Fantom

What is Fantom (FTM)?

Fantom is a high-performance, Ethereum-compatible, DAG-based smart contract platform for digital assets and dApps that is taking dead aim at the “blockchain trilemma.”

Since genesis, layer 1 blockchains like Bitcoin and Ethereum have been wrestling with the ability to provide secure platforms that are decentralized but also scalable in order to ensure high performance.

Many projects in the industry have had to focus on one or two of these characteristics but compromise on one. Many centralized blockchains, for example, can assure high levels of scalability and security, while decentralized and secure blockchains struggle for scalability.

For this reason, many layer 1s have to rely on layer 2 technology that solves the scalability problem, such as the Lightning Network for Bitcoin and Polygon or Loopring for Ethereum.

On the other hand, Fantom attempts to crack the trilemma with a unique consensus mechanism, heightening its security and providing fast finality. Fantom’s compatibility with the Ethereum Virtual Machine also makes it easy for developers to port their applications across to Fantom with a minimum of fuss.

This heady mix of speed and security, along with leaderless consensus protocols, has made Fantom a developer favorite. The ecosystem boasts thousands of active daily users and over 200 decentralized applications deployed on Fantom, ranging from decentralized exchanges, decentralized finance, and even GameFi.

When Was Fantom Launched?

Fantom’s Opera mainnet went live on the 27th of December 2019, but the Fantom project officially launched on New Year’s Day 2018.

Fantom carried out its ICO on the 15th and 16th of June, 2018, with 1.27 billion FTM tokens being sold at a price of $0.04.

With 40% of the token distribution going to ICO investors, 30% was earmarked for development, while 15% each went to the team and advisors behind the project.

Who are the Founders of Fantom?

Fantom was founded by a South Korean computer scientist, President of the Korea Foodtech Association, and co-founder of the food tech platform SikSin, Dr. Ahn Byung Ik.

Ahn, who has a doctoral degree in Computer Science, founded Fantom with the aim of creating a fast, secure, scalable, and generalizable DAG-based smart contract platform to solve supply chain issues in the food tech industry.

According to a blog post by the Fantom Foundation, this proved to be Fantom’s first clear business use case, with Ahn adding that he “felt the need to develop a new infrastructure technology that can apply blockchain across the whole society beyond cryptocurrency and finance.” 

However, Ahn is no longer the CEO of Fantom Foundation. After he stepped away, CIO Michael Kong took over, and DeFi architect and yearn.finance founder Andre Cronje began to play a pivotal role in the project.

Cronje has, however, also departed the Fantom Foundation, resigning in March 2022.

How Does Fantom Work?

Fantom operates by leveraging a technology called Directed Acyclic Graph (DAG), which implements an approach of topological ordering. It is usually correlated with data processing problems, finding the best route for navigation, data compression, and scheduling.

Blockchains like Bitcoin create block after block. All transactions taking place concurrently are stored in the same block, which miners have to compete for. The creation and validation of many blocks take a long time and necessitate more storage.

DAG, meanwhile, supports the extension of storage by increasing the number of simultaneously created blocks without changing the processing time of all of these blocks.

Here’s what DAG does differently from the Bitcoin blockchain:

• Transactions. Instead of grouping transactions into blocks and adding them to a chain, DAG processes transactions on a transaction-to-transaction basis rather than block-to-block. There is no grouping of transactions.
• Validation. Network users confirm each other’s transactions, with each transaction validating at least one prior transaction.
• Speed. Transaction confirmation in a DAG is far faster than Bitcoin’s 10-minute block time, with Fantom claiming 1-second transaction finality. This speed is achieved by directly processing transactions rather than waiting for them to be written into a block.
• Reliability. DAG is a distributed, peer-confirming system and the likelihood of double-spending is decreased because of how transactions are ordered.
• Latency. Confirmation time and speed aren’t dependent on the block size as they are in a blockchain, so DAG’s scaling is dependent on the bandwidth between communicating nodes.

Fantom’s Opera Network is built using DAG technology and, in addition to its claimed 1-second finality, is fully compatible with the Ethereum Virtual Machine.

This means that decentralized application (dApp) developers can transfer their smart-contract-based dApps written in Solidity or Vyper from Ethereum to Fantom very easily. Fantom is also compatible with the Cosmos SDK.

What are Smart Contracts?

Smart contracts make a blockchain platform programmable, allowing for the automatic execution of a predefined action when conditions are met.

The introduction of smart contract functionality has led many to describe ETH as an evolution of the “OG” cryptocurrency, Bitcoin, or a second-generation cryptocurrency.

Given the success of Ethereum in developing a foundation for a vast ecosystem of dApps using smart contracts, most newer blockchain platforms aiming to compete with Ethereum do so as well.

Many, like Fantom, try to do the same thing better, attacking various parts of the blockchain trilemma and deploying new and improved technology for the purpose.

Smart contracts are transparent and visible to all parties on-chain. They function similarly to a vending machine that, when supplied with the correct amount of funds and the right selection, will give the customer the desired item.

Smart contracts can define rules and automatically enforce them. That said, interactions with them are not reversible. Moreover, the deployment of smart contracts onto a platform is normally not reversible either. This means that users can be sure that the developers can’t change the code once it’s live and their funds are locked in.

These smart contracts are controlled by programming logic rather than an individual or company, eliminating the need (and cost) for third-party intermediaries to facilitate a complex transaction.

What Makes Fantom Unique?

Fantom is unique for its combination of Directed Acyclic Graph with a unique consensus algorithm called Lachesis.

These two technologies give Fantom a significant set of advantages over many competitors, including a 1-second time to finality that makes the network extremely fast and also very cheap.

With Lachesis providing a leaderless, permissionless consensus at extremely fast speeds, Fantom can advertise scale, security, and decentralization all on a single layer 1 platform. This in itself sets Fantom apart from many, if not most other blockchain projects.

This sort of high-performance, low-cost, decentralized, and highly secure platform appeals to both users and developers alike. What’s more, Fantom’s Ethereum compatibility adds to its stated mission to “grant compatibility between all transaction bodies around the world.”

How is the Fantom Network Secured?

As mentioned above, Fantom’s consensus mechanism is the bespoke Lachesis aBFT proof-of-stake consensus engine.

Lachesis is a protocol for distributed networks achieving asynchronous Byzantine Fault Tolerance. Byzantine Fault Tolerance (BFT) is the ability of a network to reach an agreement on the ordering of events even if some nodes in the network act maliciously.

Asynchronous BFT, meanwhile, means that network nodes can confirm event blocks containing transactions without needing to depend on any timing assumptions. This allows the network to confirm transactions faster. Once a transaction is confirmed, it achieves complete finality.

This is different from synchronous blockchains, which require multiple confirmations to ensure that a transaction is permanently part of the blockchain. This is why, with synchronous blockchains like Ethereum and Bitcoin, you may need to wait through the mining of multiple blocks before your on-chain transaction is completed.

Fantom’s aBFT algorithm, Lachesis, is also leaderless. This means that the system doesn’t use a single participant as a “leader” when it comes to adding blocks. In theory, this makes the system more decentralized.

What is the Use of FTM?

Fantom’s native FTM token has multiple use cases, with one of the main uses being staking to secure the network. Staking is a system that incentivizes validators that act according to the protocol and punishes bad actors by confiscating the tokens that they lock up in the protocol.

Fantom allows nodes on the network to become validators if they stake 500,000 FTM. Once they do this, they can earn epoch rewards and transaction fees. Smallholders (users with a minimum of 1 FTM) can delegate their tokens to a validator to receive staking rewards in exchange for a fixed 15% fee. 

Staking rewards are up to 13% APR. However, they are dynamic, meaning these rewards will decrease depending on lock-up time and as staking participation increases. A year-long lock period earns a higher rate.

These transaction fees that validators collect are also paid in FTM. While small, users are required to pay these fees for every action on the network.

Finally, FTM also acts as the governance token of the Fantom network. Decisions regarding the ecosystem are made using on-chain voting, and the voting power of a user depends on how much FTM they hold. 1 FTM equates directly to 1 vote.

As the ecosystem continues to be developed, more use cases will likely be created for FTM. The upcoming fantom.finance DeFi suite, for example, will use FTM as collateral.

Who Controls Fantom?

The Fantom Foundation is in charge of the network’s governance, advised by the community and validator nodes via on-chain consensus.

However, the Foundation has announced that it will launch a governance smart contract. This will allow validators and token holders to determine the direction of Fantom and approve changes to the underlying consensus via hard and soft forks.

After the founder, Dr. Ahn Byung Ik, resigned from the project, the Fantom Foundation is led by CEO/CIO Michael Kong. Dr. Quan Nugyen currently serves as CTO, Prof. Bernhard Scholz is the Chief Research Officer, Simone Pomposi is the CMO, and David Richardson is the Director of the Fantom Foundation.

How Much FTM Is In Circulation?

Fantom has a total supply of 3.175 billion FTM, out of which over 2.5 billion are in circulation, subject to a release schedule that runs through 2023.

A portion of the FTM supply is reserved for staking rewards, while the FTM token is present across several blockchains. Thanks to its compatibility with Ethereum, ERC-20 standard FTM tokens are present on the Ethereum blockchain, and BEP2 FTM tokens exist on the Binance Chain as well.

However, the main utility of FTM is found on the Opera network, and tokens on other blockchains can be swapped to mainnet FTM before being sent to Fantom wallets.

Notably, Fantom Opera addresses are not Ethereum addresses, even though they have the same structure as Ethereum addresses, both beginning with “0x.”

How Do You Buy FTM?

Fantom is a popular cryptocurrency that has seen plenty of hype with the smart contract and DeFi boom of 2021. As such, it is available across many of the world’s top cryptocurrency exchanges.

It is most commonly paired with stablecoins like USDT and BUSD, but pairings with fiat currencies like U.S. dollars and major cryptocurrencies like BTC also have significant liquidity.

Fantom is also a DeFi project and can be purchased via various DeFi apps on multiple blockchains, including its own Opera network, as well as peer-to-peer across those same chains.

Is It Possible to Buy FTM Instantly?

How fast you can buy FTM depends on exactly where you buy it. The fastest way to buy any cryptocurrency tends to be from a centralized exchange (CEX), but that’s only because the funds aren’t actually being sent to you. To actually take custody of your FTM, you’ll need to withdraw it from the CEX into your own wallet.

In fact, self-custody of FTM is widely accepted as a good choice because many CEX platforms don’t allow you to participate in staking and governance. Some may advertise a form of on-platform staking, but behind the scenes, your FTM is used as part of the CEX’s delegation (or validation).

The same goes for governance, where the CEX may use the FTM tokens you paid for to vote however they want on governance proposals.

Buying FTM on decentralized exchanges or on-chain peer-to-peer transactions, however, will see the transaction speed depend on which chain you use. Using Fantom’s own Opera network ought to see extremely fast transactions. Meanwhile, using Ethereum to get FTM in ERC-20 form might be slightly slower, unless you use a layer 2 network.

How Do You Store FTM?

Storage of FTM depends on which sort of token you hold, as FTM can be on Opera, on Ethereum as ERC-20 tokens, or on Binance Chain as BEP2 tokens.

Storing Opera FTM can be done on the official Fantom Wallet, which has been created as a Progressive Web App. These are easy to upgrade across all platforms via a single codebase without third-party approval.

The Fantom Foundation’s website features a tutorial on how to set up and use the Fantom Wallet.

Fantom Energy Consumption

Fantom uses a proof-of-stake consensus algorithm, and just because of that, it comes in with far lower energy consumption than proof-of-work cryptocurrencies like Bitcoin.

According to Fantom’s blockchain explorer, there are currently 76 validators on Fantom. This means that Fantom’s energy consumption really just boils down to the consumption of these 76 nodes running 24/7.

Is FTM a Good Investment?

Fantom’s limited number of validators may be a strength when it comes to energy consumption, but it could well be considered a weakness in terms of decentralization. While Fantom does allow anyone to become a validator, the 500,000 FTM staking minimum is a very hefty barrier to entry.

As such, many will argue that while Fantom puts the pieces in place to solve the blockchain trilemma, it fails to do so in this regard. Furthermore, this limited number of validators means that Fantom is susceptible to attack since it would require only a few bad actors to overcome the BFT critical threshold.

Fantom has also seen key figures depart from the Fantom Foundation. The departure of its founder, Dr. Ahn Byung Ik, and the platform’s change of direction could concern some, especially since one of the key figures of the following period, Andre Cronje, also ended up leaving.

Nevertheless, Fantom remains an elite-level smart contract platform that has infinite potential if it can do all that it claims. Cheap transaction fees and one-second finality are a heady combination that could, and perhaps should, turn the head of any dApp developer or user.