5 Things to Know Before You Buy Fantom (FTM)
by Lyle Daly | Published on Oct. 6, 2021
Fantom's recent gains have gotten the attention of crypto investors. Here's what you should know before you buy it.
While the entire crypto market was on a hot streak to end the summer, Fantom (FTM) stood out as one of the big winners. Its price shot up for the entire month of August, and it reached an all-time high of $1.93 on Sept. 9, 2021. It has cooled off since then, but for those who believe in Fantom, this dip could be a good buying opportunity.
The excitement around Fantom comes largely from its potential to be a better version of Ethereum (ETH), the second-largest cryptocurrency. If Fantom is a crypto you're thinking of adding to your portfolio, this primer will cover what you need to know about it.
1. It's a blockchain platform with smart contract capabilities
To start, it's important to have a grasp of what Fantom does. Fantom is a blockchain platform capable of running smart contracts. These programs allow blockchains to run more advanced transactions than simply sending cryptocurrency from one person to another.
There are a couple very popular uses for smart contracts right now:
- They're instrumental in decentralized finance (DeFi), which are financial services that don't require a central governing body. Through smart contracts, developers can create decentralized apps (dApps) that power DeFi platforms.
- They're used for establishing the ownership of non-fungible tokens (NFTs). These are digital collectibles that can be traded, bought, and sold.
Ethereum was the first cryptocurrency to offer smart contracts, and it's the platform where most dApps are built. However, it has been having congestion issues, resulting in outages and high transaction fees. Because of that, several alternatives have been developed offering faster transaction processing at a lower cost.
2. It's available on several large cryptocurrency exchanges
Many types of cryptocurrency, especially smaller cryptos, are difficult to buy. Fortunately, that isn't the case with Fantom. You can buy it on several of the biggest cryptocurrency exchanges, including:
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In addition, Fantom is available on many decentralized crypto exchanges. This type of exchange offers peer-to-peer crypto trading without a middleman facilitating transactions. Decentralized exchanges that offer Fantom include Uniswap and Sushiswap.
3. Transactions on Fantom are inexpensive and nearly instant
One of the main draws of Fantom is its efficient transaction processing. It can handle thousands of transactions per second, and transactions are settled within one to two seconds. Transaction fees are typically a fraction of a cent. In May, it was reported that Fantom had crossed 3 million transactions and was the fastest blockchain platform.
Fantom isn't the only cryptocurrency offering these kinds of speeds, and it may not be the fastest blockchain platform anymore. Solana (SOL) can reportedly handle at least 50,000 transactions per second and also charges a fraction of a cent in fees. Even so, Fantom's performance is very impressive.
4. Uses for the Fantom token include staking, governance, network fees, and payments
The Fantom token is the platform's native cryptocurrency. Here's what it's used for:
- Staking: Fantom uses a proof-of-stake model. Transactions are verified by nodes made up of people's Fantom tokens. By staking crypto this way, you help secure the network and earn rewards.
- Governance: Since Fantom is decentralized, token holders make decisions regarding its future. By holding and staking Fantom, you can propose and vote on changes.
- Network fees: Fees on the Fantom network are paid using its cryptocurrency. These fees are charged on transactions, deploying smart contracts, and creating new networks.
- Payments: With its fast transaction speeds and low fees, Fantom is a convenient way to transfer funds to other parties.
5. It has strong competition in Ethereum and other smart contract platforms
Perhaps the hardest challenge for Fantom going forward is stiff competition. There are plenty of alternatives to Ethereum. Cardano (ADA) is the biggest and has seen major growth of its own this year. The aforementioned Solana is another growing platform offering lightning-fast transactions.
There's also Ethereum itself, which is going through a series of upgrades to Ethereum 2.0. During these upgrades, it will transition to a proof-of-stake model like Fantom has. These upgrades should improve transaction speeds and lower fees.
Given its transaction speeds and the advanced smart contracts platform it offers, Fantom could be a solid cryptocurrency investment. The price has dipped since its all-time high, and it still has a much smaller market cap than some of its main competitors. There could still conceivably be plenty of room for it to keep growing.
On the other hand, it's hard to say which, if any, of these platforms will have the most long-term success. Make sure you carefully consider Fantom and the alternatives before deciding where to put your money.
About the Author
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
Lyle Daly owns Bitcoin, Ethereum, and Cardano.