Exploring and classifying Fantom with ITSA
At the time of writing, Fantom is the #42 token according to market capitalization and has developed a strong community. Their Opera blockchain, which is fully permissionless and open-source, promises low fees paired with security, scalability, and speed unseen in older generations of blockchain. All of this is made possible through the Lachesis consensus mechanism developed by the Fantom Foundation; It is their attempt at solving the blockchain trilemma.
Authors: Maximilian Bruckner, Christian Viehof
How could Fantom keep its promise?
Fantom isn’t the first to promise a solution to the blockchain trilemma — and many other would-be saviors have failed in the past. However, Fantom’s approach has been working very well for them so far, all thanks to Lachesis. Lachesis is an asynchronous Byzantine Fault Tolerant consensus mechanism, which can be imagined as similar to a Directed Acyclic Graph (DAG). However, there are some important differences. The key properties of Lachesis are that it is asynchronous, leaderless, byzantine fault-tolerant (BFT), and final. In simpler terms: participants can process commands at different times (asynchronous), no participant plays any sort of “special” role (leaderless), it is functional even when there are up to one-third faulty and malicious nodes (BFT), and the output can be used immediately due to transaction confirmation in 1–2 seconds (final). However, at the time of writing Fantom has only 65 listed nodes participating in the network. The high scalability of the mechanism comes at the cost of decentralization: The consensus mechanism may become inefficient once a certain number of validators is reached.
Lachesis works in the following way: Each node stores a copy of a local DAG, so this DAG is used to calculate an exact final order of events independently on each node. Unlike in other consensus mechanisms, Lachesis nodes don’t actually send event blocks to each other. Only the events themselves are being synced between nodes. Validators don’t vote on a concrete state of the network; instead, they periodically exchange observed transactions and events with peers. To read into the technology in more detail, we suggest heading to the Fantom Website and Docs: https://fantom.foundation/lachesis-consensus-algorithm/
DeFi on Fantom
Fantom offers the first-ever DeFi stack built on an aBFT consensus. So, thanks to its extremely low fees, combined with high throughput and EVM compatibility (Smart contracts on Fantom are written in solidity), Fantom Opera is home to a bustling and growing ecosystem of decentralized finance protocols. There are two “branches” of DeFi on fantom. On the one hand, we have the three key use cases which are developed and run by the Fantom protocol itself (Figure 1 below shows how they can interact):
- fMint, which allows you to mint fUSD (a USD-pegged stablecoin) with your FTM
- fSwap, where you can trade over 176 synthetic assets such as fBTC and fETH
- fLend, to either lend your FTM or fUSD to liquidity pools to earn interest or use fUSD as collateral to borrow synthetic assets to trade on fSwap
On the other hand to these “native” features, Fantom has recently been receiving more and more attention from the DeFi 2.0 community. Over only the past few months, the TVL in the Fantom DeFi ecosystem has more than quadrupled and now sits at just under $5 billion USD. Some of the notable projects currently working on Fantom are the DEXs Curve and SpookySwap, an algorithmic stable coin by Tomb Finance, and the multi-chain yield optimizer Beefy Finance. Popsicle Finance, a thought-leading project in DeFi 2.0, is also connected to Fantom and the biggest token in the fantom ecosystem by market capitalization (after Fantom). In addition, Fantom is planning a proprietary SDK called “Fantom Virtual Machine” for Fantom-native development. The EVM will still be supported, enticing Ethereum-based dApp developers to make an easy transition over to building applications on Fantom .
The FTM Token is a settlement and governance token
As the intrinsic token in the Fantom network, FTM is used for governance, payments, fees, and for securing the network through staking. There are 2.1 billion FTM currently in circulation, with a max. supply of 3.175 billion. The FTM not in circulation are periodically distributed as staking rewards. Fantom estimates that it will take another two years until all FTM are in circulation .
Economic Purpose (EEP): Fantom is listed as a Settlement and Governance Token (EEP22TU03) due to its design as a means of governance, fee payments, staking, and general use for payments in the Fantom ecosystem.
Industry Type (EIN): The issuer behind Fantom (the Fantom Foundation) is active in the field of Cloud Computing, Distributed Systems, and Decentralized Applications (EIN05DA03).
Technological Setup (TTS): Fantom is a DAG-Native Token (TTS41DG) due to the aBFT used by Fantom, which classifies as a DAG.
Legal Claim (LLC): Fantom does not entitle its holder to any legal claim or rights against the issuing organization, therefore it is listed as a No-Claim Token (LLC31).
Issuer Type (LIT): The dimension “Issuer Type” provides information on the nature of the issuer of the token. Fantom Opera is built by the Fantom Foundation and a team of programmers and engineers that make up the core contributors. Its Issuer Type is a Private Sector Legal Entity (LIT61PV).
Regulatory Framework (EU) (REU): Fantom qualifies as a Utility Token (REU52) according to the definition provided in Article 3 (5) of Regulation Proposal COM/2020/593 final. The dimension “Regulatory Status EU” provides information on the potential classification of a token according to the European Commission’s proposal for a Regulation on Markets in Crypto Assets (MiCA, Regulation Proposal COM/2020/593 final).
The International Token Standardization Association (ITSA) e.V.
The International Token Standardization Association (ITSA) e.V. is a not-for-profit association of German law that aims at promoting the development and implementation of comprehensive market standards for the identification, classification, and analysis of DLT- and blockchain-based cryptographic tokens. As an independent industry membership body, ITSA unites over 100 international associated founding members from various interest groups. In order to increase transparency and safety on global token markets, ITSA currently develops and implements the International Token Identification Number (ITIN) as a market standard for the identification of cryptographic tokens, the International Token Classification (ITC) as a standard framework for the classification of cryptographic tokens according to their inherent characteristics. ITSA then adds the identified and classified token to the world’s largest register for tokens in our Tokenbase.
- The International Token Identification Number (ITIN) is a 9-digit alphanumeric technical identifier for both fungible and non-fungible DLT-based tokens. Thanks to its underlying Uniform Token Locator (UTL), ITIN presents a unique and fork-resilient identification of tokens. The ITIN also allows for the connecting and matching of other media and data to the token, such as legal contracts or price data, and increases safety and operational transparency when handling these tokens.
- The International Token Classification (ITC) is a multi-dimensional, expandable framework for the classification of tokens. Current dimensions include technological, economic, legal, and regulatory dimensions with multiple sub-dimensions. By mid-2021, there will be at least two new dimensions added, including a tax dimension. So far, our classification framework has been applied to 99% of the token market according to market capitalization of classified tokens.
- ITSA’s Tokenbase currently holds data on over 4000 tokens. Tokenbase is a holistic database for the analysis of tokens and combines our identification and classification data with market and blockchain data from external providers. Third-party data of several partners is already integrated, and API access is also in development.
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Maximilian Bruckner is Executive Director at the International Token Standardization Association (ITSA) e.V. and Project Manager at the Frankfurt School Blockchain Center.. He has a strong international background with significant time spent in Spain, South Africa, and Canada. Currently pursuing studies at the Frankfurt School of Finance and Management, you can contact him via email@example.com and connect on LinkedIn if you would like to further discuss ITSA e.V. or have any other open questions.
Christian Viehof is an Executive Director at the International Token Standardization Association (ITSA) e.V., working to create the world’s largest token database including a classification framework and unique token identifiers and locators. He completed his Bachelor in Economics at the University of Bonn, the Hong Kong University and the London School of Economics and Political Science with a focus on Behavioral Economics and Finance. Currently pursuing his Master of Finance at the Frankfurt School of Finance and Management, you can contact him via firstname.lastname@example.org and connect with him on Linkedin, if you would like to further discuss ITSA e.V. or have any open questions.