What is Fantom?
Fantom is an open-source, smart contract platform for digital assets built on top of the Ethereum blockchain. It provides decentralized finance (DeFi) services to developers by allowing them to write, compile, and deploy smart contracts through its own unique consensus mechanism called the Lachesis protocol.
Consensus mechanisms set conditions that need to be met by nodes and validators in distributed networks, like proof of work tasks (PoW). Platforms often struggle to balance speed, security, and decentralization in their solutions. Fantom has positioned their unique algorithm as having a better balance between those factors, using an asynchronous directed acyclic graph (DAG)-based algorithm and Byzantine Fault Tolerant (aBFT).
Founded by South Korean computer scientist Dr. Ahn Byung Ik, Fantom’s development entity, the Fantom Foundation, has employees and partners across the world. The platform is currently led by CEO Michael Kong,
Decisions on how the Fantom protocol operates and evolves over time are made by its community, defined as holders of the protocol’s governance token, FTM. Fantom possesses strong appeal in the developer community, particularly those intent on deploying decentralized solutions. Recently, Fantom reached over 1 million transactions on its network.
What is the FTM token?
FTM is a multi-chain asset that exists on the Ethereum network (ERC20), the Binance Chain (BEP2), and Fantom’s mainnet Opera Chain. FTM holders can earn rewards for staking, pay transaction or deployment fees, send and receive payments, and participate in governance-related activities like voting. Fantom uses a Proof-of-Stake (PoS) system that requires validators to hold FTM, thus creating a secure network. Voting power is proportional to the amount a validator has staked plus any delegations received from users who don’t run nodes.
How does FTM compare to Bitcoin?
FTM differs from Bitcoin in a few key ways.
First, FTM is primarily used as an ERC-20 token, meaning it’s a token that runs on—and is backed by—the Ethereum blockchain. This means that FTM does not have its own miners. Ethereum miners perform the task of processing and validating FTM transactions, just like how Bitcoin miners process and validate bitcoin transactions. FTM also exists on other blockchains, as mentioned above, unlike Bitcoin.
The second major difference is that unlike Bitcoin, FTM uses proof of stake (PoS) versus proof of work (PoW) to validate transactions. Rather than using computing resources to “mine” blocks, nodes in the network will engage in validating these transactions, proportional to how much FTM they own as “validators.”
FTM bespoke leaderless PoS algorithm is also DAG-based and aBFT. This means that transactions are recorded on vertices (one on top of the other) rather than blocks. This allows for higher transaction speeds and a more secure system as nodes can reach consensus independently without needing to exchange finalized blocks.
Aside from technical workings, FTM was only launched to Mainnet in December 2019 compared to Bitcoin’s 10 or so years, which means it’s less proven, less distributed, and has a significantly smaller market value than Bitcoin.
Before trading any crypto assets it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset. First and foremost:
No Canadian securities regulatory authority has expressed an opinion about Fantom, including an opinion that FTM is not itself a security and/or derivative.
Wealthsimple has performed a legal assessment of FTM prior to making it available on Wealthsimple Crypto and has concluded that FTM is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future and the impact of this on an asset’s value is outlined in our Product Disclosure.
We evaluated FTM based on publicly available information, including (but not limited to):
- The creation, governance, usage and design of FTM, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created FTM;
- The supply, demand, maturity, utility and liquidity of FTM;
- Material technical risks associated with FTM, including any code defects, security breaches and other threats concerning FTM and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and
- Legal and regulatory risks associated with FTM, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of FTM.
Like all other crypto assets, there are some general risks to investing in FTM. These include short history risk, volatility risk, liquidity risk, demand risk, forking risk, cryptography risk, regulatory risk, concentration risk, electronic trading risk and cyber security risk. Each of these risks are described in more detail in our in-app Product Disclosure. In addition to these general risks, we note that even when compared to other DeFi protocols, FTM presents an elevated short history risk. Further, the Fantom community is not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of FTM have no recourse to Fantom or Wealthsimple if FTM declines in value for any reason.
We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading FTM. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.
WDA is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Wealthsimple Digital Assets Inc. dated June 18, 2021. Please be aware that the statutory rights of action for damages and the right of rescission in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Statement.
Last updated: September 1, 2021