A Newbie’s Information to Fantom’s DeFi Ecosystem

Key Takeaways

  • Fantom is an Ethereum-compatible Layer 1 chain with over $8 billion locked in its DeFi protocols.
  • It hosts a thriving DeFi ecosystem, together with a number of decentralized exchanges and yield farming protocols.
  • DeFi on Fantom seems to be set to proceed rising, with a number of highly-anticipated launches on the horizon.

Fantom is a Layer 1, Proof-of-Stake community with low transaction prices and quick finality. Since launching in 2019, Fantom has constructed up a good DeFi ecosystem of each homegrown and Ethereum-native functions. 

What Is Fantom?

Fantom is one in every of a number of different Layer 1 blockchains that surged in recognition in 2021. Due to it low transaction prices, the community has attracted many customers and builders which are priced out of utilizing Ethereum as a result of its excessive fuel charges.

The Fantom base chain makes use of Directed Acyclic Graphs to realize consensus. It secures an extra execution layer referred to as Fantom Opera, which handles extra particular and sophisticated features. Right now, Fantom Opera is what most individuals are referring to once they discuss Fantom and is the house of the blockchain’s DeFi ecosystem. 

Opera is the primary execution layer constructed on Fantom and is suitable with the Ethereum Digital Machine. Which means builders can write, deploy, and run good contracts written in solidity on Fantom, simply as they’d on Ethereum. Fantom’s compatibility with Ethereum has additionally helped foster growth as builders can simply port functions over from Ethereum to Fantom with few adjustments to the underlying code. 

Just like different Layer 1 blockchains, Fantom makes use of a Proof-of-Stake validation mechanism. There is no such thing as a minimal stake quantity: customers can earn rewards with only one FTM. Nevertheless, these staking decrease quantities should delegate their tokens to a validator node. The minimal stake to run a node is at present 500,000 FTM.

Fantom validation mechanism is high-speed and leaderless due to its Lachesis consensus algorithm. Single validators don’t select which transactions are legitimate in every block; as an alternative, Fantom makes use of a network-wide consensus.

By eradicating leaders, the vast majority of transaction processing doesn’t depend on the validators that maintain the most important variety of tokens, as is the case with different Proof-of-Stake chains akin to Solana and Avalanche. This will increase Fantom’s decentralization and subsequently safety by having all validators play an equal position when taking part within the consensus protocol.

As Fantom is suitable with Ethereum, it will also be accessed by means of fashionable Web3 wallets like MetaMask. Customers can merely add the Fantom Opera community to MetaMask to hook up with Fantom.

Decentralized Exchanges on Fantom

Fantom at present has two fashionable decentralized exchanges that permit customers swap property and supply liquidity. Essentially the most used one of many two is SpookySwap. It’s at present the largest native DeFi protocol on Fantom with over $1 billion in whole worth locked. 

SpookySwap’s consumer interface is clear and straightforward to know, making it an awesome place to begin exploring the community’s DeFi ecosystem. Swapping works a lot the identical manner because it does on different automated market makers: customers choose the property they wish to swap and the quantity they wish to swap then make the commerce. The SpookySwap buying and selling interface shows helpful info akin to potential slippage, worth affect, and charges earlier than trades are submitted. Extra superior customers may also create restrict orders for asset pairs. 

Customers can earn SpookySwap’s BOO token and buying and selling charges by offering liquidity to its swimming pools. BOO stakers obtain 0.03% of the charges from swaps, so the quantity of rewards paid out will increase as exercise on the protocol does. 

However SpookySwap doesn’t cease at buying and selling. The platform has additionally constructed a user-friendly interface for Multichain’s Fantom bridge that integrates seamlessly with the alternate. By means of the bridge, customers can ship property to and from Fantom and several other different Ethereum-compatible Layer 1 and Layer 2 networks, together with Binance Sensible Chain, Polygon, Arbitrum, and Avalanche. 

Fantom’s second-biggest alternate, SpiritSwap, gives comparable performance to SpookySwap and has additionally built-in Multichain’s Fantom bridge. Nevertheless, SpritSwap’s key innovation is its inSPIRIT token system. 

Liquidity suppliers that earn the alternate’s native SPIRIT token can lock it on the protocol and obtain inSPIRIT tokens. inSPIRIT holders earn a portion of the alternate’s charges, identical to SpookySwap’s BOO token. Notably, they will additionally vote on which liquidity swimming pools obtain boosted yields. 

SPIRIT token vesting (Supply: SpiritSwap)

SpiritSwap’s vesting system is just like the one utilized by Ethereum’s greatest DeFi protocol, Curve Finance. The longer holders select to lock up their SPIRIT tokens, the extra inSPIRIT tokens they are going to be allotted, giving them extra voting energy. This implies SPIRIT holders are incentivized lock up their tokens for longer durations to achieve extra affect over which yield farms get boosted returns. 

Lending and Borrowing

Shifting on from exchanges, the following key piece of Fantom’s DeFi ecosystem is its vary of lending and borrowing platforms. The most important “DeFi financial institution” on Fantom is Geist Finance. Launched in October 2021, Geist Finance is a more moderen entrant into Fantom’s DeFi scene however has rapidly gained traction. Geist features equally to the Ethereum-native lending protocols Compound and Aave and has develop into Fantom’s third-biggest protocol due to its modern token reward program. 

Geist has efficiently maintained engaging yields for customers by providing rewards in its native token, GEIST. Nevertheless, in contrast to different protocols that enable liquidity miners to promote their token rewards instantly, Geist has a three-month vesting interval on all GEIST tokens earned. Throughout this era, holders begin incomes a share of the protocol’s income as if their tokens had been staked. Tokens may be withdrawn at any time throughout the three-month vesting interval, however holders will forfeit 50% of their whole tokens collected. These forfeited tokens are then distributed to customers who select to lock up their GEIST for the complete three months, benefitting long-term holders much more. 

Not far behind Geist Finance is one other lending and borrowing platform referred to as Scream. Paying homage to the favored horror film collection of the identical title, Scream doesn’t differ a lot from Geist in its performance. Nevertheless, the protocol does help lending and borrowing for a wider vary of property together with a number of smaller stablecoins akin to FRAX, DOLA, and TUSD. 

The place Scream does divert from Geist is in its token reward construction. It’s at present within the technique of upgrading its SCREAM token staking system to divert 70% of all protocol income to token stakers, and likewise plans to ship the remaining 30% to a newly-formed DAO. Simply over half of the DAO’s funds might be held in reserve as insurance coverage within the case of a catastrophic occasion akin to a token bug or hack. The opposite half might be allotted to financing new merchandise, configuring incentives, and token buy-backs, topic to neighborhood voting. 

One other notable lending platform on Fantom is Tarot, the 14th-ranked protocol on the community. Tarot’s area of interest is offering leveraged yield farming, permitting liquidity suppliers to borrow property from lenders to leverage up the yields generated by their positions. Whereas this technique can produce massive returns, it additionally topics members to the danger of getting their positions liquidated.

Leveraged yield farming on Tarot. Supply: Tarot

Nevertheless, for many who don’t wish to tackle extra threat, Tarot permits customers to deposit their property for different customers to place to work through leveraged methods. In doing so, depositors can generate good-looking returns on single property with out having to fret about being liquidated if the market strikes towards them. Nevertheless, if utilization of lent tokens is excessive, there could be a delay interval to withdraw property. Which means locking tokens up is a threat for customers who may have quick entry to their property. 

The Way forward for DeFi on Fantom

The Fantom ecosystem is rising at a speedy fee, with a number of upcoming tasks set to attract much more liquidity to the chain. One highly-anticipated function set to hit Fantom is the so-called “degenbox” technique from Daniele Sestagalli’s Abracadabra.Cash. 

The technique lets customers deposit the Terra community’s UST stablecoin to borrow Abracadabra’s MIM stablecoin. As UST and MIM are each secure property, the borrowing place may be leveraged up with a decreased threat of liquidation in comparison with borrowing towards risky property. Nevertheless, the degenbox technique depends on UST sustaining its $1 peg—if UST drops considerably under $1, leveraged positions on Abracadabra might be liquidated. 

Regardless of the dangers concerned, the degenbox technique has confirmed fashionable with DeFi customers on Ethereum. The technique can yield between 40 and 110% returns on stablecoins relying on the quantity of leverage used. Whereas Abracadabra has already launched on Fantom, it at present solely lets customers borrow MIM towards FTM tokens. Nevertheless, it’s broadly believed that Abracadabra plans to port over the degenbox technique as soon as Terra integrates UST with the Fantom community. 

Elsewhere, the favored “DeFi architect” Andre Cronje is constructing a brand new DeFi protocol on Fantom with assist from Sestagalli. The providing will mix a number of profitable DeFi options from current protocols, akin to a token vesting system just like Curve Finance and permissionless help for protocol bribes, a follow made fashionable by Convex Finance. 

In a current weblog submit, Cronje confirmed that the brand new protocol would act as an automatic market maker for protocols, permitting them to bootstrap liquidity and simply provide token incentives to create a extra environment friendly DeFi ecosystem on Fantom. 

With a view to create a good launch for the brand new protocol, an preliminary distribution might be allotted to the highest 20 DeFi tasks on Fantom with the very best whole worth locked. Every protocol will resolve distribute tokens to its customers in a bid to make sure that tokens go to essentially the most energetic and concerned DeFi customers on the community. 

Fantom has already attracted over $8 billion throughout greater than 100 protocols with a strong basis of token exchanges and lending platforms. Due to its Ethereum compatibility, an growing variety of builders and customers are selecting Fantom to construct their protocols and deploy their property. The community’s current progress backs up this development. Fantom’s whole worth locked has elevated 109% over the previous month and reveals no indicators of slowing down. 

Disclosure: On the time of penning this function, the creator owned FTM, ETH, and several other different cryptocurrencies. Andre Cronje is an fairness holder in Crypto Briefing. 

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