Nansen's Fantom Quarterly Report - Q1 2022

Published on
Apr 28, 2022

10
mins

Beili Baraki
Research Analyst

This report provides an overview of Fantom's ecosystem and performance of the chain
via on-chain metrics.
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.

Source: DefiLlama
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.