Why Fantom could be the cryptocurrency to take on Ethereum

Another supposed “Ethereum killer” is haunting the crypto market. Trick or treat? Only time will tell.

Contrary to what you might assume, Fantom is not a spooky typo. It’s actually a crypto network and coin (FTM, in the token’s case), which offers a lot of very interesting and different features to other blockchains. In fact, those features are so interesting that its potential could pose a real alternative to heavyweight coins such as Ethereum, Cardano and Solana. Founded in 2018 in South Korea, one of the minds behind Fantom is DeFi big shot Andre Cronje, who also works for Ethereum. Go figure.

What gives Fantom potential? Well, its network uses a DAG and a consensus that’s a variant on proof of stake (which they’ve called Lachesis). For the uninitiated, a consensus is the word for how the blockchain/​network validates transactions (computers mine crypto to reach a consensus, for example).

Fantom also has a couple of features that make it different to more known blockchains, both in terms of performance and what you can do on the network. But at the moment, Fantom is the 32nd most popular crypto by market cap, which would suggest it’s still pretty under the radar (can you name 32 cryptocoins?).

Has all of this gone over your head? Don’t stress. All will be explained below.

What the hell is a DAG?

It stands for Directed Acyclic Graph. Obviously that helps basically nobody by way of explanation, but it’s good to know for any FinTech-themed pub quizzes you might find yourself at… right?

Basically, a DAG is a distribution ledger, which is the same as blockchain in that it’s purpose is ultimately about showing data transactions.Nano, an eco-focussed altcoin, also uses a DAG. So, d’ya like dags? We’ll leave that for you to decide.

So it isn’t a blockchain?

Technically no, but it is very similar. With blockchain, the idea is that you have a series of pieces of data that make a block, which is added to a chain (to form a chain of blocks, geddit?). With DAGs, individual pieces of data aren’t put into blocks, but they are sequenced in an equally secure way.

If you’re in need of a slightly oversimplified explanation (we won’t judge), imagine you’re clicking through folders to find an image: NIGHTS OUT – MESSY NIGHTS OUT – SUMMER 2019 – FABRIC – IMAGE. All pretty signposted and speedy, right? Well, the difference with blockchain (sort of) is that the subfolders are all compressed, so you have to expand them which takes more time. And time is money, folks!

The main pros for blockchain are that a lot of people are already using it, it’s more decentralised and less prone to attacks. But DAG is cheaper, faster and far more scalable where transactions are concerned. It also uses less energy than proof of stake blockchains, and waaaaaay less energy than Bitcoin and its proof of work mining consensus, which is honestly quite old-school in the world of crypto these days.

And Fantom has a different version of proof of stake?

Yeah, it’s called Lachesis. While you’d need to have around 1.3 million quid going spare to become a validator on the network, you can stake for as little as one FTM by delegating these crypto-tokens to a validator. Being able to earn staking rewards on as little as £1.27 (at the time of writing) is incredibly rare. Staking crypto can generate you passive income, but if you’re not clued up on the subject just yet, read this more detailed explainer.

The consensus mechanism is very quick, comfortably capable of more than 4,500 transactions per second, and crucially, it’ll finalise the transaction within a second or two. In contrast, bitcoin can take as long as an hour and typically does seven transactions per second, while Visa can do up to 4,000 transactions per second at its peak.

Is this all still decentralised?

Yeah, but like… loosely. To be a validator, you have to stake a million FTM, which at the current price is £1,270,000. That’s obviously a lot of money generally speaking, but it’s an especially huge amount to have holed up in a relatively unknown crypto. As a result, there’s only 75 validators at the time of writing. So while it is decentralised, it’s a little iffy in the same way a poll would be if you only asked a small number of people to take it. Of course, if you’re not too bothered about the whole decentralisation thing, that’s not too important for you.

Got it. So what does the Fantom network actually do?

The programmability gives it a lot of functionality. It can be used to create everything from smart contracts and NFTs to entire Metaverse worlds and games. It’s like how Decentraland was created on Ethereum’s blockchain, but cheaper – at least for now!

Another interesting quirk of Fantom is that it has incentives for developers. Around 370m FTM (£469.9m) are currently being kept aside to give to developers who are making interesting applications on the Fantom network. Individual sets of developers could be given as much as a million USD a month to create cool projects (particularly ones that get users to stay on the network).

This means users are more likely to stay on the platform long-term, as opposed to other crypto incentives used by cryptos like fellow Ethereum killer” Polygon (MATIC), which incentivises the user not the developer. As a user, if you’ve made the most of an incentive in one place and then somewhere else offers you a better one, you’re gonna jump over, aren’t you? As an alternative, by prioritising developers, Fantom is essentially hoping to monopolise the best apps and resources. If the resources are always being made on Fantom, users are naturally going to choose it over other platforms.

For example, SpookySwap, Tarot and SCREAM (all supernaturally named, you’ll notice) are a decentralised exchange, a lending protocol and a DeFi application, respectively, made on and for Fantom. That should give you an idea as to how many avenues the network already has.

How could Fantom “kill” ethereum?

This is mainly down to the transactions. See, along with being quicker and able to process more transactions than Ethereum, Fantom’s transaction fee is also way cheaper, at around a penny. In contrast, Ethereum’s notoriously spenny gas fee can easily hit a hundred quid at a peak time. All of these attributes mean Fantom has a fair claim to being more viable for mass adoption of crypto than Ethereum does. Yes, you might think mass adoption is already here, but actually, the estimated number of crypto users worldwide is less than half a billion. You’re still early doors, people.

Fantom is also Ethereum Virtual Machine (EVM) compatible, which is why the network is an especially interesting candidate for offering an alternative to Ethereum. A software developing tool that can be used to create decentralised applications on Ethereum, Fantom’s compatibility with EVM means you could quite simply copy and paste things you’ve made using Ethereum and host them on Fantom (with a few small tweaks, maybe). For many, this creates a pretty easy way to get around the gas fees on Ethereum – just use Fantom instead. If that trend spirals, Ethereum could find itself in a bit of a crypto pickle.

Give it to me straight. What are the downsides?

Relative to blockchains, DAGs have some security issues. But even within DAGs, Fantom’s security is relatively concerning. You’d only need to control around a third of the network to be able to start tampering with transactions. However, this is a pretty unlikely level of control for any group to be able to get.

Another risk is that Ethereum 2.0 could arrive and be so well-made that it brushes all these competitors” away. Fantom is roughly 77 times smaller than Ethereum at the time of writing, based on market cap.

Where can I find it?

Fantom is on a fair few exchanges, but not all of the major ones just yet. You’ll find it on Binance, Crypto​.com, KuCoin, Gate​.io and others, but it isn’t on Coinbase or Kraken, for instance.

So there’s the case for another Ethereum killer, the killer of the supposed killer of bitcoin, ooooo. That’s a lot of spooky stuff for one week’s crypto reading, don’t you think?

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