In the rapidly evolving world of blockchain technology, Fantom Network has emerged as a game-changing platform that offers scalability, decentralization, and secure smart contract capabilities.
Founded in 2018 by the Fantom Foundation, this innovative protocol utilizes the Proof-of-Stake (PoS) model to protect its network.
With its proprietary Lachesis consensus mechanism at its core, Fantom supports multiple blockchain layers, building the way for a new era of scalable, safe, and decentralized infrastructure.
The recent bear market has taken a toll on many cryptocurrencies, but a handful of projects have managed to thrive despite the challenging market conditions.
One such project is Fantom Network, a Layer 1 blockchain that has continued to fight, build and expand its ecosystem even in the face of new competitors entering the market.
Powered by its unique consensus mechanism called Lachesis, Fantom has positioned itself as a force to be reckoned with in the blockchain industry.
In this article, we will go into the various aspects of the Fantom Network, analyze its on-chain metrics, and explore some of its top decentralized applications (dApps) to assess whether Fantom has the potential to outperform other Layer 1 blockchain in 2023.
What is Fantom Network?
Fantom Network is a scalable and decentralized smart contract platform that aims to provide a robust infrastructure for decentralized applications (dApps) and blockchain-based solutions.
Founded in 2018 by the Fantom Foundation, the network operates on its own consensus mechanism called Lachesis, which enables high throughput and fast confirmation times.
At its core, Fantom Network utilizes a proof-of-stake (PoS) model to secure the network and validate transactions.
This means that participants can stake their tokens and earn rewards for supporting the network’s operations.
The native currency of the Fantom Network is $FTM, which is used for various purposes within the ecosystem, such as paying transaction fees and participating in on-chain governance.
One of the standout features of Fantom Network is its compatibility with the Ethereum Virtual Machine (EVM), allowing developers to seamlessly port their existing Ethereum-based dApps to the Fantom platform.
This interoperability opens up a wide range of possibilities for developers and promotes the growth of the Fantom ecosystem.
With its scalable infrastructure and efficient consensus mechanism, Fantom Network aims to overcome the limitations of traditional blockchains, such as slow transaction speeds and high fees.
By providing a secure and scalable platform for dApps, Fantom Network aims to drive innovation and foster the adoption of decentralized technologies across various industries.
FTM, an ERC20 token serving as the native currency of the platform, plays a crucial role in securing the network through a proof-of-stake system.
As with many cryptocurrencies, $FTM faced challenges during recent turbulent times.
FTM is currently valued at approximately $0.31.
Fantom’s Strengths and Positive Cash Flow
Despite the bear market, Fantom has managed to maintain positive cash flow and has sufficient funds to sustain its operations for more than three decades, according to a Medium article by Andre Conje.
This financial stability positions Fantom as a reliable and long-term player in the blockchain space.
Moreover, the Fantom team has announced plans for a Fantom Ecosystem Vault, where 10% of the gas fees paid on the network will be allocated.
This vault will support the growth of projects within the Fantom ecosystem, providing funding opportunities for eligible projects through a community-driven voting process.
Evaluating Fantom’s On-Chain Metrics
On-chain metrics play a crucial role in assessing the health and vibrancy of a blockchain ecosystem.
When analyzing the number of unique wallets sending on-chain transactions in a 24-hour period, Fantom stands out as one of the most active networks alongside NEAR.
Both Fantom and NEAR have witnessed significant growth in daily active addresses, with an 8-10x increase in the second half of 2022.
While transaction volumes have declined from the DeFi summer peak, Fantom’s daily transaction volume remains substantial, accounting for nearly one-third of Ethereum’s volume.
Additionally, Fantom has maintained a high Total Value Locked (TVL) despite the bear market, with a TVL approximately 1.5 times that of Solana and 8 times that of NEAR.
Unveiling the Lachesis Consensus Mechanism
At the heart of Fantom lies the Lachesis consensus mechanism, a groundbreaking protocol that enables the network to achieve consensus through asynchronous Byzantine fault tolerance (aBFT).
This means that even in the presence of malicious nodes, the network remains trustworthy and capable of verifying and generating blocks in the correct order and at the right time.
The asynchronous nature of Lachesis allows nodes to process and deliver information at different times, enabling the network to tolerate lost or indefinitely delayed information.
While identifying bad actors in a network with indefinite delays poses challenges, it demonstrates the network’s reliability and practicality in real-world environments.
The Versatility of Fantom’s Implementation Layers
One of the standout features of Fantom is its ability to support various networks and implementation layers built on top of its core Lachesis consensus mechanism.
The first layer, known as Opera, was launched on December 27, 2019.
Opera represents a cutting-edge smart contract platform that is fully compatible with the Ethereum Virtual Machine (EVM).
Developers can create diverse decentralized applications (dApps) on Opera or seamlessly port existing dApps from Ethereum or other EVM-compatible networks like Polygon or Binance Smart Chain.
As of February 9, Opera’s main network hosts over 150 different applications, with a total value locked of more than $8.7 billion.
Spotlight on Top Fantom dApps
Fantom’s ecosystem is bolstered by several successful decentralized applications (dApps) that contribute to its growth and adoption.
One such dApp is SpookySwap, a leading decentralized exchange (DEX) that enables token listings and trading on the Fantom network.
SpookySwap also provides asset-bridging capabilities, allowing users to transfer assets between Fantom and other blockchain networks like Polygon, Avalanche, and Binance Smart Chain.
Another prominent dApp is Beethoven X, a DeFi investment platform built on the Balancer protocol.
Beethoven X offers customizable liquidity pools and a vault system to manage liquidity across multiple crypto assets.
Geist Finance, a decentralized lending protocol, is another notable dApp on Fantom that allows users to borrow assets against collateral and incentivizes lending and borrowing activities with GEIST tokens.
The Purpose of the Fantom Token (FTM)
Similar to many Layer-1 blockchains, Fantom operates with its own native token called FTM, which serves multiple functions within the ecosystem.
Users are required to pay network fees in the form of FTM for every transaction conducted on the Opera main network, including activities such as casting non-fungible tokens (NFTs) or deploying smart contracts.
However, these costs are typically low, with simple exchange transactions often incurring fees as low as 0.02 FTM.
Beyond transactional purposes, FTM tokens play a vital role in protecting network security. Token holders can choose to pledge their FTM tokens to become verifiers or entrust them to existing verifiers.
To initiate the pledge, a minimum of 1 FTM is required, and users have the option to lock their tokens for varying periods ranging from 2 weeks to 365 days.
Longer lock-up periods yield higher returns.
Entrusting tokens to specific verifiers incurs a fixed commission fee of 15% paid to the verifier.
Becoming a verifier necessitates pledging at least 500,000 FTM tokens and possessing the required hardware to run a verifier node.
The hardware specifications currently mandate a minimum of 4 virtual CPUs running at 3.1GHz and 3TB of storage space.
However, ongoing proposals seek to reduce the minimum number of FTM tokens required.
Verifiers receive rewards based on their pledges and an additional 15% return from their clients.
Additionally, users who have pledged their FTM tokens can still fully utilize their assets through Fantom’s Liquid Staking solution.
By casting an equivalent amount of pledged FTM (sFTM), users can leverage their assets in other applications that support sFTM on the Fantom network.
Furthermore, there are no longer any costs associated with coinage and redemption.
The Governance Role of FTM Token Holders
As with many decentralized protocols, FTM holders play a crucial part in the governance process.
They can propose and vote on changes to the Fantom blockchain network.
Voting takes place entirely on the chain, and each FTM token is equivalent to one vote.
Voting rights are granted to both clients and validators.
Pledgers can also submit chain proposals by paying a cost of 100 FTM, which is destroyed upon submission.
Fantom provides a flexible voting system where participants can express their agreement or disagreement by selecting a simple “yes” or “no” response or choosing a degree of agreement on a scale of 0 to 4.
A score of 0 indicates complete disagreement, while a score of “4” represents full agreement.
The Role of FTM in DeFi
FTM tokens are tradeable on major centralized and decentralized exchanges such as Binance and Uniswap.
Additionally, FTM can be utilized on Ethereum and Binance Smart Chain as ERC-20 and BEP-2 tokens, respectively.
This high level of interoperability allows FTM to be seamlessly integrated into the Fantom blockchain and various local applications on other blockchains.
For instance, FTM token holders can over-collateralize their tokens on platforms like Geist to borrow other assets.
FTM also serves as the underlying asset in numerous liquidity pools across various native Fantom exchanges.
By providing liquidity in conjunction with another asset, token holders can receive token rewards from these platforms.
The Flourishing Fantom Ecosystem
Fantom’s compatibility with the Ethereum Virtual Machine (EVM) empowers developers to swiftly migrate their existing Ethereum-based dApps to the Fantom Opera mainnet.
This transition enhances dApp performance and reduces costs, creating an ecosystem ripe with innovation and growth.
In the second quarter of 2022, the Fantom dApp ecosystem experienced significant growth, welcoming notable projects like Automated Market Maker SpookySwap, Balancer fork Beethoven X, and engaging games like Andre Cronje’s Rarity.
These developments have attracted a burgeoning user base, resulting in an impressive quarterly transaction volume of approximately 95,000.
Conclusion: Fantom’s Path to Progress
Despite the challenges posed by the bear market, Fantom and its DeFi ecosystem have experienced a significant decline.
However, the Fantom Ecosystem Vault represents an exciting opportunity for builders within the Fantom network.
While regulatory uncertainties and concerns about centralization persist, the funding program provided by the Fantom Ecosystem Vault has the potential to propel Fantom to new heights, making it a compelling option for investors seeking undervalued Layer 1 blockchain projects in 2023.
Fantom’s strong fundamentals, positive cash flow, active on-chain metrics, and successful dApps make it a promising contender in the blockchain industry.
As the market conditions evolve and investor sentiment improves, Fantom could potentially emerge as one of the most undervalued Layers 1 blockchain, offering significant growth potential in the coming year.
While Fantom’s growth trajectory experienced a plateau during the past quarter, primarily due to the absence of a single protocol driving hyper-growth akin to Solidly in Q1 2022, external factors such as the overall downturn in the cryptocurrency market may have impacted user enthusiasm, and, subsequently, Fantom’s growth.
Nevertheless, Fantom’s continuous efforts to enhance the protocol are yielding tangible results, evident in lower gas fees and faster transaction completion times.
Looking ahead to the next quarter, users can expect to benefit from Fantom’s cost-effective gas fees, swift transactions, and an expanding array of products integrated with the Fantom network.
The future holds great promise for Fantom Network as it continues to solidify its position as a leading force in the blockchain industry.