Fantom has become a popular smart contract platform for DeFi apps. The FTM token has also significantly increased its value. This article explores Fantom, its history, technology, and the FTM token.
Fantom is a smart contract platform
Let’s first place Fantom into the right category of cryptocurrencies. We divide cryptocurrencies into three different categories: currencies, platforms, and tokens.
Currencies have no other significant purpose besides transferring and storing value. Bitcoin is the most famous example in this category. Other well-known currencies are Litecoin and Monero.
Platforms are entire ecosystems and frameworks for smart contracts. These can be used to build decentralized applications (Dapps). Platforms can be thought of as iOS and Android operating systems. The most popular platform is Ethereum. Other platforms include Solana, Cardano, and Terra.
Tokens don’t have their own blockchain. They are always issued on a platform. Tokens have often a utility or governance use case. Aave and Uniswap are some of the biggest tokens in the market.
Fantom belongs to the platform category. It is a direct competitor for Ethereum and other previously mentioned smart contract platforms. The native token of Fantom is FTM. It is used for staking and paying for transaction fees.
History of Fantom: Andre Cronje and Sam Bankman-Fried
Fantom was founded in early 2018 by Ahn Byung Ik, a South Korean Doctor of Computer Science. Ahn has founded several successful start-ups. He is also a member of many South Korean technology associations.
However, Ahn is no longer working on Fantom. Many have speculated this is due to South Korea’s strict cryptocurrency legislation.
Fantom is now personified in the platform’s DeFi architect and main programmer, Andre Cronje. He was recruited for the project in late 2018. Cronje is best known as the creator of the Yearn Finance DeFi protocol in 2020.
Cronje was away from Fantom for a couple of months between 2020 and 2021. Lately, he has played an important role in Fantom again.
Michael Kong is the only one of the original founders still working with Fantom. He is the CEO and CIO of Fantom Foundationissa. This is the organization responsible for Fantom’s development. You can find the key personnel from here.
Fantom raised about 35 million dollars in 2018 from four different ICOs. This is also when the FTM token was issued. Fantom’s original goal was to create a cryptocurrency for smart cities. The 2018 white paper describes a scaling solution up to 300,000 transactions per second.
Since then, Fantom’s focus has been shifted on decentralized financial applications (DeFi) which are run as CaaS (consensus-as-a-service). This means supply chains, healthcare management, and digital currencies for central banks, as an example.
Fantom’s Mainnet was launched in December 2019 (see the tweet below). Users still had to wait until the end of 2020 before Fantom began implementing the key functionality. This ecosystem is also known as Opera.
The Fantom Foundation is incredibly proud to announce that the genesis block of Opera Mainnet has been confirmed on Friday, December 27, 2019, 3:56:40 AM Greenwich Mean Time (GMT +0).https://t.co/V50AHjXoHe
— Fantom Foundation (@FantomFDN) December 27, 2019
Many of Fantom’s investors are big-money players. One of these is Alameda Research, the investment company of Sam Bankman-Fried, founder of the FTX cryptocurrency exchange. In February 2021, Alameda Research acquired Fantom’s FTM tokens directly from the market for USD 35 million.
Just three days later the whole Fantom network halted because the two biggest validator nodes stopped working.
The price and utilization rate of the FTM token has risen with it entering into several partnerships, such as Coinbase, Chainlink, and Central Asia. Fantom has also announced an incentive program worth 370 million FTM tokens to attract software developers.
This Coinbureau video goes through some of the key events that have taken place lately in the Fantom ecosystem.
Fantom’s technology: DAG instead of blockchain
Fantom uses a DAG (Directed Acyclic Graph) structure instead of a traditional blockchain. DAG is a unique variation of decentralized accounting technology that can process transactions simultaneously.
This method differs from many other cryptocurrencies in the platform category. Most of them use a blockchain and only one block builder (Proof of Work miner or Proof of Stake validator).
Every computer connected to the Fantom DAG gossips the network status to its surrounding nodes, which in turn pass information forward. Soon this gossip has spread so far that consensus on the network has been reached.
The Lachesis consensus algorithm developed by Fantom can validate an estimated 4,500 to 20,000 transactions per second with the finality of transactions being 1-2 seconds. Avalanche and IOTA are also well-known cryptocurrencies using DAG technology.
In addition to DAG technology, Fantom’s Lachesis consensus uses Proof of Stake. Like many other smart contract platforms, Fantom gets its security from the insensitive network users to stake Fantom’s FTM tokens to the protocol. Stakers receive FTM tokens as a reward for acting according to protocol rules.
The image below is from Fantom’s website.
A Lachesis network will remain operational even if 1/3 of the nodes were corrupted. However, even this was not enough in 2021, when the Fantom network stopped for seven hours. The two largest validators stopped working, and their shared input was more than a third of all staked FTM tokens. At the time of the incident, there were only 39 validators.
Validating nodes must stake at least 500,000 FTM tokens (about $1.3 million at November 2021 price). Such a massive minimum stake is one reason why Fantom currently has only about 60 validators. Though, Fantom has announced that it is aiming for between 1,000 and 2,500 nodes in the future.
For those who want to delegate their tokens for staking the minimum stake is just 1 FTM token. You can do the delegation via Fantom’s web wallet, which also supports the so-called liquid staking. This means that you’ll receive a “stake FTM token” that is possible to transfer elsewhere in Fantom’s DeFi ecosystem. This is how staked tokens work on some popular Ethereum protocols too, such as Aave.
Fantom and EVM
Fantom is compatible with Ethereum’s EVM (Ethereum Virtual Machine). This means popular Ethereum applications can be integrated easily into Fantom’s ecosystem. Users can switch between EVM-compatible networks in their Web3 wallets (like Metamask) and use ecosystems with lower fees compared to Ethereum.
However, other popular platforms are EVM compliant too, so this is not that big a deal. EVM also imposes capacity restrictions. Fantom can only process a couple of hundred TPS per second when they are smart contract transactions.
Fantom does not have its own Software Development Kit (SDK) for software developers, nor does it have a Fantom Virtual Machine software platform. Because of this, Fantom’s success is strongly linked to Ethereum. At least for now. It’s almost better to see it as an Ethereum sidechain than as a competitor.
FTM token as an investment
FTM is Fantom’s native token. It is used for staking, governance, and transaction fees inside Fantom’s network, as well as collateral in Fantom’s DeFi protocols. FTM also exists as an ERC-20 token in the Ethereum network and as a BEP-20 token on the Binance Smart Chain.
FTM token has a maximum supply of 3,175 billion. All but about 600 million tokens (reserved for staking rewards) are in circulation.
Although only 1.5% of the tokens were reserved for the public in the ICO, the vesting of private investors ended already in November 2020. It is worth noting that the ownership of FTM tokens is quite concentrated in certain wallet addresses and Fantom has not been too transparent about these.
Only FTM tokens yet to be issued are those reserved for staking rewards. Stakers earn a total of 500,000 FTM tokens a day. The sales pressure from these is approximately $1.3 million per day with November 2021 token price. This is a quite small figure in the crypto market overall. At the same time, Fantom creates incentives for software developers to build DeFi applications, which in turn creates demand for FTM tokens.
The FTM price has risen about tenfold in the last four months. The platform has also raised more than $5 billion in liquidity. Although the token price has grown, it has not been able to keep up fully with the Total Value Locked (TVL) growth.
According to this indicator, FTM tokens could still have room to grow, especially if the predictions of the continuation of the bull market are true. You can find up-to-date information on Fantom and other DeFi platforms at Defillama.com.
Also, check the Coin Bureau video below.
Coinbase’s non-custodial wallet added support to the FTM token in September 2021, which has caused speculation about a possible Coinbase listing. If Coinbase lists FTM, Fantom’s price would certainly get an extra boost.
Fantom’s more centralized structure may have prevented FTM’s Coinbase listing. Fantom itself maintains some nodes on the network, and Fantom CEO Michael Kong has said Fantom uses Amazon Web Services, which reduces decentralization further.
Potential DeFi regulation might also hold back Fantom’s development compared to more decentralized projects.
Another potential vulnerability is DeFi guru Andre Cronje, to whom the entire development of Fantom is strongly personified. What if Cronje decides to leave the project again? Will Fantom succeed in attracting talented software developers to build innovative applications or will the liquidity stop flowing into Fantom’s ecosystem?
Although Fantom is actively working with the governments of Central Asian countries, these projects do not affect the FTM token price. Fantom’s services to businesses and communities are not part of Fantom’s DeFi ecosystem, where FTM token plays an essential role.
Fantom price and how to buy FTM
If you want to invest in FTM, you should do it at Binance, where you can find trading pairs with USDT, BTC, BUSD, BNB, and ETH. Binance is the market’s leading cryptocurrency exchange.