First, let’s start with a caveat muchachos. So as to increase my chances of appearing on the term what is fantom crypto, I am going to do something weird. I will be using Fantom crypto instead of plain old Fantom. Pardon me if I sounds silly but this is what le Google wants. So here we go.
1/9. OK, so what is Fantom crypto?
Fantom crypto is a smart contract blockchain that competes against Ethereum. It’s competitive advantage is that it is 30-60 times faster and much cheaper.
Fantom is unique in that its blockchain does not process transactions sequentially. Rather, they have developed their technology in a way that transactions get processes simultaneously.
While there are other blockchains, such as Solana, that result in even faster transactions than Fantom, Fantom has managed to develop a massive ecosystem of DeFi dapps and some unique partnerships with -stan governments (Afghanistan , Tajikistan, Pakistan).
The key reason for this is that it uses the same coding language as Ethereum.
Because most apps originally deployed on Ethereum developers find it extremely easy to port them over to Fantom.
Fantom crypto also stands apart for the backgrounds of its founders most notable of whom is Andre Cronje the serial blockchain developer who founded Yearn.finance. Check out What is Yearn Finance if you don’t know what that is.
Let’s go on to understand each of the above in more detail. If that first paragraph flew over your head then it would be best that you read our foundational article on Ethereum: What is Ethereum. This will give you a good footing on smart contracts and blockchains.
2/9. Fantom transactions per second
There are two ways to measure speed on a blockchain.
The most common one is to look at how many transactions per second the blockchain can handle. Fantom is theoretically able to handle 20K transactions per seconds (TPS).
Compare this to Bitcoin which stands at 7 TPS and Ethereum at 13 TPS and you see how Fantom crypto stands out.
However there are other Ethereum competitors that are even faster. Solana for example boasts a TPS of 60K. And Ethereum 2.0 expects to reach 100K TPS.
The second way to measure speed is to view it from the user’s perspective. After all, users don’t care about the theoretical throughput of the network. They only really care about how long it will take for their transaction to be fully confirmed and final.
Finality is the amount of time required for the transaction to be set in stone. For bitcoin this can be an hour or more. For Ethereum it can take a minute whereas for Fantom it takes 1-2 seconds.
Practically this means that if you are exchanging some coins on the Fantom network, say using Metamask or another wallet, your transaction will go through almost instantly.
3/9. How much cheaper is Fantom crypto?
Transactions on Fantom are negligible costing less that a cent. On Ethereum, fees for trading coins can start at $100 upwards.
The reason Ethereum is expensive to use is purely a result of supply and demand.
Ethereum is now 7 years old and was the first successful blockchain to offer smart contracts. This resulted in most of the products in the crypto space to be using the Ethereum platform.
As a result anyone seeking to transact on these products needs to pay transactions fees in Ethereum. This has caused demand for Ether to increase pushing its price up.
At the same time Ethereum 1.0 Proof-of-Work consensus mechanism can only process 13 transactions per second.
As a result Ethereum’s transactions fees, known as gas fees, are very expensive. Yet, to date many users have been willing to pay these expensive fees due to the lack of good alternatives.
Fantom’s faster network results in much cheaper transactions.
Fantom has a competitive advantage over Ether because it’s not affected by traffic congestion. Instead of using one single platform Fantom offers a separate blockchain for every app.
Similar to many other blockchains out there (Cosmos, Polkadot etc) Fantom says it is a network of networks.
4/9. How has Fantom crypto managed to develop such a large ecosystem?
A key differentiator between Fantom and other Ethereum competitors such as Solana, Algorand and Avalanche is that Fantom continues to use EVMs.
EVM stands for Ethereum Virtual Machines and is the software that Ethereum developers use to deploy their dapps. They use a coding language called Solidity.
Because Fantom uses EVM it is very easy for developers to copy paster their apps (with some minor adjustments) into Fantom.
Since most crypto developers are familiar with Solidity it is similarly easy for them to deploy completely new dapps on Fantom. These network effects have led to the creation of a rich DeFi ecosystem of products.
On Fantom you can find any kind of DeFi product that is available on the Ethereum network from decentralized exchanges, to yield farming, to NFTs and gaming.
DeFi products and FTM tokens on Fantom crypto
The first product to launch on Fantom was their DeFi platform which is their one-stop shop for all things DeFi.
Here you can stake your FTM tokens and earn an interest rate for doing so. The longer you stake the higher the interest rate you can achieve.
What is cool about FTM is that you can even use your staked tokens to generate sFTM which is just another token that is pegged to FTM.
You can then provide your FTM or sFTM as collateral to borrow a stablecoin called fUSD which is pegged to the US dollar.
Let’s look at an example of minting fUSD
Below you can see how I have used 7.99 FTM to borrow (mint) 4.18 fUSD.
The maximum that I can mint is 5.59 fUSD and my collateral ratio is 401% (= 4.18 / (7.99*2.095)).
Fantom require that this ratio does not fall below 300%. If the ratio falls below 300% my collateral becomes locked but is still there until I top up.
If I maintain a collateral ratio of greater than 500% I can earn a 6% APY.
Your fUSD can be used in a bunch of applications. You can use it to trade, to lend and earn interest or borrow other tokens.
Basically you can do anything you can imagine. The options are endless.
You will find many videos on YouTube recommending you take some very complicated routes with incomprehensible risks packaged into those actions.
As you can see in the above image on the left menu, the Fantom wallet has its own decentralized exchange (fSwap) where you can trade 176 tokens. Similarly for fUNI which is a Uniswap clone.
But the Fantom DeFi ecosystem is way more than this.
There are many many other apps that have built on Fantom or have ported over to the Fantom ecosystem.
Popular Dapps such as Curv, Sushi and Cream have already created Fantom versions and are readily available to transact on.
Similarly, cloned apps such as AnySwap (like Uniswap on ETH) and Geist (like Compound on ETH) have deployed on the Fantom network.
It is also super easy to move ETH to Fantom using bridges.
Here are the top 10 DeFi projects on Fantom
Let’s take a quick look each of these
- SpookySwap is a decentralized exchange (DEX) where you can trade one token for another without a central intermediary.
- Scream: Like Cream, but customized for Fantom, this is a decentralized borrowing and lending platform. You can lend your tokens out to earn interest or you can use them as collateral to take out a loan.
- Geist is the same as Scream
- Curve is a decentralized exchange like Uniswap except you can only trade stablecoins
- Beefy finance is a platform that automatically compounds your interest. Say you lend a token on Cream and earn 10% APR. Beefy will take any interest every hour and lend it again. Which in itself will earn interest which will lead to a much higher interest rate at the end of the year (APY=Annual Percentage Yield). Beefy just aggregates all the products where you can earn a yield and automatically compounds it as described above for a small fee.
- C.R.E.A.M is one of the original lending platforms that was ported over from Ethereum (remember it is very easy to bring stuff that exists on the ETH network into the Fantom network)
- SpiritSwap: like SpookySwap, SpiritSwap is a decentralized exchange where you can buy and sell tokens
- Beethoven X is similarly another DEX
- SushiSwap is another DEX that is a competitor to Uniswap that has ported over to Fantom
- Tarot is another lending platform.
The projects are in order of total value locked (TVL) which is the total amount of value that is deposited on the platform (to trade, stake, lend, borrow etc).
There are two more things you need to know about the Fantom DeFi ecosystem
i. NFTs and Gaming on Fantom
For many, NFTs are the gateway drug to crypto.
Many artists are launching NFT collections on Fantom and generative art similar to what you see on Ethereum.
Many of these NFTs can be deployed as characters across games. A large gaming protocol is 8bit World which is a Play-to-Earn metaverse game where you buy real estate and other virtual assets.
ii. Tomb Finance
Tomb Finance is a unique blockchain that does something weird and is so intertwined with Fantom that you need to know about it.
Firstly, Harry Yeh, an influential crypto entrepreneur, who invested in Fantom, is heavily involved in Tomb Finance.
Secondly, Tomb Finance aims to create a stablecoin that, instead of being pegged to a fiat currency like the US dollar, tracks the value of 1 FTM.
The mechanics of Tomb work in such a way that 1 Tomb will always equal 1 FTM.
The motivation for doing this according to the Tomb team is that Fantom is such a great product but given the limited supply there will be demand for a parallel product like Tomb.
The very high APYs offered by Tomb for providing TOMB and FTM to the liquidity pool have resulted in close to $1Bn in total value locked. If you compare this with Fantom that has about $7Bn it is a significant proportion.
Recently, critics have attacked this model. They argue that this effectively increases the supply of FTM (real FTM + Tomb which is same value as FTM) causing its value to be diluted.
What’s more, because all the code is out there, there are loads of copies being made. Already there is one called 2omb finance and another called 3omb.
If you look on https://www.whatthefork.xyz/ you will find many versions have been ported over to other blockchains: Avalanche, Solana, Ethereum etc. If you want, you can find out more about the threat of these so called Vampcoins.
Fantom crypto partnerships
With strong connections to Governments and the corporate world, Fantom’s team has established some interesting partnerships.
- Afghanistan: Fantom is supporting the Afghan government to track medications and upgrade their digital infrastructure by digitizing archives.
- Tajikistan: collaboration on CRM system for one of their ministries while there are also discussions around establishing a central bank digital currency
- Pakistan to power education
- Uzbekistan: blockchain solutions to the Uzbek government
Corporate and blockchain
- Alameda research invested $35Mn causing FTM to rise at the time.
- Injective partnership: uses FTM tokens on their protocol DEX
- Ledger wallet added support for FTM
- TheGraph added support for FTM which thus makes developers eligible for grants
5/9. Fantom crypto’s history: a story of perseverance
Fantom’s story is somewhat unique.
Fantom initially sought to be a blockchain for smart cities.
A bunch of professors and post docs from one of South Korea’s renowned technical universities did the initial development. They approached Michael Kong for funding.
Michael had an academic background in crypto and had recently started a crypto hedge fund. Attracted by the concept, Michael helped Fantom with their ICO which happened during the tail end of the ICO craze in 2018.
A quick aside on what an ICO is
During this time many projects had been raising funds through these Initial Coin Offerings.
An ICO is a pun on IPO (Initial Public Offering) which companies use when they want to issue shares on a stock exchange to raise funds.
ICOs were an easy way for crypto projects to raise capital. Many people were excited by the prospect of being able to invest in something at an early stage just like a VC would.
Many investors who had seen the extraordinary returns made by Bitcoin and ETH investors wanted to find the next gem to invest in. They quickly piled into these ICOs hoping to make a quick buck.
A bubble quickly formed as many of these projects were nothing more than a website and a white-paper outlining some inspirational idea.
Michael Kong finds out he has been tricked
Eventually, the ICO bubble burst and do did Michael Kong’s hopes when he realized that there was no substance behind the Fantom white-paper.
In a recent podcast, Michael says that he soon found out that these academics plagiarized their work. The lesson here is to not rely on the background of founders alone when choosing a project.
Instead of giving up, however, Michael replaced the old team with a new set of people.
Andre Cronje, the South African entrepreneur and developer of Yearn Finance, a successful dapp on the Ethereum network, became involved early in the technology’s development and built a team from scratch.
The new team built a new consensus mechanism and launched the Fantom Opera mainnet in December 2019. Most people were positively surprised as they thought Fantom was dead because a lot of time had passed since the ICO.
In 2021 Fantom took off.
Key catalysts to this were that a couple of DEXs (decentralized exchanges): SpookySwap and SpiritSwap become popular.
These were better versions of Uniswap and Sushi swap, which are famous decentralized exchanges on Ethereum, only with much lower fees.
While Andre has moved on to other projects, Michael is now the CEO of Fantom Foundation.
The Foundation is split into two lines if business.
The first is a for profit arm that sells private blockchain solutions to governments and tech corporations.
These are supply chain, record management and central bank digital currency services mostly. The profits generated from this line of business then fund the not-for profit line of business which continues to invest in improving and expanding the Fantom ecosystem.
Fantom is also sponsored by Harry Yeh, the crypto entrepreneur and hedge fund manager who heavily invests in Fantom.
6/9. Fantom crypto tokenomics
Tokenomics is a term which refers to incentive structure of the blockchain.
Each blockchain issues a token / coin to incentivize certain behavior.
Just like in an arcade where you would exchange dollars for plastic tokens to go on rides so too do you need to purchase blockchain tokens to use its respective dapps.
On the Fantom Network you can purchase FTM tokens. FTM is used for network fees, staking, governance and collateral on their DeFi platform.
- Network fees: validators need some kind of reward in order to verify transactions. This is in the form of FTM.
- Staking: you give your FTM to a validator. Validators need FTM for the Proof-of-Stake process. Don’t worry you don’t lose this (unless the validator tries to manipulate the system, which is unlikely). In return for lending a validator your FTM, you receive a share of the transaction fees they generate. You can lock up and stake FTM from anywhere between 14 and 365 days and get compensated accordingly.
- Governance: anyone who owns FTM can participate in voting for decisions concerning the Fantom Network. Fantom is also unique in the way voting takes place. Instead of voting yes or not you signal on a scale of 1-4 where you stand on the issue.
- Collateral: you can use FTM on one of the DeFi apps in multiple ways. One way would be to take out a loan. You provide for example, 100 FTM and get 50 FTM as a loan. Another way is to generate synthetic assets: you provide your FTM and get a synthetic stock that tracks the value of a specific stock. What’s interesting about FTM is that you can use your staked FTM as collateral.
FTM Token supply and break up
Unlike other blockchains the maximum supply of 3.175 billion FTM is all minted.
However only 2.1Bn is in circulation while the rest is in reserve for staking rewards. Here is the breakup:
- 37% private investors. FTM was sold at 3.5 cents raising $37Mn.
- 1.5% sold to ICO at 4cents per FTM.
- 15% to advisors.
- 10% to team and founders.
- 31% to staking rewards.
- 5% set aside as a strategic reserve.
FTM is used as an ERC-20 token on the Ethereum network and BEP-2 /-20 on Binance / BSC respectively. Transactions are much cheaper on the latter.
FTM is also available on its own mainnet via the FTM wallet.
7/9. How does the Fantom Blockchain actually work: Technical deep dive
BTC, ETH and most other blockchains have synchronous networks. This means that transactions have to wait to be included into a block.
FTM stands out for being asynchronous i.e. for confirming transactions as soon as they enter the network.
An analogy often drawn is that most blockchains are like a train: you stand on the platform and wait for the train to pass by every 10 minutes.
During rush hour, everyone lines up in a queue and has to wait before they are able to onboard the approaching train. Of course, only a certain number of passengers are allowed in and 5 trains need to have passed after you to make sure your train is a part of the network. That’s just the rules.
Fantom crypto is like a magic train. As soon as you get to the station a train comes and everyone fits in it.
The reason for this is that Fantom uses a distributed ledger technology that allows computers to process transactions in parallel.
Each computer gossips (communicates information) to random nearby nodes.
Like a rumor the transaction spreads though network.
Shhhh! It’s actually not a blockchain
Just in case anyone asks: technically Fantom is not a blockchain but a directed a-cyclical graph.
We really don’t need to invest time in understanding this but basically it is a structure that allows Fantom to operate in the way it does.
Fantom crypto uses a Proof-of-Stake (PoS) consensus mechanism.
PoS have come under criticism for theoretically allowing centralisation to happen.
This means transaction confirmations collect in the hands of too few validators who might collude to manipulate transactions.
On the flip side, many argue the same for Bitcoin.
Bitcoin requires certain economies of scale and specialist knowledge to become a miner.
Hence, even Bitcoin, which uses Proof-of-work, is not the most decentralized consensus system out there.
Has Fantom solved the blockchain trilemma?
Fantom claims it has solved the blockchain trilemma of scalability, security and decentralization. This is a framework that Vitalik Buterin, the founder of Ethereum, put forward.
He says that a blockchain can’t have all three at the same time. Fantom believes it can.
- Scalability: We saw already how Fantom is able to process transactions quickly.
- Security: Fantom’s technology ensures transactions are secure. There is no leader validator in the Proof-of-Stake process and it can still ensure security even if 1/3 of nodes are malicious.
- Decentralization: Fantom currently has 51 validators which is an ok-ish number for some. They do plan to scale up further in the future. Currently you need 1Mn FTM to become a validator. A validator also can’t have too much capital so they can’t stake more than 15Mn FTM of their own. Beyond that they will need to raise further funds from delegators. You only need 1 FTM to delegate.
If you really want to geek out on the technicals you can read Fantom’s own description of how they solve the blockchain trilemma.
Apart from the base layer consensus system Fantom, has a middleware stack.
This is how smart contracts are executed and this is the part that works with EVM (i.e. compatible with Ethereum). The Fantom Foundation hope to replace it eventually with their own Fantom Virtual Machines.
The third component of Fantom is their application layer. This contains all the tools that devs use to deploy their apps.
Hence everything on top of the consensus is similar to ETH and this has led to the network effects described above.
8/9. Fantom crypto roadmap
The Fantom Foundation plans to drive both institutional and retail adoption.
They will continue trying to convince ETH dapps to launch on FTM and in the near term plan to reduce the minimum stake required to become a validator.
On the technical side they are exploring how they can further scaling while maintaining security and decentralization.
One way to do this is by sharding.
Sharding helps do computation with horizontal scaling to infinity. With blockchains, because everyone confirms transaction it adds to computation cost.
With sharding you confirm a part and put it together at the end. While in the near term Fantom can optimize to scale a little more it can’t infinitely scale with its current structure. For example, it can’t do 100Mn transactions per day.
By exploring sharding they hope to address that challenge. So next steps will be to:
- Minimize the size of the data on chain that validator needs to store to process transactions.
- Execute smart contracts faster. In EVM when you write data in smart contracts it gets slower over time. Fantom Foundation wants to find alternative structures.
- Look into sharding.
Finally, FTM currently has 51 validators. They want to see what performance would look like with more validators.
A key dilemma is how much decentralization is enough i.e. how many nodes? This according to Michael Kong depends on one’s philosophical beliefs. He feels a few hundred nodes should be enough.
9/9. Wrapping up Fantom crypto
Fantom is a serious layer 1 Ethereum contender.
With a large ecosystem and following it has serious chances of being around in the future. It’s finality for transactions is fast and its roadmap robust.
If you enjoyed this article you might want to check out how a layer 2 solution known as Polygon works to scale Ethereum.