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Use Case

The Fantom Foundation originally leaned into a narrative around providing infrastructure for Smart Cities. The thinking being that smart contracts would enable systems automation in rapidly developing Smart Cities across the world. In such a world, transactions with near-instant time-to-finality, and consistently low transaction fees, would provide a plethora of utility. Fantom has since pivoted away from the Smart City-type use cases and has instead found traction in the world of DeFi.

Primary Use Case

Fantom has found its primary use cases within the emerging DeFi ecosystem. The major dApps using Fantom as of Q4 2022 include DEXs (Curve, SpookySwap, Beethoven X, SpiritSwap, etc.), yield aggregators (Beefy Finance, Yearn Finance), lending platforms (Geist Finance), and algorithmic stablecoins (Tomb Finance). As of Q4, Fantom has ~$470 million in Total Value Locked (TVL), of which Gesit Finance makes up ~20.9%. DEXs account for the majority of TVL on Fantom. Should Ethereum’s universe of DeFi applications spill over into Fantom’s ecosystem, dApps built on Fantom could continue growing and gaining adoption. 

Fantom’s pivot away from Smart City automation towards DEXs and other DeFi applications speaks to the versatility of EVM-compatible smart contracts. In theory, a blockchain network with low fees and fast time-to-finality can target any number of diverse use cases. In the past, the Fantom Foundation has signaled an intent to innovate in the medical industry. One would be forgiven for wondering what issues Fantom doesn’t plan on solving. The shift towards DeFi applications after DeFi started to gain significant adoption begs the question of what other digitally native opportunity spaces Fantom might attempt to address moving forward. Naturally, building DeFi products and services doesn’t necessarily present similar oracle problems as building smart cities makes it easier to develop. Additionally, there’s no requirement to reliably and securely interface with a plethora of IoT hardware devices.

Fantom is comparable to Avalanche, Cosmos, and Polkadot to various degrees insofar as new dApps and projects building on Fantom can essentially launch their own chain that's natively compatible with the remainder of the Fantom network. Fantom aims to be able to scale to sufficient transactional throughput to support applications reliant on micropayments, such as gaming. It remains to be seen if the Fantom network will have its ambitions tested in practice.

Secondary Use Case

Fantom’s main secondary use case is staking the network’s native token, FTM, to secure the network. Validator nodes in the Fantom network are required to stake 500,000 FTM to participate in generating network consensus. In addition to earning block rewards (via the release of tokens from a pre-mined reserve, there will never be more than 3.175 billion FTM), validators also earn a portion of the network transaction fees. Network participants can also delegate their stake to validators, requiring at least 1 FTM. Those staking sufficient FTM and delegators (who pay a ~15% fee on their rewards to validators) stand to earn rewards for successfully propagating the chain. Fantom’s chain is structured in epochs that last for approximately four hours (1,000 blocks).

In addition to the transaction fee levied in FTM, which is paid to validators, 30% of each transaction fee is burned. Transaction fees are paid out to validators proportionally to their weight. Delegators stand to earn higher rewards the more they stake to validators and can lock up tokens for up to a year to maximize their earnings. 

Competitive Advantage

Fantom has a relatively strong price-to-sales ratio and revenue generation capacity relative to its size. Fantom has plenty of room to grow and appears to be generating revenue more efficiently than Solana.

The low token price also helps appeal to retail, as does the relatively low level of VC involvement. Further, Fantom isn’t listed on any major crypto exchanges (Coinbase, FTX etc.), so in the event of significant growth, there’s ample room for yet more tailwind.