- In January 2022, FTM surged 21% and Fantom cemented its spot in the top 5 chains (TVL)
- Fantom utilizes DAG as a solution to the Blockchain Trilemma
- What’s driving continued investor interest in Fantom and FTM
If you’ve been paying attention to famous DeFi developer Andre Cronje’s Twitter and Medium, you may often see him endorsing emerging Layer 1 blockchain Fantom (FTM). On the crypto market, Fantom’s native token FTM is also rapidly gaining investor interest.
Due to strong fundamentals and rising investor confidence in the project, FTM is part of what the crypto world calls the ‘FOAN’ trade quartet - which also comprises the tokens of Harmony (ONE), Cosmos (ATOM) and sharded blockchain NEAR Protocol (NEAR). These blockchains and Fantom are seen as strong alternatives to Ethereum and FOAN tokens including FTM have outperformed other major crypto as investors choose to inject funds into FOAN. FTM even surged 21% at one point last month.
FTM Price Chart - CoinGecko. FTM has risen exponentially since January 2021.
Fantom’s rise is not limited to just price movements of its token. In January 2022, the number of transactions on Fantom overtook hot favourite Avalanche’s. Fantom’s total value locked (TVL) even crossed $12B then, temporarily making it the third largest DeFi chain by TVL. While its TVL is now around $8.99B at time of writing, Fantom continues to maintain its ranking in the top 5 chains.
What is Fantom?
Fantom claims to be a high-performance, high-scalability, and secure open-source smart contract platform. It aims to solve existing blockchain limitations and build its own DeFi ecosystem.
We all know that for public chains, more nodes indicate a higher degree of decentralization, but they also reduce speed and scalability. We don’t want chains that cannot scale because this means higher gas fees and longer processing time.
Fantom employs a Directed Acyclic Graph (DAG) structure in its attempt to solve the Blockchain Trilemma. Through DAG, users enjoy low fees and almost instant transactions.
The Brief on DAG
Traditional blockchain structure vs DAG structure
DAG stands for Directed Acyclic Graph. If we break down the term, ‘Directed’ means moving in one direction only, ‘Acyclic’ means that you can't return to a node from the current node, and ‘Graph’ means that the system looks more tree-like, or like a graph. DAG is a data structure that already exists and is widely used in Computer Science. This is not to say that DAG cannot be found in everyday life. An example would be in GPS navigation. DAG helps us to travel via the shortest route.
Referring to the diagram, the traditional blockchain is a single chain structure with a long main chain. The order of blocks on the chain is also arranged according to the time of discovery.
The DAG is more complicated but efficient. Although there is also a chain, the relationship between nodes is much more complex. The chronological order in which transactions, or nodes, occur no longer has a major impact on the formation of the chain. Instead, new transactions are built on top of older ones, thus forming the graph structure in DAG.
Transactions can be validated simultaneously without waiting for the previous one to be completed. Transaction information also does not need to be synchronized.
Lachesis is the name of the Fantom blockchain consensus mechanism. The blockchain is secured by Proof-of-Stake (PoS). If you recall our previous article on PoW vs PoS, we explain that a consensus mechanism is a set of rules that participants follow to enable distributed systems to work together and keep secure.
In the traditional blockchain, each node or each block represents a ledger, which is maintained and operated by miners and records all transaction information.
For Lachesis, each node is a transaction. Each transaction needs to be confirmed by the previous two or three valid transactions before it is accepted into the network. In this case, the number of consensus messages created for one transaction will be reduced, which can shorten completion time and lower communication overhead among nodes.
Screenshot of FTM token utility
FTM is the native token of Fantom. Similar to other layer 1 tokens, FTM is a governance token and can be used as gas fees. FTM is also used for node verification by staking, since Fantom operates on a PoS model.
Last year, Fantom announced the launch of a $370M incentive program for its community, especially for developers and builders. Under the program, if a protocol can maintain or grow its TVL to a certain level, it can apply for an FTM award from the Fantom Foundation.
Although current protocols built on Fantom seem to contribute to a comprehensive DeFi ecosystem and Fantom’s TVL is decent, the number of DApps and activity level are still behind other popular Layer 1 projects. Some investors also feel that the development of Fantom is going too slowly.
Fantom has a grand vision to create an ecosystem capturing DeFi, the NFT market and GameFi. However, other than DeFi, its other sectors have not yet shown outstanding results.
Cronje recently teamed up with Daniele Sestagalli, another famous DeFi developer, to deploy a new project on Fantom. Cronje’s high-profile endeavour is sure to boost continued investor attention to Fantom and FTM and may help retain its prominence among investors. That said, we’ll have to wait and see if Fantom can successfully expand its scope instead of relying solely on its DAG blockchain and Cronje’s endorsement.
The views expressed in this article are the author's alone and do not necessarily represent the views of ApolloX.
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