Robert Steinadler, a year ago
The year 2021 has been the year of the layer 1 solutions. More and more smart contract platforms evolved and were aiming to catch market share in decentralized finance and the NFT economy. With the growing user base of blockchain protocols, they have to face obstacles that didn’t exist a few years ago. The most pressing problem is the scalability of blockchain technology and there have been several attempts to solve the trilemma between security, scalability, and decentralization.
Fantom is claiming to have solved the famous trilemma by offering a new technology that is capable to scale without neither sacrificing the decentralization or the security of its blockchain. This is a very strong claim and Fantom is not the first player in the crypto industry to suggest that achievement.
In this article, we are going to take a closer look at Fantom and how the fundamentals of this blockchain technology are working.
Fantom is a layer-1 blockchain that is based on a novel consensus mechanism that is called the “Lachesis Protocol”. Its algorithm is based on a directed acyclic graph (DAG) to achieve asynchronous Byzantine fault tolerance (aBFT). Fantoms blockchain allows the creation of multiple execution chains. The aBFT consensus protocol achieves:
Fantom allows running multiple blockchain layers with Lachesis at the core of the system. The first additional layer within Fantom was Opera. The platform launched in December 2019 as a smart contract platform that is compatible with the Ethereum Virtual Machine (EVM). This makes Fantom highly interoperable with other blockchain platforms and the fact that Opera is running very common DeFi applications like SushiSwap and Curve pays testimony to that capability.
Fantoms technology is also highly scalable because each network that is built on it runs independently from one another. In effect, each decentralized application has its own blockchain and this prevents congestion as some of our readers might have witnessed with other smart contract platforms in times of heavy network load.
Given the fact that Fantom already built a bridge to Ethereum, there is more than one incarnation of FTM token. There is the native FTM token and there is also an ERC-20 version of it, that is automatically converted once it has been sent to a Fantom wallet. FTM also exists on the Binance Chain as BEP2 standard token.
At the time of writing, there are about 2,5 billionFTM in circulation with a maximum supply of a little bit more than 3,1 billion FTM. The token can be used to pay transaction fees and gives investors the opportunity to earn additional income by participating in Fantom staking.
Fantom has no separate governance token. Instead, token holders can participate in the governance system by staking their FTM. This allows easy access to the ecosystem among other use-cases, e.g. using FTM to settle payments.
Most smart contract platforms that achieve a high scalability are using a proof of stake consensus model. This is also the case with Fantom. It uses leaderless proof of stake on Fantom Opera that removes the chance for a set of validators to have significant authority.
Getting involved in staking is very easy. Advanced users can run a validator which will require a stake of 3,175 million FTM. Even investors with less than the required minimum stake can participate in staking by delegating as little as 1 FTM or more to a validator. This system is very similar to other solutions in the industry and creates a similar user experience comparable to staking Cardano, Solana or Tezos.
Decentralized Finance and Non-fungible tokens are the most important use cases for smart contract platforms. There are a variety of DeFi protocols native to Fantom and also a couple of protocols that are native to Ethereum. This makes it easy not only to swap tokens for a negligible fee but also to participate in more complex transactions that are a vital part of the decentralized economy.
Here are a couple of examples to give you a better overview of already existing protocols:
As always: Please note that these protocols and the services they offer are in no way endorsed or recommended by LiteBit. With the growing amount of native DeFi protocols, Fantom is making an impact in this sector. Given the fact that it is not limited to native protocols, there is indeed a lot of room to grow. There are over 115 different protocols running on Fantom at the time of writing and the fact that the total value locked on-chain is comparatively low hints that Fantom is still in a very early stage of its overall development.
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