Fantom Deploys High-Speed PoS to Solve the 'Blockchain Trilemma'

While decentralized finance improves on traditional finance, web3 comes with its own set of problems.

For example, to function optimally, assets like Bitcoin must compromise on one of three core components: scalability, security, or decentralization. Bitcoin's Proof of Work provides robust security and decentralization but results in slower transaction speeds. This concept is known as the "blockchain trilemma."

Coined by Vitalik Buterin, the “blockchain trilemma” suggests that decentralized technologies (at least in their layer-one state) can’t balance all three aspects equally.

Platforms like Fantom are trying to solve this trilemma. Fantom uses a high-speed Proof of Stake consensus mechanism called “Lachesis” that doesn’t compromise on security or decentralization to scale.

With its bespoke “leaderless” PoS protocol, Fantom also lets developers fully customize blockchains and tailor specific qualities for digital assets based on their 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) and digital assets. It also offers a suite of built-in DeFi tools and resources. The Fantom Foundation, which oversees Fantom’s products, was founded in 2018 and launched their mainnet (OPERA) in December 2019.

Team members

Over the past several years, the Fantom Foundation, founded by South Korean computer scientist Dr. Ahn Byung lk, has grown into a global team of experienced blockchain developers, engineers, scientists, researchers, designers, and entrepreneurs. The Fantom Foundation focuses on building infrastructure to make advanced technologies more accessible and an integral part of everyday life. Their remote working environment and company setup reflect the ethos of a distributed platform.

Fantom’s token ecosystem.

Funding

According to Crunchbase, the Fantom Foundation has been funded by 12 investors and raised $40M over two venture capital rounds. Their investor network includes firms like Signum Capital, Obsidian Capital, 8 Decimal Capital, and DHVC.

Main characteristics

Fantom’s infrastructure is maintained through its Asynchronous Byzantine Fault Tolerant (aBFT) (aBFT) Proof-of-Stake (PoS) consensus mechanism. Launched in 2019, the aBFT network is designed to preserve network security while maximizing transaction speed.

To better understand what makes Fantom unique and how it operates, let’s break down its core components:

What is a consensus mechanism

A consensus mechanism is the driving force behind distributed technologies. In a decentralized environment, there’s no single authority to validate transactions and data. Instead, this role is filled by a specific consensus protocol, allowing the community to reach agreements in a “trustless” and transparent way.

Consensus mechanisms have evolved since the 1980s, including 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)

Fantom uses Asynchronous Byzantine Fault Tolerance (aBFT).

While there are complexities in how an aBFT network compares to other consensus mechanisms, a key difference is that nodes can reach consensus independently without exchanging finalized blocks of data. This allows the network to function in a distributed, meritocratic, or “leaderless” environment, which enhances security, reduces latency, and speeds up the network.

Moreover, aBFT networks offer greater scalability and decentralization since there is no excessive communication or data congestion limiting the number of participating nodes.

Directed Acyclic Graph (DAG)

Another important aspect of Fantom’s infrastructure is the use of Directed Acyclic Graphs (DAG). A DAG is a data structure often used in scientific or medical fields to observe relationships between variables and how they impact each other. In a DAG, data moves in one specific direction and doesn’t loop back on itself.

In the context of DAG cryptocurrencies, there are no blocks or mining required to extend the database. Each vertex in the DAG structure represents a transaction, and transactions are built on top of one another. However, a minor Proof-of-Work operation is needed when a node submits a transaction to prevent spam and ensure the network continues to validate prior transactions.

The Fantom wallet

Although DAGs are relatively new to cryptocurrencies, they offer several advantages, including greater speed, minimal to no transaction fees, and no scalability issues.

Lachesis

The engine that powers the Fantom network is called Lachesis. It was designed to overcome the limitations of previous consensus mechanisms (as highlighted by the blockchain trilemma) and to provide consistently high throughput, fast finality, and bank-grade security. Developers can use Lachesis to build applications without creating their own networking layer, leveraging its core advantages: an asynchronous design, leaderless environment, Byzantine Fault Tolerance, and the ability to confirm transactions in 1-2 seconds.

FTM Tokenomics

FTM is Fantom’s primary token, offering flexibility as a native mainnet token or either ERC20 and BEP-20. The main use of FTM is to secure the network through a Proof-of-Stake system, which includes features like staking, governance rights, payments, and fee incentives.

To stake FTM tokens, validator nodes must hold at least 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. Currently, 2.1 billion FTM tokens are in circulation, with the rest reserved for staking. While reward distribution depends on governance decisions, the Fantom Foundation estimates it will take over two years to distribute all the rewards and reach full circulation.

Although FTM can be bought on major exchanges (with Binance offering the lowest slippage and highest volume), the creators discourage this due to custodial risks and the unavailability of staking rewards for FTM holders who acquire tokens outside the official FTM network.

A nascent cluster of platforms like Fantom are solving this trilemma. Fantom achieves this with its high-speed Proof of Stake consensus mechanism called “Lachesis.”

Expanding on the unique features and benefits of the FTM token:

Payments

Thanks to its high throughput and speed, payments on the Fantom network take about 1 second and cost only $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 participate in decision-making and propose or vote on improvement proposals through on-chain governance. The influence and power of voters depend on the amount of FTM they hold.

Compensating Validators & Network Fees

Without a buffer, malicious hackers and spam could easily target the Fantom network, harming performance and filling the ledger with useless information. FTM is used for transaction fees, and fees for creating smart contracts and new networks, even though these fees are kept very low. FTM also compensates validators who help prevent transaction spam, validate transactions, and perform other important tasks.

Staking Rewards

Users who stake their Fantom (FTM) tokens on the platform can earn an Annual Percentage Rate (APR) ranging from 3.79% to 11.59%. The APR depends on the amount of FTM staked and the lock-in period. For a clearer insight into the specific APR and estimated rewards, FTM holders can use the Foundation’s calculator to select the preferred number of tokens and lock-in period. Unstaking FTM takes seven days, and if tokens are unstaked before the lockup period ends, all of the FTM tokens will be burned.

The Fantom Ecosystem

Fantom DeFi

Through its integrated DeFi stack, Fantom allows users to mint fUSD using their FTM tokens. fUSD is Fantom’s native stablecoin, pegged 1:1 to the US dollar, and can be used for trading, lending, and borrowing 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. They can repay their minted fUSD by unlocking their staked FTM tokens.

Fantom Opera

Powered by its aBFT consensus algorithm, the Fantom Opera mainnet offers a secure, open-source, and fast environment for building real-world decentralized applications without congestion or lag. Designed to overcome the limitations of other blockchains, Fantom Opera is fully compatible with the Ethereum Virtual Machine (EVM) and supports smart contracts written in Solidity for seamless dapp porting. This compatibility allows developers to write and deploy smart contracts as they would on Ethereum but with the benefits of a faster consensus mechanism. Users can stake on Opera with a minimum of 1 FTM, and those with the technical expertise and at least 1,000,000 FTM can also run a validator node.

Products and Partnerships

Fantom has developed notable partnerships and products across various global industries, including financial markets, healthcare, education, tokenized real estate, and supply chain management. Partnerships with Fantom include, but are not limited to, crypto.com, Travala, Ethereum Classic Labs, OKEx, Waves, and many more.

Staking & Storing Fantom (FTM)

To stake Fantom FTM tokens, users need a minimum of 1 FTM. Here’s a basic guide for the process:

1. Install the FTM wallet on your PC, iOS, or mobile device.

2. Transfer your FTM to your Opera address.

3. Choose a reputable validator from the list and stake your preferred amount of FTM tokens. Be cautious during this step; although validators can’t access your tokens, if a validator node acts maliciously, you could lose all your staked FTM tokens.

Staking rewards for FTM tokens vary based on the level of participation of the FTM holder. Since staking occurs on-chain, your personal devices don’t need to be online or connected. Once tokens are locked for staking, users can safely log out of their wallet and periodically check back to view their reward balance.

Wallets

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, among other features. Fantom wallets are fully compatible with leading mobile platforms like Metamask, Ledger, and Trust Wallet. Full guides on setting up and using FTM mobile wallets can be found here, and for setting up Ledger Nano S/X with Fantom, here.

Fantom (FTM) Price

As of October 15, 2021, Fantom (FTM) is trading at USD 2.08, with a 24-hour trading volume on exchanges of approximately USD 455,862,269.

Mason Marcobello is a writer, entrepreneur, and aspiring creative technologist.