Sonic Upgrade
The Fantom Sonic upgrade marks a substantial progression for the network, enhancing transaction processing speed, transactional scale, and operational efficiency. It is designed to achieve over 2,000 TPS based on testnet data. Key features include the Fantom Virtual Machine (FVM), Carmen data storage solution, and an optimized Lachesis consensus mechanism. This upgrade maintains a single-layer, shard-free architecture, simplifying the network and reducing complexity and potential failure points.
Fantom Sonic unlocks new possibilities for the Fantom ecosystem, particularly in decentralized finance (DeFi) platforms, blockchain games, high-frequency applications, and the Internet of Things (IoT). The enhanced throughput and efficiency enable smoother operation of DeFi platforms, richer gaming experiences, efficient handling of microtransactions, and secure IoT data exchanges.
Technology Stack Enhancements
- Fantom Virtual Machine (FVM): Facilitates improved smart contract execution speed and is backward compatible with EVM, allowing a smooth transition for developers.
- Carmen Data Storage: Introduces live pruning for efficient data storage management, enhancing network synchronization speeds.
- Lachesis Consensus Mechanism: Enhanced to optimize transaction processing and ensure secure and reliable block production.
Sonic Labs and Other Initiatives
- Sonic Labs Accelerator Program: Aims to foster innovation on the Fantom network, providing financial aid and support to emerging blockchain projects.
- Gas Monetization Program: Rewards developers for contributing high-quality applications to the network, stimulating ecosystem growth.
- Ecosystem Vault: A funding mechanism to support ecosystem builders financed through a portion of transaction fee burns.
Network Performance and Outlook
Recent metrics show a positive trend in Fantom’s performance, with a notable increase in daily transactions, revenue, and TVL growth. With the upcoming Fantom Sonic upgrade and overcoming past challenges, 2024 appears optimistic for the Fantom network and community.
Fantom Overview
Fantom is a layer-1 smart contract platform designed to hold compatibility with the Ethereum Virtual Machine (EVM) through its novel Fantom Sonic technology stack, with key differences. One primary difference is that Fantom uses a directed acyclic graphs (DAGs) data structure (as opposed to traditional blockchain) to help order the chronology of events and transactions on the network and enable storage optimization through local sub-DAGs. Additionally, Fantom combines proof of stake (where validators have deposited funds that can be slashed), incentivizing proper behavior and reporting with a leaderless, asynchronous consensus mechanism called Lachesis. Together, these technologies aim to make Fantom competitively fast, secure, and reliable.
Fantom Architecture
Fantom Sonic
The development of Fantom Sonic marks a significant leap for the Fantom network as it introduces the necessary infrastructure needed to enhance Fantom’s base-layer transaction processing speed and operational efficiency. The upgrade is set to redefine expectations with its ability to handle a much higher volume of transactions, allowing Fantom to evolve into a blockchain worthy of hosting projects requiring high throughput.
Fantom Sonic’s architectural advancements enable it to process transactions at an unprecedented pace for the Fantom blockchain, potentially reaching over 2,000 TPS, per their own testnet data and expectations. The upgrade streamlines the entire transaction process, ensuring that each operation is executed with optimal resource usage, reducing bottlenecks and latency issues (primarily stemming from limitations inherent to the EVM) that have historically plagued blockchain L1s like Fantom in the past.
Key upgrades included with Fantom Sonic are the Fantom Virtual Machine (FVM), a new database storage solution called Carmen, and transaction pool optimizations. Together, these elements enable Fantom Sonic to scale the network efficiency without the reliance on more complicated technology integrations. Unlike many blockchain solutions that rely on sharding or layering to scale, Fantom Sonic achieves scalability while maintaining a single-layer, shard-free architecture. This approach simplifies the network structure, reducing potential points of failure and complexity.
What Sonic Unlocks for the Fantom Ecosystem
One of the most exciting prospects of the Fantom Sonic upgrade is its potential to enable a new generation of decentralized finance (DeFi) platforms, blockchain games, and high-frequency applications. The improved throughput capabilities and efficiency improvements open up Fantom to applications that demand higher throughput, low latency, and robust security.
This can include applications like:
- DeFi Platforms: With the improved transaction speeds and efficiency, DeFi platforms on Fantom can operate more smoothly, handling complex financial transactions and smart contract executions faster than Opera. This opens the door to innovative trading platforms, lending markets, and prediction markets that operate in real-time.
- Blockchain Games: The gaming sector on blockchain has unique demands, such as the need for rapid transaction processing and the ability to handle large volumes of microtransactions. Fantom Sonic’s capabilities make it a more capable platform for blockchain gaming, potentially leading to richer, more interactive gaming experiences.
- Microtransactions: Micropayments offer several promising use cases, including content consumption (paying for individual articles or songs), digital goods and services (freelance work or in-app purchases), public sector services (pay-per-use for public Wi-Fi or transport), and decentralized applications (micro-transactions in games or data monetization).
- Internet of Things (IoT): Sonic’s high throughput can enable the secure and reliable exchange of data between countless devices. Imagine hundreds of thousands of sensors generating data in real time, seamlessly feeding information to decentralized applications for analysis and automation.
Technology Stack
Fantom Virtual Machine (FVM)
The Fantom Virtual Machine (FVM) is a key component of the Sonic upgrade, facilitating elevated efficiency, performance, and compatibility with the wider DeFi ecosystem and existing EVM products. At its core, the FVM is engineered to enhance the speed at which smart contracts are executed substantially. What sets the FVM apart from other virtual machine iterations is its ability to seamlessly convert the Ethereum Virtual Machine (EVM) bytecode into a new, more efficient format. This conversion process is pivotal, ensuring that existing smart contracts, originally designed for the EVM, can operate on the Fantom blockchain without requiring extensive modifications or rewrites.
For developers, it paves the way for a smooth transition to the Fantom network, enabling them to leverage their existing EVM-compatible smart contracts and tap into the enhanced performance of Fantom Sonic without facing a steep learning curve. This backward compatibility is a game-changer, as it bridges the gap between the well-established Ethereum ecosystem and the emerging capabilities of Fantom Sonic, allowing any of the most popular Ethereum dApps to migrate and host apps on Fantom.
A crucial aspect of the Fantom Sonic upgrade is its approach to compatibility and the transition process for existing users and developers on the Fantom network using Opera. One of the most noteworthy features of the Fantom Sonic upgrade is that it does not require a hard fork. In the blockchain world, a hard fork represents a significant change that is not backward compatible, often leading to a split in the network and the creation of two separate blockchains. By avoiding a hard fork, Fantom Sonic ensures the existing network remains intact and unified.
Fantom Sonic will also offer immediate and full compatibility with Fantom Opera, allowing existing smart contracts and decentralized applications (dApps) to continue operating without requiring modifications. Thus, users and developers can adopt the new features and improvements of Fantom Sonic without undergoing a complex migration process. Additionally, developers will be happy to learn that they can continue to use popular programming languages, like Solidity, even after the upgrade.
Carmen Data Storage
Carmen is the new StateDB storage solution introduced by Fantom Sonic. At its heart is a feature known as live pruning, a process that dynamically reduces the blockchain's historical data storage footprint. This innovation is crucial, as the ever-growing size of the ledger can lead to down-the-road inefficiencies and increased operational costs. By implementing live pruning, Carmen effectively addresses these scalability challenges, ensuring the blockchain remains lean and efficient as it grows.
Live pruning works on Fantom Sonic by splitting the database into LiveDB and ArchiveDB. The LiveDB is tasked with keeping the current state of the Fantom network, whereas the ArchiveDB contains the history of Fantom. Validators are only responsible for storing LiveDB, and archive nodes are responsible for syncing both.
Thanks to this dual database design, Carmen substantially boosts the network's synchronization speeds by streamlining the storage requirements. This enhancement is vital for maintaining a high-performance blockchain network, particularly as it scales to accommodate growing transactions and users. Faster synchronization improves the network's overall performance and enhances the user experience, ensuring that transactions are processed quickly and reliably.
Lachesis Consensus Mechanism
The Fantom Sonic upgrade introduces significant enhancements to the Lachesis consensus mechanism, a feature that has long been central to the effectiveness of the Fantom blockchain. Lachesis is a form of aBFT consensus mechanism originally designed by Fantom, which combines the technologies of DAGs and BFTs. It's similar to a network that adopts Byzantine fault tolerance, where even if one-third of the nodes are malicious, the network can still be trusted to validate and produce blocks with the correct order and timing. It is ‘asynchronous’ in that nodes can process and transmit data at different times and is considered 'leaderless' as it eschews the concept of a privileged node in block production.
A directed acyclic graph (DAG), the structural foundation of Fantom's technology, consists of nodes in a network with directional connections termed 'edges.' Unlike trees, another form of data structure in other blockchains, DAGs do not allow for closed loops and have directional connections. This structural choice has broad implications for data modeling on networks, extending beyond blockchain technology into diverse fields like epidemiology and computational scheduling.
Beyond simply the DAG architecture, Fantom distinguishes itself through its unique utilization of graphs and event blocks. Within Lachesis, each node maintains a locally stored DAG of 'event blocks' that chronicle transactions and their respective order. This structure allows each node to independently determine the transaction order, a departure from traditional blockchain models where nodes typically agree on a single transaction history. Validator nodes communicate about transactions, reaching consensus on the DAG's root to ensure a consistent event order network-wide. This fundamental difference in transaction processing underscores a potential for increased efficiency and scalability, critical factors in the evaluation of blockchain technologies.
Contrasting with conventional blockchain models, Fantom's network does not maintain a mempool of pending transactions. This departure is rooted in the network's consensus on event blocks rather than singular, aggregated blocks. Nodes communicate about events and transactions, using new events as a voting mechanism for previous ones. The subdivision of DAGs into 'epochs' that are sealed upon reaching a block threshold further distinguishes this process. Finally, Fantom's use of Lamport timestamps for deterministic finality sets it apart from probabilistic finality models employed by blockchains like Bitcoin and Ethereum. This approach relies on the logical progression of directed edges in the graph, rather than physical time, to establish transaction finality.
Fantom Opera Chain
Launched in 2019, Fantom's Opera Chain is structured around the Lachesis protocol (DAG)-based architecture. In this system, nodes within the Fantom network leverage its unique consensus model to generate a sequence of verified blocks. These blocks, known as event blocks, serve as data structures individually crafted by nodes. They are instrumental in disseminating information across the entire network, ensuring cohesive data sharing and storage.
The Opera layer-1 smart contract platform is compatible with the Ethereum Virtual Machine (EVM). Opera's compatibility facilitates the creation and migration of decentralized applications from Ethereum and other EVM-compatible networks, such as Polygon and Binance Smart Chain. This feature enhances Fantom's appeal to users and developers alike, offering flexibility and ease of transition for developers entrenched in the Ethereum ecosystem.
Fantom Sonic represents the next stage in Fantom’s evolution, replacing the Opera technology stack once officially rolled out in ~spring 2024.
Upgrade to Lachesis
The changes to Lachesis are focused on the transaction pool. In Lachesis, the transaction pool acts as a buffer for incoming P2P transactions by placing them in a priority queue where higher gas transactions have more priority. This was originally powered by Opera (Fantom 1.0), but Sonic has now been optimized to increase the efficiency at which transactions are processed. Sonic can handle much higher amounts of peak gas versus Opera per day (~34,000 vs. 283).
Fantom Sonic Testnet Performance
The closed testnet phase of Fantom Sonic has been a critical step in validating the technological advancements made. Currently, on Fantom mainnet (Opera), the network averages approximately 2.5 transactions per second (TPS) with a block confirmation time of 2.7 seconds.
So far, the Sonic open testnet has averaged a significantly improved TPS of 212 and a time to finality of 0.56 seconds. The Sonic testnet is processing an estimated 18.4 million transactions per day versus the mainnet’s 533 million. Thus, some scaling will still need to occur outside of the testnet, meaning Sonic’s performance numbers should be expected to depreciate. Nevertheless, Sonic appears to be on pace to create significant efficiency improvements for Fantom overall.
Fantom has also conducted a closed testnet of Sonic, which has demonstrated a notable maximum theoretical throughput of approximately ~2,050 transactions per second (TPS) with a time to finality (TTF) of 1.1 seconds. Impressively, the composition of these transactions was diverse, with 10% comprising token transfers, ~65% involving ERC20 mints and transfers, and the remainder attributed to decentralized exchange (DEX) swaps.
Sonic's testnet results provide a promising outlook for the scalability challenges that have long plagued blockchain technologies. By successfully handling a varied load of transactions, including the complex ERC20 mints and transfers, the platform demonstrates its capability to support numerous high-throughput use cases.
Connect to the Sonic Testnet
The Sonic open testnet dashboard features a button to add the network to your preferred wallet automatically. We use MetaMask for this part of the tutorial, but any wallet that can mimic or inject as MetaMask should work.
A) Connect wallet
- Go to the Sonic open testnet dashboard
- In the top-right corner, click Connect
- Choose your desired wallet account and connect
- Go to the account page unless automatically redirected
B) Configure network
- In the Network section, click Add to MetaMask
- Ensure the network details in your wallet match those on the web page
- Approve the action in your wallet and click Switch network when prompted
Sonic Labs
The Fantom Foundation recently unveiled its Sonic Labs accelerator program, an initiative designed to stimulate innovation utilizing the Sonic technology stack. This program, which runs from December 4, 2023, to February 6, 2024, is hoping to court the next generation of Web3 founders onto the Fantom network. Sonic Labs is specifically meant to identify and cultivate visionaries and builders in the blockchain sector, offering them essential resources, expert guidance, and robust support.
A key feature of this program is the financial aid that will distribute ~1,000,000 FTM across a handful of selective projects. This funding is earmarked for the development of their minimum viable products (MVPs) across all sectors from within the blockchain industry.
Incubator
At the core of Sonic Labs is its role as an incubator for up to five development teams participating in this program. In addition to financial assistance, the program offers multifaceted support. Participants will benefit from technical backing, co-marketing opportunities, and mentorship from prominent figures in the Fantom leadership, including Andre Cronje. Other benefits include guidance from Marc Tillement of Pyth, compliance and payroll support from Christophe Fonteneau of Request Finance, and legal guidance from the Fantom Foundation's in-house counsel, Eli Bernstein. Additionally, these projects will gain exposure to partner venture capitalists and the Foundation for potential further investment. These benefits culminate in the opportunity to be part of the official Sonic mainnet launch in 2024.
By February 12, 2024, projects will be internally selected and will start collaborating with the Foundation to refine their MVPs, with prize distribution beginning shortly thereafter. From February 22 onwards, the participating projects will be announced to the public, with dedicated support available to them until August 2024. This support includes introductions to venture capitalists and strategic planning.
Other Initiatives
Gas Monetization Program
The Gas Monetization program is a key initiative undertaken by the Fantom Foundation as part of its strategic efforts to stimulate network activity and ecosystem growth. This program is intricately designed to incentivize and financially support developers who contribute high-quality applications to the Fantom network by rewarding them with 15% of the gas fees their dApps generate.
The program is focused on rewarding developers of high-quality applications within the Fantom ecosystem. It is a part of Fantom's broader strategy to attract and nurture talented developers, enriching the network's offerings in DeFi protocols, NFT marketplaces, gaming applications, and more. A significant element of the program is providing a sustainable income to developers. This is achieved by allocating a portion of the application's transaction fees back to the developers, creating an economic incentive for maintaining and improving their applications on the Fantom network.
As of July 2023, the Fantom Foundation introduced a quarterly bonus feature within the Gas Monetization program. This initiative is structured to distribute accumulated FTM tokens to qualifying dApps. To be eligible, dApps must have completed at least 15,000 transactions on Fantom and been active for a minimum of 1.5 months. Since its inception, the Gas Monetization program has accrued approximately 118,000 FTM in rewards for protocols. These rewards are then distributed to the top-performing projects, with a significant portion of the FTM tokens (505,000) accumulated from transaction fees earmarked for distribution among the top 12 earning projects.
Ecosystem Vault
The Ecosystem Vault, launched by the Fantom Foundation in Q4 2022, represents another significant initiative aimed at fostering the growth and development of the Fantom ecosystem. This innovative funding mechanism has been instrumental in supporting ecosystem builders and incentivizing development across the network.
The Ecosystem Vault introduced an on-chain mechanism to support builders and developers within the Fantom ecosystem. A portion of Fantom's transaction fee burn rate, amounting to one-third of the 30% transaction fee burn rate at the time, was redirected to a Special Fee Contract (SFC). This strategic reallocation of funds was designed to support the ecosystem's growth directly. The Ecosystem Vault has secured ~1,000,000 FTM, or roughly $335,000, as of Q4 2023.
Network Performance
Recent performance metrics of Fantom have cast a positive light on the network, with the Sonic upgrade contributing to growth in user engagement in the back half of the calendar year. The biggest surprise came in daily transactions in November. As the chart illustrates below, daily transactions (briefly) saw an unbelievable rise to 5M+ from the yearly baseline of ~500,000 due to the Ordinals craze moving from Bitcoin to certain EVM chains like Avalanche, Polygon, and Fantom.
This rush of transactions obviously translated into increased fees and revenue for the protocol.
Finally, after a difficult 2023 DeFi bear market, the Fantom DeFi TVL is up ~50% from the lows in October 2023. With the difficulties of the bear market and Multichain hack behind them, coupled with the anticipation surrounding the Sonic upgrade, 2024 is looking optimistic for the Fantom network and community.
Conclusion
The Fantom Sonic upgrade stands poised to redefine the Fantom landscape and trajectory in the blockchain space. Through its unique architecture, which combines the speed and efficiency of the Fantom Virtual Machine (FVM), Carmen's advanced data storage solution, and the optimized Lachesis consensus mechanism, Fantom is set to significantly enhance transaction processing capabilities. This advancement positions Fantom as a leading platform for a wide range of previously impossible applications, including high-frequency DeFi use cases, blockchain gaming, microtransactions, and IoT solutions. With promising testnet performance and initiatives like Sonic Labs, the Gas Monetization program, and the Ecosystem Vault, Fantom is gearing up for substantial growth and increased adoption.
The Sonic testnet is currently live for users to explore and try out. The exact release of Sonic for mainnet (Fantom 2.0) has not yet been officially scheduled, though the Fantom team has mentioned a plan to complete the rollout of Sonic on mainnet sometime in the spring of 2024.
Disclaimer: This report was commissioned by Fantom. This research report is exactly that — a research report. It is not intended to serve as financial advice, nor should you blindly assume that any of the information is accurate without confirming through your own research. Bitcoin, cryptocurrencies, and other digital assets are incredibly risky and nothing in this report should be considered an endorsement to buy or sell any asset. Never invest more than you are willing to lose and understand the risk that you are taking. Do your own research. All information in this report is for educational purposes only and should not be the basis for any investment decisions that you make.
