Disclaimer: Nansen has produced the following report as part of its existing contract for services provided to Fantom at the time of publication. While Fantom has the right to review and provide feedback to Nansen, Nansen maintains full editorial control over the publication of this report. All views expressed are the independent opinions of Nansen's research analyst(s) who are the author(s) named in this report. This report is intended for informational purposes only and does not serve as investment, financial, professional, or other advice. For more information, please refer to the disclaimer at the end of this report, as well as our Terms of Service.
Overview
Fantom is an EVM-compatible smart contract blockchain platform with a unique consensus mechanism called Lachesis. Lachesis is an asynchronous consensus mechanism that is designed to achieve fast finality due to smaller communication overhead compared to other consensus mechanisms like synchronous BFT. Thanks to fast transactions and low fees, Fantom has a thriving ecosystem of dApps ranging from native protocols like leveraged yield farming protocol Tarot and Balancer fork Beethoven X, to DeFi blue chips such as Yearn Finance.
Check out Nansen Alpha’s previous report on Fantom here.
Key Developments: Q1
- Of all the L1s, Fantom has had perhaps the most dramatic activity in Q1 2022.
- In February 2022 there were 4,677 verified contracts deployed. This represents an increase of 42x from February 2021.
Solidly Mania
- On 3rd January, Fantom contributor Andre Cronje hinted at a new project dubbed ve(3,3).
- On 11th January, Cronje described some of the key features of this mystery project.
- This was later revealed to be Solidly, an AMM with unique tokenomics that combined Curve’s ve (voter-escrowed) tokenomics with Olympus DAOs tokenomics which are often described by the game theory meme (3,3).
- TVL on Fantom went from $5.26b on January 11 to a peak of $12.81b on January 25 - an increase of $7.55b, or a 145% increase in 2 weeks. This TVL increase can largely be attributed to this single project Solidly - as protocols sought to acquire the new protocol’s tokens.
Other notable developments
- Aave V3 launched on Fantom.
- Ankr and Stader started supporting liquid Fantom staking.
- Wormhole added Fantom support.
- Fantom is working on improving scalability and is developing the Fantom Virtual Machine which the team believe will help with this. It is unclear when this will launch but worth looking out for in Q2.
Ecosystem Fund
- Fantom announced changes to their ecosystem fund (335m FTM or $480m). Fantom has partnered with Gitcoin grants and will enable all Fantom projects to apply for funding, from seed stage to well-established players.
- Fantom’s users can decide on the allocations, and there will be greater FTM matching rewards for the projects that are most supported by their users. This is an improvement on the previous incentive program which gave out funding in accordance with TVL. However, TVL is in an exact measure that favors DeFi projects over other applications such as gaming and NFTs.
Governance
- A proposal went live to reduce the minimum stake to be a Fantom validator.
- A proposal went live to reduce governance requirements.
Both of these are important for the network but are unlikely to pass this quarter. The outcome of the proposals will be something to watch out for in Q2.
Quarterly on-chain performance
Daily Transactions
As can be seen in the Nansen Data, both transactions and gas have been volatile in Q1 2022. This makes sense, as the data coincides with the Solidly mania in which an influx of transactions caused gas fees to rise. Fantom is currently working on ways to make the network more scalable to better deal with these periods of hyperactivity.
Daily Gas Paid vs Ethereum
As can be seen, gas paid on Fantom is drastically lower than that of Ethereum. Typical gas fees on Fantom are less than a dollar - and the platform’s cheap and fast transactions have helped make it a popular DeFi hub with a strong core community. Note that these cheap gas fees are in part enabled by a far lower validator count. Note the extreme volatility in daily gas paid in Q1 2022. This can be attributed to the enormous increase in activity during the build-up to and launch of Solidly.
Contract Deployments vs Ethereum
As can be seen, contract deployments increased substantially on Fantom over Q1. The very large spike in late February can be attributed to the Solidly mania. Overall, contract deployments fell towards the end of the quarter, but remained at higher levels than much of 2021 which is a positive sign for the Fantom Foundation and something that they will be looking to build on in Q2.
Daily Active Addresses
A positive metric is that Fantom has managed to maintain a high number of daily active addresses. Although these have inevitably declined from the mid-quarter highs of Solidly mania, the chain has achieved a consistently high user base. This is something that the Fantom Foundation will seek to maintain and grow in the coming quarter.
Stablecoins: Volume
The Daily Stablecoin volume in a chain is another important metric that can be used to assess the activity and adoption taking place in that network. As the adoption of a chain grows, so does the amount of the daily on-chain stablecoin volume, as stablecoins are a fundamental component that facilitates token transactions. The graph above shows the daily on-chain volume for USDT, DAI and USDC on Fantom. The daily on-chain volume for all three stablecoins roughly follows the same trajectory. The daily volume for all three peaked at around the same time (late Jan) and has been falling considerably in the last two months ( with minor spikes at the end of Feb). USDC has had the highest daily on-chain volume out of the three and continues to dominate. It recorded its maximum daily on-chain volume on the 25th of Jan (just over $15bn on the day) and hovers at around a daily volume of $2.2b at the moment (compared to $641m for USDT and $348m for DAI). The overall fall in the daily on-chain volume for the stablecoins is indicative of capital leaving the network, as the hype relating to projects in the chain has decreased significantly.
Stablecoins: Daily Active Senders
By further analyzing the Daily Active Senders for the different stablecoins, it can be seen that USDC is the highest-circulating stablecoin by far, followed by DAI and USDT. All three stablecoins had an increased daily user base since the beginning of the year. USDC was the biggest winner, however, as it saw its daily active senders quadruple to around 17k by late January (its peak). This didn’t last long, however, two months after the peak, the numbers have decreased to around 7k daily active senders. The other two stablecoins also experienced the same fall during the same time. This again reinforces the idea that a significant number of users have left the network, as the hype for the project has cooled down.
Ethereum Smart Money on Fantom
The chart above shows a breakdown of the Smart Money addresses that are active on Fantom. They have been categorized based on the type of Smart Money. If you are not yet familiar with or need a refresher on what the different labels mean, please follow this link here for the specific definitions. It can be seen from the chart that the type of Smart Money attracted by Fantom falls predominantly under First Mover Stakers and First Mover LPs, these are the fastest addresses to enter staking and liquidity pools respectively. Interestingly, Smart Money representing funds are not very dominant in Fantom. Additionally, Smart Money associated with NFTs ( e.g. Smart Minter, Smart NFT early adopter) are also less active on the network. This is understandable, however, as the NFT ecosystem on Fantom is not as developed as the one on Ethereum.
Fantom Multichain Bridge
The graph above shows the transactions per day for the Fantom Multichain bridge. It can be seen that there has been a significant uptick in activity starting from mid-January. This was around the same time Cronje released some key features about Solidly. The peak of the activity happened on the 22nd of January when 2404 transactions were sent on the day. Ever since then, the amount of transactions sent per day has been gradually coming down, stabilizing at around 250 transactions a day for the last few days.
The data shows a general increase in TVL in the Fantom ecosystem in Q1. There was significant volatility over this period due to the Solidly mania. However, overall TVL has grown which is a positive sign for the ecosystem.
Conclusion
As a whole, Fantom has had a positive Q1. Tangible progress was made on a number of fronts, and despite the influx of mercenary liquidity around the time of the Solidly launch, TVL has grown over the quarter. Fantom will be looking to continue building on this progress going into Q2. Fantom’s revamped incentive scheme is positive, as it will enable a wider range of projects to receive grants. The previous incentive scheme favored DeFi projects - which has contributed to Fantom becoming one of the most active DeFi hubs in crypto. It will be exciting to see if Fantom can cultivate other ecosystems with this new incentive fund. Finally, it will be particularly interesting to see what progress is made at the protocol level, as the team continues building out the Fantom Virtual Machine.
