The introduction of Bitcoin in 2009 led to a great advancement in technology and a bigger step towards a more efficient financial system. However, Bitcoin doesn’t have the ability to scale and process many transactions quickly due to its slow consensus mechanism—the engine that powers the blockchain.
Several blockchain platforms that try to solve this problem are unable to do so effectively and they often compromise between three components: scalability, security, and decentralization. This is known as the blockchain trilemma.
Fantom blockchain seeks to solve these three core blockchain problems without neglecting any. Its high-speed consensus mechanism, Lachesis, allows digital assets to operate at a fast speed and delivers great improvements over the existing blockchain platforms.
In this article, you will learn about how Fantom blockchain works, what its utility token, FTM, is used for, and what makes Fantom a unique platform.
What is Fantom?
Fantom is a unique smart contracts platform that supports the creation of new decentralized applications (dApps) and digital assets. It is one of many blockchain networks that exist to provide an alternative to Ethereum.
The Fantom blockchain mainnet was launched in December 2019 and its network architecture intends to solve the problem of blockchain trilemma by providing a steady balance of scalability, security, and decentralization.
Fantom operates on a “leaderless” Proof of Stake ( PoS) consensus mechanism known as Lachesis. Lachesis is designed to preserve network security while maximizing speed. It is also an asynchronous Byzantine Fault Tolerant (aBFT) consensus mechanism.
This means that network data can be processed at different times by nodes and the network can tolerate up to one-third of its participants engaging in faulty or malicious behavior without causing any harm to network processes.
The Lachesis consensus also powers Fantom’s dApp deployment platform — Opera chain. It is where developers launch and host dApps operating on the Fantom network. Opera chain can host real-world applications with a low risk of network congestion or high gas fees.
Fantom is positioning itself as a faster and cheaper alternative to Bitcoin (for money transfers) and Ethereum (for development platforms). For instance, on Fantom, a money transfer takes only 1 second and it costs just $0.0000001.
Fantom Use Case: Securing the Network Through Staking
The most important utility of the FTM token is securing the network through its Proof-of-Stake system. Users can stake their FTM to secure the network and earn staking rewards.
FTM holders who stake their FTM can earn rewards according to the number of tokens assigned to validators and the duration of the lock-up staking period. The current annual percentage yield on staking is 13% APY.
Users with the minimum number of FTM tokens (currently 1,000,000) can participate as validators and earn a share of the transaction fees on the network.
Fantom also utilizes a feature called Liquid Staking to allow stakers to mint sFTM at a 1:1 ratio to their staked FTM. They can use the sFTM as collateral in Fantom Finance, a DeFi platform powered by Fantom. This allows users to get more out of their staked FTM.
Here are some simple steps on how to stake FTM on FTM wallet;
- Open the FTM wallet on your computer or your mobile device. Create a new wallet, or access an existing one using some secret key phrases.
- Transfer your FTM from an exchange to your Opera address.
- Select Delegation
- Choose the amount of FTM you would like to stake and a validator. You can click on a validator to show more information.
- Choose your lock-up period. you can choose the stake-as-you-go for a 4% APY or lock up your FTM for at least two weeks up to a year to earn higher staking rewards.
Let’s read on to see how FTM is used in governance.
Fantom Use Case: On-chain Governance
The FTM token can also be used to participate in on-chain governance activities on the Fantom network. Fantom is one of the first chains that support on-chain governance. This governance system allows FTM holders to give their opinions and suggestions on network concerns by creating new proposals and voting on existing ones to improve the network.
FTM holders can vote on decisions like software upgrades, changes in the network operations, changes in validators slashing penalties, or changes in the rewards rate.
The voting is entirely on-chain and decentralized. Voting is available to only FTM holders who stake. It costs just the transaction fee, usually just 1 FTM.
Any FTM token holder who stakes FTM can also submit a proposal. Each proposal submission costs 100 Ftm. It will be burned during the operation.
Fantom Use case: Purchase Goods on Shopping.io
Another use case of FTM is that it can be used to shop for goods on Shopping.io. Recently, Fantom Foundation has partnered with a crypto e-commerce platform, Shopping.io, to allow buyers to purchase goods from major online retailers using, FTM.
With this new partnership, FTM holders can now use their tokens on Shopping.io to purchase items from several popular retailers like Amazon, Home Depot, eBay, and Walmart.
This move to enable FTM holders to purchase goods online signifies a great move to facilitate mainstream crypto adoption. With this, FTM is the only crypto platform that enables users to spend cryptocurrencies on e-commerce websites.
Fantom’s 1-second high transaction fee and low average transaction fees of ~$0.01 make the FTM token favorable for everyday transactions and seamless online purchasing.
Fantom Use case: Network Fees
The FTM token is used on the Fantom network to pay network fees. FTM is used to pay for various fees like fees for transactions, smart contract deployment, and network creation. These network fees are very low, but enough to make it difficult for a malicious actor to carry out an attack or fill the ledger with useless information.
The network fee is currently 1 FTM per transaction. This cost of sending transactions through Fantom is significantly minimal compared to using Ethereum.
This low cost is a great opportunity for users to perform as many transactions as they desire and developers also leverage the low fee strategy of Fantom to offer low-cost services.
What Makes Fantom Unique?
Fantom’s sole focus on supporting dApp development makes it appealing to developers. For instance, the platform’s source code is available via open-source licensing at Github. Anyone can create building blocks using Fantom’s code and APIs.
Furthermore, the FTM utility token isn’t just for use as a store of value but has valuable uses like rewards for validators and for securing the network.
Another unique aspect of Fantom is its rich ecosystem of decentralized finance tools, including fMint, fSwap, and fLend which all facilitate the ease of use in DeFi. Every element of the Fantom platform was designed with decentralization and interoperability in mind.
On the Fantom network, each application can run on its blockchain, independent from another. They can also have custom tokens, tokenomics, and governance rules. However, all the blockchains on Fantom can interact with each other and benefit from the speed and security of Fantom’s Lachesis technology.