Fantom is essentially a network of blockchains that uses an advanced DAG-based aBFT consensus algorithm.
What is a DAG?
Similar to a blockchain, a directed acyclic graph (DAG) is a type of distributed ledger. It just works in a slightly different way.
To understand how Fantom functions at its core, you need to comprehend the difference between a blockchain and a DAG. That hyper-linked article explains it in detail, however.. here’s a short form explanation..
A blockchain, as you may already know, uses a chain of blocks to store transactions – hence the name.. BLOCK-CHAIN.
Each block contains a certain number of transactions, and the blocks are linked together in chronological order. This creates a linear chain of blocks that is modification resistant.
To validate new transactions, most blockchain networks use a consensus mechanism such as proof-of-work (PoW) or proof-of-stake (PoS). To learn the difference between the two, read this article: Proof of Work vs Proof of Stake.
A DAG is also a distributed ledger technology (DLT), however, rather than using a chain of blocks to store transactions, it uses a graph structure to store them.
In other words, instead of storing the information in a line (like a chain of blocks), it stores the information like a web or a network. Each piece of information is a “node” and the connections between them are the “edges”.
When new information or transactions need to be added to the DAG, they are added as new “nodes” in the web. These new nodes are then connected to other related nodes that came before it, creating new “edges” between them. This creates a web of interconnected nodes, instead of a linear chain of blocks.
The main advantage of using a DAG is that it can handle more transactions at the same time. It also allows these transactions to be validated and confirmed quicker as well.
Compare this graph showing the average “time to finality” transaction time of popular blockchain networks vs Fantom.
The reason why a DAG validates transactions quicker than a blockchain is because with a blockchain, transactions are grouped into blocks and added to the chain only after they’ve been validated by the network.
With a DAG, however, transactions are added to the graph/network immediately (as individual nodes) after they are submitted – and validation is done as part of the consensus mechanism.
What Is A Consensus Algorithm, and Which Type Does Fantom Use?
A “consensus algorithm” refers to a set of rules that everyone on the network follows to make sure that the information on the network is accurate. It’s what ensures that all members of the network have the same copy of the data.
Consensus algorithms are used to validate new transactions and add them to the shared data structure (typically a blockchain, but in the case of Fantom, a DAG) in a secure and reliable way.
By following the consensus algorithm, members of the network can agree on which transactions are valid. This allows the network to keep track of changes to the shared data without the need for a central authority.
Fantom does not use a traditional proof-of-stake (PoS) consensus algorithm. Instead, it uses a variation of the DAG (Directed Acyclic Graph) based consensus algorithm called Lachesis, which allows for high throughput and low latency of transactions.
In traditional proof of stake systems, validators are chosen to create the next block based on the amount of stake they hold. The more they have staked, the the more likely they are to be chosen to create the next block.
In contrast, “Lachesis” uses a DAG structure to organize the transactions, and each node in the network is assigned a unique event. The consensus algorithm ensures that all nodes in the network agree on the order of the events and the transactions they contain. This allows for faster confirmation of transactions and improved scalability, as it can process more transactions per second than traditional blockchain consensus algorithms.
The Fantom network also uses a variation of PoS algorithm called the BFT-DPoS to secure the network and to elect the nodes that will validate the blocks. This algorithm is a Delegated Proof of Stake, which means that holders of the FTM tokens can delegate their tokens to the validators they trust and can change their delegate at any time. The elected nodes will validate the blocks and receive rewards for their work, but the validation process is still managed by the Lachesis algorithm.
The popularity of Fantom for Decentralized Finance (DEFI)
Fantom is well-suited for decentralized finance (DeFi) applications for a few reasons:
- High scalability and fast transaction speeds: The Lachesis consensus mechanism used by Fantom allows for faster and more efficient validation of transactions, and can handle a high number of transactions per second. This is beneficial for DeFi applications, which often require fast and reliable transaction speeds to support a high volume of financial transactions.
- Decentralized and secure: Fantom is a decentralized blockchain network, which means that it is not controlled by any single entity. A network of nodes works together to validate the transactions, which makes it secure and tamper proof – both of which are important for DeFi apps.
- Interoperability: Fantom is blockchain agnostic, meaning it can communicate and interact with other blockchains. This feature allows for easy integration and cross-chain communication between DeFi applications, enabling a smooth user experience.
- Low fees: Fantom uses a unique consensus mechanism that enables low-cost transactions and eliminates the need for high fees associated with gas charges, which is common in other blockchain networks.
- Low latency: “Latency” is a measure of time that it takes from a signal to travel from one point to another. The Lachesis protocol Fantom uses is considered “low latency” because it’s so fast at processing transactions. Obviously, this is beneficial when you’re trying to get trades through on a DeFi platform.
These features combined make Fantom a solid choice for DeFi applications, as it is able to handle the high volume of transactions, provide a secure and tamper-proof environment, allow for easy integration with other blockchains, and offers low cost and low latency for smooth user experience.
Who Is Behind The Project?
Fantom is an open-source project that was founded in 2018. The core development team is based in South Korea, and the “Fantom Foundation” (a non-profit promotional organization), is based in Singapore.
The team behind Fantom includes a group of experienced individuals with backgrounds in blockchain technology, software development, and research. The CEO and founder of Fantom is Dr. Ahn Byung Ik, who holds a Ph.D. in computer science from Yonsei University in South Korea and has over 20 years of experience in the field of software engineering.
Michael Kong, who is a co-founder and the CEO, serves as the “face” of of the company. Michael does a lot of the communication work for the project, and can often be seen speaking about the project on crypto-related Youtube videos and podcasts.
Perhaps the most infamous contributor to the Fantom project is “rockstar” developer Andre Cronje. Andre is a South African developer who became well known after he developed the yearn.finance (YFI) project, which is a DeFi platform built on the Ethereum blockchain.
He also built up a following due to the code reviews he used to do for a site called CryptoBriefing, on which he would analyze Github submissions from various projects – then give his opinion on whether or not the project was legitimate.
Many people view him as a DeFi genius, and in early 2022, when he announced that he was stepping away from the space, the price of Fantom dumped hard.
He has since returned (did he ever really leave?), and investor confidence seems to have been restored.
If you couldn’t tell by the tone of this article, I think Fantom is an impressive project. I actually think it’s somewhat underrated, and this was particularly true during the DeFi craze of the 2021 bull market.
Fantom was one of the top blockchains in terms of total value locked into their protocols, but I feel as though the price didn’t reflect that.
One thing that gave me even more confidence in the long term potential of the project is the fact that Andre Cronje published a post on Medium outlining their financial situation. That post is viewable here.
That was posted around the time FTX went bankrupt, and industry players (particularly exchange owners) were scrambling to reassure the community they had their financials in order to remain solvent.
In the post, he states that they have the financial means to operate for 30 years without even having to sell their FTM tokens.
