While the ever expansive world of decentralized finance is improving on its traditional counterpart the web3 is not without its problems.
For example, to maintain an optimal state of functionality, commonly used assets like Bitcoin need to compromise between one of three core components: scalability, security, or decentralization. This concept is known as the “blockchain trilemma.”
Coined by Vitalik Buterin, it advocates that decentralized technologies (at least in their present layer-one state) can’t equally balance all three of these aspects simultaneously. With Bitcoin, for example, we can see that while Proof of Work helps provide strong security and a purer embodiment of decentralization, the speed of its transactions are slower as a result.
Still, a nascent cluster of platforms like Fantom are attempting to solve this trilemma. Fantom achieves this with its high-speed Proof of Stake consensus mechanism called “Lachesis.” It doesn’t compromise on security or decentralization to scale. With its bespoke “leaderless” PoS protocol, Fantom also allows developers to fully customize blockchains and tailor specific qualities for digital assets according to their respective use cases.
What is Fantom?
Built as an alternative network to Ethereum, Fantom (FTM) is an open-source DAG smart contract platform for decentralized applications (dApps), digital assets, and also offers a suite of built-in DeFi tools and resources. The Fantom Foundation, an organization created to oversee the Fantom product offering, was founded in 2018 and deployed their mainnet (OPERA) in December 2019.
Over the past several years, The Fantom Foundation, founded by South Korean computer scientist Dr. Ahn Byung lk, has grown to include a global team of experienced blockchain developers, engineers, scientists, researchers, designers, and entrepreneurs who share a collective vision, led by their current CEO Michael Kong.
The Fantom Foundation has been consistently focused on building an infrastructure that helps make advanced technologies more accessible and seamlessly integrated into the lives of the everyday person. It showcases
an underlying ethos of a distributed platform in their remote working environment and company set-up.
According to current data from Crunchbase, the Fantom Foundation has been funded by a total of 12 investors, and raised $40M over two venture capital rounds. Their investor network includes firms such as Signum Capital, Obsidian Capital, 8 Decimal Capital, and DHVC.
The infrastructure and efficiency of Fantom is maintained through what’s known as its Asynchronous Byzantine Fault Tolerant (aBFT) Proof-of-Stake (PoS) consensus mechanism. The aBFT network, which went live in 2019, is mainly designed to help preserve network security while maximizing the speed of transactions. To better clarify the features that make Fantom unique and how they operate we can start by breaking down the core components:
What is a consensus mechanism:
A consensus mechanism is considered the driver of distributed technologies. In a decentralized environment, there’s no single authority figure that validates transactions and data on the network. Instead, this traditionally hierarchical set-up is replaced by the specific consensus protocol. That is how a community achieves an agreement in a “trustless” and transparent way.
Various consensus mechanisms have taken form as early as the 1980s and include iterations like classical consensus, byzantine fault tolerance (BFT), practical byzantine fault tolerance (pBFT), Nakamoto consensus, and Asynchronous Byzantine Fault Tolerance (aBFT).
Asynchronous Byzantine Fault Tolerance (aBFT):
Specific to Fantom is what’s known as Asynchronous Byzantine Fault Tolerance (aBFT). Considered the premier standard of consensus mechanisms, it solves the blockchain trilemma by allowing for the highest quality and assurance in terms of decentralization, scalability, and security.
Although there are layered complexities to the structure and ways in which an aBFT network differs from alternative consensus mechanisms, one notable factor is that in an aBFT network, nodes can reach consensus independently (unlike Proof of Work), and do not need to exchange finalized blocks of data. This enhanced functionality enables the network to embody more of a distributed, meritocratic nature or “leaderless” environment, which also helps strengthen security, reduce latency, and create a faster network overall. Alongside this, aBFT networks also help provide a greater level of scalability and decentralization as there is no excessive communication or data congestion that would ordinarily limit the amount of participating nodes.
Directed Acyclic Graph (DAG):
Another key factor when it comes to understanding Fantom’s infrastructure is “Directed Acyclic Graphs” or DAG for short. A DAG is an alternative data structure typically used in scientific or medical fields to observe the relationship between variables and how they directly impact each other.
As per its name, the data is directed because it moves in one specific direction, and its acyclic (not cyclic) because the information or vertices don’t loop back on themselves. Specific to the context of DAG cryptocurrencies, there’s no notion of blocks, nor is mining required to extend the database. Each vertex in the DAG structure represents a transaction and instead of gathering transactions into data blocks, they are built on top of one another. However, a minor Proof-of-Work operation is required when a node submits a transaction to ensure the network isn’t spammed and continues to validate prior transactions.
Although the underlying mechanics and application of DAGs are quite new to cryptocurrencies, there are several advantages, chiefly being greater speed, no requirement for mining, little to no transaction fees, and no scalability issues.
The engine that powers the Fantom network is called Lachesis. It was created to help overcome the limitations of prior consensus mechanisms (as alluded to with the blockchain trilemma) and to allow consistently high-throughput, fast finality, and bank-grade security. Developers can also use Lachesis to build applications without creating their own networking layer and leverage its core advantages, chiefly being an asynchronous design, leaderless environment, Byzantine Fault-Tolerant, and able to confirm transactions in 1-2 seconds.
FTM is Fantom’s primary token and offers flexibility for users as a native mainnet token, or either ERC20 and BEP-20. The primary use-case of FTM is to secure the network through a Proof-of-Stake system that includes varied features like staking, governance rights, payments, and fee incentives.
To stake FTM tokens, validator nodes need to hold a minimum of 3,175,000 FTM and will receive “epoch rewards” along with a percentage of transaction fees on the network. The total supply of FTM is 3.175 billion. At the time of writing, there are 2.1B FTM tokens in circulation, with the remainder reserved for staking. While the reward distribution ultimately depends on governance decisions, at the current rate, it will take approximately over two years to distribute all the rewards and reach full circulation of the total supply, estimates the Fantom Foundation.
Although FTM can be bought on all major exchanges (with Binance offering the lowest slippage and highest volume), the creators of FTM discourage this practice due to custodial risks and the unavailability of staking rewards for FTM holders who acquire FTM from any place other than the official FTM network.
To elaborate on the unique features and benefits of the FTM token:
Due to its high throughput and speed, payments on the Fantom network currently take around 1 second and cost $0.0000001.
On-Chain Governance and Governance Activities:
Given the decentralized and permissionless nature of its ecosystem, any holder who has staked their tokens in the FTM network can carry out decisions and propose changes or vote on improvement proposals via on-chain governance. The influence and power of voters depend on the amount of FTM held.
Compensating Validators & Network Fees:
Without a buffer, malicious hackers and spam would easily target the Fantom network, ultimately hampering performance and filling the ledger with useless information. Although capped at a significantly low rate, FTM is used for transaction fees, and fees required to create smart contracts and new networks. FTM is also used to compensate validators who perform various activities like helping prevent transaction spam, validate transactions, etc.
Users who stake their Fantom (FTM) tokens on the platform will also gain a minimum Annual Percentage Rate (APR) of 3.79% and a maximum of 11.59%
The annual percentage rate depends on the amount of FTM staked and the total lock-in period. To receive a clearer insight into the specific APR and estimated rewards, holders or supporters of FTM can visit the Foundation’s calculator to select the preferred number of tokens and lock-in period. Unstaking FTM takes seven days, and if holders unstake tokens before the lockup period is complete, all of their FTM tokens will be burned.
The Fantom Ecosystem:
Through its integrated DeFi stack, Fantom also allows its users to mint fUSD with their FTM tokens. fUSD is the native stablecoin on Fantom pegged 1:1 to the US dollar, which can be used to trade, lend, and borrow against 176 synthetic assets and tokens, including fBTC and fETH – all integrated with Fantom wallets. Holders can choose the amount they want to mint and rebalance at any time with a 500% collateral ratio by adding or removing FTM and can repay their minted fUSD by unlocking their staked FTM tokens.
Powered by its abFT consensus algorithm, the Fantom Opera mainnet is a secure, open-source, and fast environment designed to build real-world decentralized applications with no risks of congestion or lag. Designed to overcome the limitations of alternative blockchains, Fantom Opera is fully compatible with the Ethereum Virtual Machine (EVM) and provides full support for smart contracts written through Solidity for seamless dapp porting. By being fully EVM compatible, developers can write and deploy smart contracts as they would on Ethereum but with the added support of a faster consensus mechanism. Users can also stake on Opera with a minimum of 1 FTM, and pending on their technical backgrounds (along with at least 1,000,000 FTM), can also run a validator node.
Solutions and partnerships:
Notable partnerships and solutions have been developed with Fantom for a range of global industries like financial markets, healthcare, education, tokenized real estate, and supply chain management. Partnerships with Fantom are inclusive but not limited to crypto.com, travala, Ethereum Classic Labs, OKEx, Waves and many more.
Staking & Storing Fantom (FTM):
To stake Fantom FTM tokens, users will need to have a minimum of 1 FTM. The following guide is a basic walkthrough for the process:
1. Install the FTM wallet on either PC, iOS, or mobile device.
2. Transfer your FTM to your Opera address
3. Choose from a range of validators (a reputable one) and stake preferred amount of FTM tokens. Caution is advised during this step as although validators do not have access to any tokens other than their own, if a validator node acts maliciously, there is a chance that users can lose all of their staked FTM tokens.
Staking rewards for FTM tokens changes based on the level of participation of the FTM holder. As staking occurs on-chain, personal devices such as mobiles or desktop computers don’t always have to be online or connected. As staking occurs completely independently once tokens are locked, users can safely log out of their wallet and periodically check back in to access or view their reward balance.
The Fantom (FTM) wallet is the native wallet for the FTM Opera mainnet. With the Fantom wallet users can send and receive FTM, stake, claim, and unstake FTM, and vote on governance proposals amongst many other features. Fantom wallets are fully compatible with leading mobile platforms like Metamask, Ledger, and Trust Wallet. A full guide on how to set-up and use FTM mobile wallets can be found here. A guide on setting up Ledger Nano S/ X with Fantom can be found here.
Fantom (FTM) Price:
Fantom (FTM) is currently trading at USD 2.08 as of Oct. 15, 2021. The 24-hour trading volume on exchanges is approximately USD 455,862,269
Mason Marcobello is a writer, entrepreneur, and aspiring creative technologist. While avidly curating, creating, and collecting NFTs, Mason is also currently in the process of building Apollo’s Atlas, a library for the metaverse inspired by two dogs, Apollo and Atlas.