Topics Altcoins
Bybit Learn
Bybit Learn
Intermediate
Jun 22, 2022

Fantom Crypto (FTM): A Smart Contract-Enabled Blockchain That Promises Scalability?

Fantom Crypto on chain ecosystem

The rise of decentralized finance (DeFi) and the increasing demand for the utility of decentralized applications (DApps) has given rise to Fantom. As a smart chain-enabled blockchain, it offers not only a fast but yet scalable solution derived from its unique consensus mechanism — Lachesis.

This platform allows the development of digital assets and DApps with supposedly easier to integrate solutions, offering an alternative to Ethereum. The Fantom network went live in 2019, focusing on providing users a better environment to combat the blockchain trilemma — decentralization, security and scalability.

What Is Fantom?

Fantom is a permissionless smart contract platform that utilizes an asynchronous Byzantine Fault Tolerant (aBFT) proof of stake (PoS) consensus mechanism. This maintains the network’s efficiency and aims to maximize speed and ensure high security at a lower cost.

To achieve that, the aBFT network structure helps improve the limitations of the Byzantine Fault Tolerance (BFT) model by promoting the interoperability of nodes at the block confirmation level through the use of a two-thirds supermajority. It means each block producer needs to confirm each of the blocks twice — the first stage to propose a last irreversible block and the second stage to finalize the proposal making it more secure. 

What Makes Fantom Unique?

Fantom’s “leaderless” consensus mechanism is called Lachesis. It secures the network, offering a faster transaction speed using the aBFT consensus. The highlight of Lachesis protocol is its capability of processing the network data at different times since nodes are most likely to be scattered around the globe at different time zones. Fantom follows a modular approach and has a flexible and decoupled consensus blockchain layer that can be plugged into a distributed ledger.

What makes Fantom different from proof of work (PoW) networks is its instant finality. Transactions on the Fantom platform are finalized and confirmed in just seconds, as opposed to PoW networks on which block confirmation is a time-consuming, laborious process.

The aBFT consensus mechanism obviates long block confirmation processes, making the network faster and comparatively scalable.

In fact, the Lachesis consensus mechanism makes Fantom different from Ethereum and other alternatives. With Lachesis, developers can create peer-to-peer (P2P) applications without having to produce a networking layer of their own.

Here are some other features of Lachesis:

  • It’s asynchronous, which means participants can freely process commands at varying times.
  • It’s leaderless, which means no participant has to play a specialized role and every node is equal when participating in the consensus protocol.
  • Since it’s Byzantine fault tolerant, the consensus mechanism will continue to work, even if up to a third of the nodes are failing.
  • Lachesis is also final, which means the output can be used immediately. You don’t have to wait for block confirmation, as the transactions reach finality in one to two seconds.

The developers claim that they created Lachesis to tackle the limitations posed by existing consensus mechanisms. Fantom is an ideal choice for DApps requiring fast finality and high throughput and security.

The consensus mechanism allows you to create DApps and build improved versions of available products in different sectors, like supply chain tracking and payments.

Fantom: Background

The Fantom Foundation team consists of entrepreneurs, designers, researchers, scientists and engineers who share a similar vision of building infrastructure for an efficient and democratic future.

Michael Kong is the CEO/CIO of the Fantom Foundation, while Andre Cronje is their DeFi Architect. Though it was founded by a South Korean computer scientist, Dr. Ahn Byung Ik.

The developers describe themselves as “blockchain integrators.” They’ve designed the Fantom network to be compatible with the Ethereum virtual machine (EVM) and Cosmos SDK, allowing users to operate per their preferences.

Moreover, Lachesis boasts ABCI (advanced blockchain interface) compatibility. Thus, users can integrate it as an individual consensus module to other blockchains.

What Problems Is Fantom Trying to Solve?

The Fantom platform focuses on solving the main problems currently faced by developers: speed, cost, and security.

Faster Transaction Speed

Typically, blocks take a long confirmation time. In contrast, Fantom’s consensus mechanism offers near-instant transaction finality, giving confirmation in a second or two.

Greater Affordability

According to the Fantom Foundation website, money transfers on the platform cost only $0.0000001, which is more affordable than most other networks.

On the other hand, the lowest average recorded fee on Ethereum in the past few months was $2.15. As compared to Fantom, this is obviously much higher. Meanwhile, the highest transaction fees on the Ethereum platform were nearly $70 in May 2021, when Ethereum hit a high of over $4,100, and went as high as $1,700 to send Ether during an NFT mint event on 30th April 2022.

Ethereum has high gas fees due to network congestion, which is also the cause of the platform’s scalability issues. The much-anticipated rollout of ETH 2.0 contains provisions to overcome this problem.

However, Fantom already has this built-in capability, which is why its fees are low.

Improve Interaction Across Blockchain Platforms

Fantom’s compatibility with Cosmos SDK and the EVM allows developers to use it on the network of their choice, thus improving interaction across different blockchain platforms.

Core Innovations of Fantom

The consensus mechanism forms the crux of any distributed technology. Decentralized environments don’t have a central entity validating or overseeing transactions.

Therefore, a consensus protocol is required, which ensures agreement between all participants on a network.

Here are the core innovations of the Fantom blockchain.

Asynchronous Byzantine Fault Tolerance

Byzantine fault tolerance refers to the ability of a network to operate through consensus achievement, despite the presence of malicious participants or incorrect information.

This ability is limited by the blockchain trilemma, which asserts that it’s only possible for two of the three components to be present at once:

  • Scalability
  • Security
  • Decentralization

On the Fantom network, the nodes reach a consensus independent of each other, as the finalized blocks don’t have to be exchanged between them. For this reason, the PoS consensus mechanism is entirely leaderless.

While practical BFT (pBFT) relies on the confirmed delivery of messages shared among nodes, aBFT consensus lets the messages be lost or delayed. In doing so, it protects the network against distributed denial-of-service (DDoS) attacks. In addition, it lowers the latency of the transaction, making the network faster. Since there’s not as much communication needed in the network, scalability is enhanced.

Directed Acyclic Graph (DAG Technology) in Each Node

Before explaining what a directed acyclic graph is, let’s be clear that a “graph” in this regard refers to a network of connected nodes. The information can pass between these nodes, coming from the original node and possibly returning to it at the end.

If the information passes through the network without coming to a node more than once, the graph is cyclic.

Meanwhile, there are no cycles in an acyclic graph. The information doesn’t have a path allowing it to return to the node without encountering a node more than once.

With individual DAG technology, several chains of blocks can interconnect and coexist without ever forming a connection or edge with the initial (parent) node.

As a result, multiple possibilities exist for lowering latency times because the information doesn’t have to move in a cycle, nor does it have to be confirmed by the previous block before moving to the next.

With Fantom, each network node has an individual DAG which records the chronology of transaction and event blocks independently. Together, these confirmations form the finalized blocks on the Fantom blockchain.

The independent nodes can occasionally communicate about events and transactions, but they do not confirm the finalized blocks.

This is the architecture that enables Fantom to process transactions so quickly.

Opera: Fantom Mainnet

The mainnet deployment platform on Fantom Opera Chain is an open-source and permissionless environment hosting DApps on the network.

The Opera chain has a comprehensive smart contracts capability range similar to that of Ethereum. In addition, it integrates with the Ethereum virtual machine and supports Ethereum’s Solidity programming language, used for smart contracts on its network.

The Fantom Foundation developed the Opera chain to overcome limitations posed by older blockchains.

Previously, blockchains used PoW mechanisms with probabilistic finality, requiring a significant amount of time to finalize transactions. The average finality time (from the next block is mined and published that become final) for Bitcoin is about 60 minutes. Although Ethereum is faster, its average finality time is still six minutes. In contrast, the Opera Chain can achieve finality in approximately one to two seconds.

Opera is the network’s second layer. It performs functions such as issuing rewards and writing story data used by the platform to trace all past transactions.

(Source: Fantom Foundation)

Disadvantages of Fantom

Fantom is open-source, so anyone can run a node, but operating a validator node requires at least 3,125,000 FTM staked. Coming up with that much money — millions of USD as of March 2022 — is a high bar (unless you’re a so-called whale).

It’s also tied to the fact that Fantom lacks a large number of validators. This over-centralization on the platform has raised security concerns.

Fantom also has upcoming competition from market entrants such as Cardano (ADA) and Solana (SOL), and a few other platforms that also offer near-instantaneous transactions. Also, the anticipated upgrade to Ethereum 2.0, with its new PoS ecosystem, also promises to have faster transaction speeds and lower fees.

Lastly, Fantom’s use cases for the IoT industry and smart cities are, so far, limited because they are still nascent concepts.

Fantom vs. FTM Coin

Fantom’s network divides event blocks into either unconfirmed or confirmed. The new blocks are unconfirmed, while the blocks in the past two to three frames are confirmed.

After independent consensus in each node, the batches of confirmed event blocks are formed. Lachesis nodes don’t send blocks between each other. Instead, there’s a synchronization of events between the nodes only.

To optimize the process, Fantom divides a DAG into sub-DAGs. Each sub-DAG is an “epoch,” containing several finalized blocks. When an epoch reaches a certain time or a particular number of blocks, it’s sealed. After being sealed, the indexes inside an epoch are pruned, ignoring any new events.

FTM Coin

FTM is Fantom’s primary token, used for staking, payment, fees and governance on the network. Fantom uses the FTM coins to secure the network. Stakers have to lock up their tokens to get fees and epoch rewards in return and there’s a total of value locked (TVL) of $1,12,776,894 as of June 22, 2022. There is a maximum supply of 3,175,000,000 FTM and its all-time high was $3.68 in October 2021.

Since Fantom has a leaderless, fully permissionless system, decisions about the network are made through on-chain governance. Stakers get to vote for improvements and changes on the network, and they can also propose changes.

If there were no barriers on the network, spammers could easily target it, hampering the system’s efficiency and performance. That’s why FTM is used to accept transaction and network fees.

Although Fantom’s fees are pretty low compared to other platforms, they’re still sufficient to make a malicious attack expensive.

fWallet Version 2

Fantom also created their own fantom official wallet known as fWallet and version 2 has lots of new features. With fWallet, you can not only send, receive, and stake your FTM, you can also easily participate in governance, and bridge in and out of the Fantom DeFi ecosystem right from the fWallet homepage.

Fantom Staking

With Fantom staking you can help secure the network, earning FTM tokens as a reward. Since you can stake it from your personal computer or phone, there’s no need for a particular device or special hardware.

On the Fantom website, you can choose to stake a certain number of FTM. Then, you select the duration for which you want to lock it, with the maximum locking period being one year. The website shows you the current APR, along with your estimated rewards.

Who Can Participate in Fantom Staking?

Anyone can stake on Fantom as long as they have at least 1 FTM. Here’s the straightforward process for Fantom staking:

  • Login or sign up for a wallet that supports FTM.
  • Deposit your FTM into your wallet by transferring them from an exchange to the Opera address.
  • Choose a validator. You can either lock your FTM (for two weeks or to a year) to earn staking rewards from 4.5% to 13.9%, or choose the stake-as-you-go model, earning roughly 4% APY.

The highlight of Fantom staking is that there’s no minimum requirement. You can start earning rewards with just 1 FTM.

You can also run a node since validator nodes form a crucial part of the network. The requirements for running a node are as follows:

  • Minimum of 1,000,000 FTM.
  • The maximum validator size is 15 times the self-stake amount.
  • Minimum hardware requirements are 1.5TB of Amazon EBS general purpose SSD (gp2) storage (or equivalent), and AWS T2.large EC2 (or equivalent).

Users can get the most out of their staked tokens by participating in liquid staking. However, the concept is better understood by advanced users who want to partake in Fantom Finance.

Fantom Liquid Staking

Liquid staking allows users to stake their FTM assets and earn higher APY without having their funds locked up. This gives users the best of both worlds as they can simultaneously earn staking rewards, as well as participate in DeFi as using their staked FTM, unlocking its value!

All this is possible with Ankr Earn's instant liquidity to exit their FTM staking position at any time. The Ankr Earn platform will distribute the staked FTM to be locked across a few periods: 25% of FTM staked for 28 days, 25% for 56 days, 50% for up to 365 days.

Here's a further elaboration: Users can stake FTM directly on Ankr Earn to mint new aFTMb 1:1 or they can swap FTM for aFTMb on a DEX. aFTMb will usually have a slight discount due to its locked nature but it is a reward-earning token in their wallets and they will see the balance grow daily to reflect their staking rewards.

With aFTMb, users can participate in liquidity mining, farming LP rewards, vaults, lending, and more. Read more about all potential DeFi opportunities here

Andre Cronje Saga

Andre Cronje, who is the influential developer of projects such as Fantom and Yearn Finance was said to be leaving DeFi for good around March 2022. His departure was due to the toxic defi culture. Many of the projects he represented fell sharply over the weekend following his departure announcement.

Of the 25 projects, Nell said the most notable ones are related to Yearn Finance, Keep3r Network, Multichain.xyz, smart contract protocol exchange Solidly, Chainlist and Bribe Crv Finance. Some projects will apparently be carried on by other people, Nell added. Front-end services for most of the projects are expected to end by April 3 while their open source code and smart contracts will allow others to fill the void left by Cronje, according to a new message on multiple websites affiliated with the prolific developer, such as Yearn.fi.

Yearn.Finance, for instance — the protocol’s main entry point — continues unabated. A leading pseudonymous developer for Yearn who goes by the name Banteg was quick to note on Twitter that Cronje has not contributed to the project for “over a year.”

On June 4 2022, Andre created another Twitter account called @OnAndreCronje where he tweeted that he will continue to build in private. It remains to be seen whether he will release another DeFi product but he has made some code changes based on his github contribution history.

What's building on Fantom?

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.

Beethoven X: Balancer fork on Fantom, allowing for portfolio management with uniquely name liquidity pools with multiple assets such 'A late quartet' that consists of ETH, BTC, USDC, and FTM with 25% each.

Geist Finance: A decentralized lending protocol, similar to AAVE but on Fantom.

Fantom Virual Machine

Fantom's speed will receive a major upgrade soon from EVM (Ethereum Virtual Machine) to FVM (Fantom Virtual Machine).

Large Ethereum DeFi protocols, such as Curve Finance, Yearn Finance, and SushiSwap, has been deployed onto Fantom's EVM. However, the team has observed several issues with this. The main issue is the throughput since it only settles around 18 transactions per second. Additionally, according to the Fantom team, the EVM hasn’t evolved much from its initial specification.

Therefore, the Fantom Foundation has devised the Fantom Virtual Machine to solve these performance issues. It is working alongside the University of Sydney and Yonsei University on the project.

Fragmented upgrades of the FVM will be rolling out throughout 2022 and some high-level features include:

  • Solidity compatibility: Dapps from Ethereum will still be easily migrated onto Fantom.
  • Parallel processing: This increases the throughput and transaction finality.
  • Bytecode-compressed: This will make storing data more efficient.

The Bottom Line

To sum up, Fantom has an innovative approach to DeFi, making it an ideal choice for developers who want to evade the blockchain trilemma and utilize the network to the fullest.

Moreover, Fantom’s scalable smart contracts can be leveraged in payments, smart city programs and supply chain payments. In fact, some of them are already used globally, for example in Afghanistan.

Currently, there’s a lot of competition in the blockchain space as more Ethereum alternatives emerge. However, Fantom’s DAG technology, coupled with scalable and efficient smart contracts, makes it a notable platform which is likely to gain substantial traction in the future.