The Ethereum-compatible Layer 1 network is home to a thriving DeFi ecosystem and has become a favorite among some of the crypto industry’s most productive builders. Fantom is a Proof-of-Stake network at Layer 1 with cheap transaction costs and speedy finality. Fantom has amassed a significant DeFi ecosystem of both indigenous and Ethereum-native applications since its inception in 2019.
What Exactly Is Fantom?
Fantom is one of the Layer 1 blockchain alternatives that gained momentum in 2021. The network has attracted many users and developers who were previously priced out of utilizing Ethereum because to its hefty gas expenses.
To reach agreement, the Fantom base chain employs Directed Acyclic Graphs. It protects an extra execution layer known as Fantom Opera, which handles more particular and complicated functions. Today, most people refer to Fantom Opera as the home of the blockchain’s DeFi ecosystem. Opera is the first execution layer developed on Fantom and is compatible with the Ethereum Virtual Machine.
This implies that developers may build, deploy, and operate solidity-based smart contracts on Fantom in the same way that they would on Ethereum. Fantom’s interoperability with Ethereum has also aided development by allowing developers to quickly move apps from Ethereum to Fantom with minimum modifications to the underlying technology.
Fantom, like other Layer 1 blockchains, has a Proof-of-Stake validation process. There is no minimum bet: players may earn prizes with only one FTM. Those staking less must, however, delegate their tokens to a validator node. The current minimum stake to run a node is 500,000 FTM. Because of its Lachesis consensus method, the Fantom validation mechanism is fast and leaderless. Fantom does not employ single validators to determine which transactions are legitimate in each block; instead, it relies on network-wide agreement.
By eliminating leaders, the bulk of transaction processing is no longer reliant on the validators with the most tokens, as is the case with other Proof-of-Stake chains like Solana and Avalanche. This strengthens Fantom’s decentralization and, as a result, security play an equal role when participating in the consensus protocol.
Since Fantom is Ethereum-compatible, it may also be accessible using popular Web3 wallets like as MetaMask. To connect to Fantom, users just add the Fantom Opera network to MetaMask.
Fantom Decentralized Exchanges
Fantom presently offers two prominent decentralized exchanges where users may exchange assets and provide liquidity. SpookySwap is the most popular of the two. With over $1 billion in total value locked, it is now the largest native DeFi protocol on Fantom.
SpookySwap’s user interface is simple and straightforward, giving it an excellent spot to begin exploring the network’s DeFi environment. Swapping operates much as it does on other automated market makers: users choose the assets to exchange and the amount to swap then make the trade.
Before submitting trades, the SpookySwap trading interface offers valuable information such as potential slippage, price effect, and fees. Limit orders for asset pairings can also be created by expert users. By providing liquidity to SpookySwap’s pools, users may earn the BOO token and trading fees. BOO stakers earn 0.03% of exchange fees, therefore the amount of incentives handed out grows in tandem with protocol activity.
SpookySwap, on the other hand, does more than just trade. The platform has also created a user-friendly interface for Multichain’s Fantom bridge, which smoothly connects with the exchange. Users may transmit assets to and from Fantom as well as numerous other Ethereum-compatible Layer 1 and Layer 2 networks, such as Binance Smart Chain, Polygon, Arbitrum, and Avalanche, via the bridge.
SpiritSwap, Fantom’s second-largest exchange, has comparable capabilities to SpookySwap and has also incorporated Multichain’s Fantom bridge. SpritSwap’s primary innovation, however, is its inSPIRIT token mechanism.
Liquidity providers that earn the native SPIRIT token of the exchange can lock it on the protocol and obtain inSPIRIT tokens. Like SpookySwap’s BOO token, inSPIRIT holders get a part of the exchange’s fees. Notably, they have the ability to vote on which liquidity pools receive increased yields.
The vesting technique employed by SpiritSwap is comparable to the one used by Curve Finance, Ethereum’s largest DeFi protocol. The longer holders keep their SPIRIT tokens locked up, the more inSPIRIT tokens they will receive, giving them additional voting power. This implies that SPIRIT holders are motivated to keep their tokens for extended periods of time in order to acquire more influence over which yield farms get boosted returns.
Borrowing and lending
Following on from exchanges, the next critical component of Fantom’s DeFi ecosystem is its lending and borrowing platforms. Geist Finance is Fantom’s largest “DeFi bank.” Geist Finance, which debuted in October 2021, is a recent newcomer into Fantom’s DeFi market, but it has swiftly garnered appeal. Geist operates similarly to the Ethereum-native lending protocols Compound and Aave, and has grown to become Fantom’s third-largest protocol as a result of its novel token incentive program.
Geist has effectively maintained appealing returns for users by rewarding them with its native cryptocurrency, GEIST. Unlike other protocols that allow liquidity miners to instantly sell their token prizes, Geist has a three-month vesting time on all GEIST tokens acquired.
During this time, holders begin to receive a portion of the protocol’s income as if their tokens were staked. Tokens can be withdrawn at any moment during the three-month vesting period, however holders will lose 50% of their total tokens. These forfeited tokens are subsequently awarded to customers who opt to lock up their GEIST for the entire three months, further benefiting long-term holders.
Scream, another loan and borrowing site, is not far behind Geist Finance. Scream, which pays tribute to the iconic horror film series of the same name, is functionally similar to Geist. The protocol does, however, offer lending and borrowing for a broader variety of assets, including numerous minor stablecoins like FRAX, DOLA, and TUSD.
Scream deviates from Geist in its token reward mechanism. It is actively revamping its SCREAM token staking mechanism to funnel 70% of all protocol income to token stakers, with the remaining 30% going to a newly established DAO. In the event of a catastrophic occurrence, such as a token glitch or hack, slightly more than half of the DAO’s cash will be held in reserve as insurance. The remaining half will be used to fund new goods, provide incentives, and conduct token buy-backs, subject to community approval.
Tarot, the network’s 14th-ranked protocol, is another important lending platform on Fantom. Tarot’s specialty is leveraged yield farming, which allows liquidity providers to borrow assets from lenders in order to increase the returns provided by their positions. While this technique has the potential to generate large gains, it also exposes players to the danger of having their positions liquidated.
For individuals who do not wish to take on more risk, Tarot allows users to deposit their funds for other users to employ in leveraged tactics. Depositors can thereby earn substantial profits on specific assets without fear of being liquidated if the market goes against them. However, if lent tokens are heavily used, there may be a delay in withdrawing assets. This means that locking up tokens poses a danger to users who want quick access to their assets.
The Future of DeFi on Fantom
The Fantom ecosystem is rapidly expanding, with numerous forthcoming initiatives expected to provide even more liquidity to the chain. The so-called “degenbox” method from Daniele Sestagalli’s Abracadabra is one much awaited feature due to arrive on Fantom. Money.
The approach allows users to deposit Terra’s UST stablecoin in order to borrow Abracadabra’s MIM stablecoin. Because UST and MIM are both stable assets, borrowing may be leveraged up with a lower risk of liquidation than borrowing against volatile assets. However, the degenbox approach is dependent on UST retaining its $1 peg—if UST falls far below $1, leveraged holdings on Abracadabra will be liquidated.
Despite the concerns, the degenbox approach has become popular among Ethereum DeFi users. Depending on the amount of leverage employed, the approach can provide profits on stablecoins ranging from 40% to 110%. While Abracadabra is already available on Fantom, it presently only allows users to borrow MIM in exchange for FTM tokens. However, once Terra combines UST with the Fantom network, it is commonly assumed that Abracadabra intends to carry over the degenbox strategy.
Andre Cronje, the well-known “DeFi architect,” is working on a new DeFi protocol on Fantom with the assistance of Sestagalli. The offering will incorporate numerous successful DeFi elements from other protocols, such as a token vesting scheme akin to Curve Finance and permissionless support for protocol bribery, which Convex Finance popularized.
Cronje revealed in a recent blog post that the new protocol would operate as an automated market maker for protocols, allowing them to kickstart liquidity and simply give token incentives to establish a more efficient DeFi ecosystem on Fantom.
To ensure a fair introduction of the new protocol, an initial allocation will be made to the top 20 Fantom DeFi projects with the largest total value locked. To guarantee that tokens go to the most active and involved DeFi users on the network, each protocol will select how to distribute tokens to its users.
With a robust base of token exchanges and lending platforms, Fantom has already drawn over $8 billion over more than 100 protocols. Because of its Ethereum interoperability, a rising number of developers and consumers are selecting Fantom to design and deploy their protocols and assets. The network’s recent expansion confirms this tendency. The total value locked by Fantom has climbed 109% in the last month and shows no signs of slowing down.