With emerging criticism over the high costs associated with transacting on the Ethereum mainnet, investors are switching attention to faster and more cost efficient alternatives. Binance Smart Chain (BSC) has seen a meteoric rise in growth over the past year or so, suggesting there is sufficient demand from investors when it comes to alternatives to the blue chip networks of Bitcoin and Ethereum. This is where Fantom comes into play. Fantom is a fast, high-throughput open-source smart contract platform for digital assets and dApps. It is a layer 1 solution, with layer 1 referring to the base layer of all blockchain infrastructure.

Fantom has experienced a massive influx of new users over the past calendar year, surging from a price of $0.0258 on January 4th 2021, to reaching an all time high of $3.48 on October 28th. That’s a whopping increase of about 13,488%. At the time of writing, Fantom is valued at $2.43, sitting 29.9% below its ATH. The number of unique wallet addresses has also grown massively, from about 10 million last year, to almost 60 million at present. Fantom has certainly had an excellent 2021.

Fantom was founded by South Korean computer scientist Dr. Ahn Byung Ik and Matthew Hur, who sought to provide an alternative solution to some of blockchains’ existing problems, namely their ability to scale. The Fantom Foundation is the parent company of the Fantom blockchain. Its current CEO is Michael Kong, while Andre Conje, a well known internet crypto personality, sits as chairman.

How does it work?

So we know that Fantom is fast, affordable, and scalable, but how does it work? Fantom’s consensus mechanism, Lachesis, is an Asynchronous byzantine fault tolerance (aBFT) mechanism. Byzantine Fault Tolerance is a mechanism that enables a decentralized, trustless network to function even in the presence of malfunctioning or malicious nodes. As long as two-thirds of the network remains compliant, the network will continue to operate. Compared to Classical and Nakamoto consensus, Lachesis is a ‘faster, more scalable, and more secure choice’.

Fantom’s native token, FTM, is a proof-of-stake (PoS) token. This means that in order to secure the network users can delegate their FTM to stake, which helps validate blocks in the network. Therefore users who choose to delegate FTM are actively participating in maintaining and upholding the network.

What value does it bring to the table?

When assessing the utility of the Fantom token, and what value it brings to would be investors, the first things we might point out are the low gas, or transaction fees, involved, and the speed at which transactions are validated.

An often overlooked part of the Fantom ecosystem is the dApps (decentralised apps) that are built on the network. Fantom’s defi ecosystem shows signs of promise with several dexs (decentralised exchanges) present, while there are also numerous staking and liquidity lending protocols. These protocols can often appear very lucrative to investors looking to grow their crypto in a passive manner. Tomb Finance is an excellent example of this.

You may notice that many of Fantom’s dapps are ghoulishly or morbidly themed. Spookyswap, Tomb Finance, Grim Finance and Spiritswap are just a few of the spooky themed applications built on the Fantom network. This theme adds a touch of playfulness and fun to these defi activities, and sets this ecosystem apart from many of the currently existing yield farming and dex protocols.

Fantom also offers real world solutions. The Fantom Foundation has partnered with Uzbekistan and Tajikistan with the goal of improving digital infrastructure and bringing their respective financial systems into the modern digital age. These projects are exciting as they show that Fantom has legitimacy, while the number of Fantom users will no doubt grow as a result of adoption in these countries.

Are there any risks?

While Fantom no doubt looks like an excellent project that is moving somewhat under the radar, we must always consider potential risks, limitations and weaknesses in any blockchain application. Despite sound on-chain security, some of Fantom’s defi protocols have suffered from hacks and mishaps. On the 19th of December 2021, Grim Finance was hacked with about $30 million worth of staked value stolen. Faults in the vault contract were exploited, so that anyone who had deposited tokens into the protocol at any point was vulnerable to their funds being stolen. A combination of human error and negligence was at play here, as developers failed to flag the potential weaknesses in the protocol’s security. Similarly, Tomb Finance lost about $8–10 million worth in funds, however denied that this was a hack. The Tomb developer team claimed that there was a gatekeeping error that in turn caused a massive sell off of funds, causing a massive devaluation.

These occurrences certainly serve a stark warning for would be investors who are looking to grow their holdings via Fantom’s DeFi ecosystem. While there is certainly high reward, there exists the duality of high risk as well.

Conclusions

Fantom is a promising layer 1 network that offers a growing defi ecosystem and a strong community. The blockchain’s speed and low costs make it appealing to those seeking to find alternatives to Ethereum, while the token’s market performance over the past year makes a compelling case for would be investors. Fantom offers investors the chance to grow their wealth via an appreciating asset, while also offering passive avenues to further grow. 2022 will be a year where we certainly keep a close eye on this project, with big things expected to come.