buy it directly in the fSwap with your FTM at a 1:1 ratio. At the time of writing, fUSD's value is 55 cents. That's quite a large deviation from the 1 USD mark.
Now, you can click Lock Collateral, and you're ready to mint the fUSD! The minimum collateral you have to provide is 3 to 1. Still, if you keep it above a healthy 5 to 1, you receive some wFTM as a reward. If the collateral ratio falls below 3 to 1, your collateral is frozen, not liquidated. To unfreeze it, just add more funds to improve the ratio.
The collateralization ratio (C-ratio) is calculated by the price of 1 USD, not fUSD. Here's an example: let's assume that you lock 10 wFTM, worth 3 USD apiece. You want to borrow at the minimum C-ratio available– you want to mint as much as possible.
Your total collateral is worth:
10 FTM · 3 USD/FTM = 30 USD
At the minimum C-ratio, your maximum mint is calculated:
30 USD / 3 = 10 USD
You can't mint 10 USD worth of fUSD. You can only mint exactly the same amount as if 1 fUSD was worth exactly 1 USD. In our case, you could mint 10 fUSD. This heavy overcollateralization allows for a better user experience, even during turbulent times.
If you want to use your fUSD to purchase other synths on the fUNI–a Fantom version of Uniswap–one fUSD is worth whatever its price is at the moment. What's nice about fMint is that you can collateralize your staked FTM.
Becoming a validator will be very expensive. That said, you can still delegate 1 FTM at minimum to any validator. If you choose to delegate your FTM to a validator, we strongly suggest you do your own research and pick a trustworthy one.
You can view all available validators on the FTMScan, the Fantom blockchain explorer. When choosing a validator, always choose an active one with zero downtime.
Once you pick a validator that suits you, connect to Fantom DeFi with your fWallet. If you have FTM in your fWallet, you can easily delegate. Simply head over to Staking and choose the amount and validator. The longer you lock your collateral for, the better yield you receive.
Besides Fantom Finance, Fantom features many other decentralized finance applications. Working in tandem with Fantom Finance, they make for a complete ecosystem. Let's discuss 3 dApps on the Fantom Network.
Spookyswap is an automated market maker (AMM). In other words, it's a decentralized exchange (DEX). It offers the usual functionalities, like swapping, providing liquidity, and single-staking pools. That said, it also offers bridging assets and their official NFT. The Spookyswap protocol's native token is BOO.
The bridge offers a connection between multiple networks, like Ethereum, Binance Smart Chain, Polygon, Avalanche, Arbitrum, Cronos, Harmony, OEC, and obviously Fantom. Their NFTs called Magicats are the Genesis limited series and 5000 will be minted altogether.
Another well-known Fantom protocol is Scream. It's a decentralized lending protocol where users can borrow and lend capital using their crypto as collateral. Scream protocol's native token is SCREAM.
Scream also features the ScLoans. These are undercollateralized decentralized flash loans.
That means you can get a loan even if you don't have the collateral, but you must return it within the same block. That's especially handy for arbitrageurs looking to exploit the price differences and consequently bring the markets in equilibrium.
Geist Finance is an all-in-one money-market and AMM protocol. In plain terms, Geist allows you to lend, borrow, stake, or pool your assets on the platform. Users can also receive flash loans, similar to Scream. Geist also rivals its other DEX competitors. The Geist Finance protocol's native token is GEIST.
Geist is completely without governance or ownership. Half the network's earnings go to GEIST stakers. If you're providing liquidity, your earned GEIST unlocks with a three-month vesting period. You can also unlock it immediately if you're willing to pay a 50% penalty. The penalty is then redistributed to GEIST stakers.
All the above platforms and others on the Fantom Opera network, like Tarot and Beethoven X, have one thing in common. They all have a spooky Halloween-like style, separating themselves and the Fantom Opera network from others.
FTM is the Fantom blockchain's native token. The FTM also exists on the Ethereum (ERC20), Binance Chain (BEP2), or the Binance Smart Chain (BEP20) token. You can use it for staking, governance, network fees, and as collateral for using Fantom Finance.
The total FTM supply on all blockchains is 3.175 billion FTM. All of the FTM were minted during the mainnet launch in December 2019.
The current staking rewards are between 4.63% and 14.18%. It depends on two parameters:
Get a better idea of your annual percentage rate with this calculator. When you stake your FTM, it becomes locked. That's why you should unlock them before you can sell them. That said, you can provide your stake as collateral to mint synths.
Fantom introduced its governance system in early 2021. To resolve, or reject, any strategic decision, a vote in the Fantom Finance ecosystem takes place. Only stakers who have staked their tokens in the network can participate.
They can propose new changes, cast their votes, and define the roadmap. If you delegate your stake to a validator and don't vote, the system takes your validator's vote.
Among the first proposals, 2 votes were about reimbursing two slashed validators. If penalties can be reversed just like that, we have to ask: how effective is the penalizing system?
Fantom's governance system prompts stakers to show their level of agreement on a scale of 0 to 4. If you want to know more about how many votes it takes, you can check here.
All altcoins" price activity is very dependent on Bitcoin's direction. That said, the crypto environment has been maturing, and regulations have been catching up. That's why I believe most altcoins will eventually decouple from Bitcoin.
One of the best ways to measure DeFi dApps" popularity is the Total Value Locked (TVL). Fantom is holding strong in this regard: it has 9.2 billion USD of TVL at the time of writing. To put this into perspective, Ethereum's TVL sits at 86 billion USD. Getting listed on other major centralized exchanges could help drive new capital into the ecosystem.
It seems the general push is towards lowering validator requirements. That said, it's up to debate how much lower they can go. Validators need to lock a large amount as collateral to prevent successful attacks on the network. That means the network can't excessively reduce requirements without risking security.
Lately, Andre Cronje has been teasing the public with cryptic announcements on his Twitter. He hinted at cooperating with another prolific blockchain coder, Daniele Sestagalli, the man behind several protocols. So far, they"ve only been dropping hints, but even the hints are exciting knowing the team behind the wheel.
When evaluating anything in life, we should always look at the pros and the cons. That's how we can gain a balanced perspective on all matters in life. That's also the case with Fantom. Even though cheap transactions make for an extremely pleasurable user experience, nothing comes without a cost. In DeFi, it's our responsibility to know every aspect of the protocol we"re supplying our liquidity to.
Cheap, fast, and finalized quickly: DAG characteristics make operating on Fantom Opera virtually free and instant.
Poor decentralization: Reasons on the left side come at a price. It takes only a third of malicious nodes to successfully attack the network.
Incentive program: Fantom is offering up to 370 million FTM, currently worth 725 million USD. Focusing on developers instead of new users seems like a smarter idea.
High dependency on Cronje: Genius minds often come with a high ego. That isn't necessarily bad, but Fantom seems quite dependent on Andre.
EVM compatibility: Developers are the road builders of any crypto project. They"re doing everything to catch up to their competitors in infrastructure built on the network.
Riskier asset: If you want to find a bigger reward, you'll have to go for a riskier asset. Although Fantom has established itself, it still needs to catch up to the competition.
Fantom is a cryptocurrency that combines some of its competitors" best features. It uses a DAG, not a blockchain. That makes it incredibly efficient. It also leverages the Ethereum Virtual Machine. In turn, it can run smart contracts without any hassle. It has also managed to join a very exclusive cryptocurrency club: the cryptos that attracted governments" attention.
That said, it still has a lot to do to catch up to competitors. While the DAG means high efficiency, it comes at a higher centralization cost. Although validators face harsh penalties in case of malicious behavior, only time will tell if that'll be enough.
The Fantom project has successfully proved that they mean business. Like with any project, though, their success also depends on external factors. We'll have to wait and see what the future brings to the Fantom ecosystem, and hope that the developers continue putting in the work to maintain the network's greatness.
Fantom is the first DAG-based Layer 1 project that focuses on cheap transactions at a fraction of a penny. It's virtually free to try out, which makes it a great network to learn about DeFi. It offers minting, staking, and many other Fantom-supported dApps. Just like Cardano, it's peer-reviewed. It has even attracted some foreign governments" attention; a feat only few blockchain projects achieve.
Although it takes only a third of validators to be malicious to successfully attack the network, severe penalties are currently in place. All validators have to stake a minimum of 500,000 FTM. If a validator is caught propagating fake transactions, they have their entire stake slashed as punishment.
Fantom isn't the first project that implemented a DAG instead of blockchain. Yet, it's the first DAG-based project that has other DeFi layers built on top of it. The low fees and transaction speeds on its DAG truly make the Fantom ecosystem stand out from its competitors.
Fantom Opera is a fast and cheap environment to build decentralized applications on. Instead of reinventing the smart contract wheel, Fantom uses Ethereum Virtual Machine (EVM). It's EVM-compatible. That means anything built on the Ethereum network can easily be implemented on Fantom.
FTM surely has what it takes to be a good investment. It's fast and cheap to use, it's adding new applications all the time, and it has turned heads in the past. That said, you must make your own decision that suits your risk preferences and assume full responsibility for it. Always do your own research before investing in any asset, no matter how promising it seems.
Check this article for answers about DeFi.
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