Should You (or Anyone) Buy Fantom (FTM)?
by Emma Newbery | Published on Sept. 12, 2021
Find out about the crypto that has jumped almost 10,000% this year.
Smart contract crypto platforms have taken center stage recently as investors look for the "next" Ethereum (ETH). People want cryptocurrencies that are fast, secure, and affordable. And Fantom (FTM) checks all those boxes.
That's part of the reason why Fantom's price has risen 9,710% this year -- and it is up over 500% since the start of August. In fact, on Sept. 9, FTM reached a new all-time high of $1.93. Let's look at why Fantom is growing and why smart contracts are so important.
Why smart contracts matter
Smart contracts are exciting because they enable cryptocurrencies to run other applications, including decentralized finance (DeFi) and non-fungible tokens (NFTs). NFTs are a type of digital collectible -- like digital art or gaming assets -- where the ownership information is coded into the item. And DeFi is an umbrella term for various applications that will cut the middleman (banks and lenders) out of day-to-day financial transactions.
Ethereum was the first crypto to introduce smart contracts, and as a result, according to State of the dApps, almost 80% of applications are built on its network. Unfortunately, the Ethereum network is congested and many users complain of high fees. Fantom is one of a number of newer cryptocurrencies that promise to do better.
- What it does: FTM is the network token for Fantom and can be used for staking, governance, payments, and network fees.
- Fantom team: The founder, Dr. Ahn Byung Ik, was a leading computer scientist with a background in food technology. After he stepped away from the project, the CIO, Michael Kong who'd worked on several blockchain projects, became CEO. The big name to watch out for in Fantom is its DeFi Architect, Andre Cronje -- a prolific DeFi developer who founded Yearn.Finance.
- Date launched: Mainnet went live in December 2019.
- Market cap: $3.8 billion (CoinMarketCap, Sept. 10, 2021).
- Availability: FTM is available on some major U.S. cryptocurrency exchanges like Gemini, but has not yet been listed on Coinbase.
Should you buy?
If you are buying with the hope of another 9,710% gain in the next nine months, you may be disappointed. There's a good chance that a frenzy of smart contract speculation has pushed Fantom's price to its recent highs, and there's no guarantee it will hold. Since the market is extremely unpredictable in the short term, it makes more sense to consider how you believe Fantom can perform in the long term.
The basics above show that Fantom has solid fundamentals. It has a good management team, and Andre Cronje's involvement provides a sprinkling of crypto stardust. Plus, it has attracted backing from reputable investors like Alameda Research and HyperChain Capital.
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It's operating in an extremely competitive space. Ethereum wannabes like Cardano (ADA), Solana (SOL), Polkadot (DOT), and more are all jostling for position, each touting their high speeds and low transaction costs. There's a good chance that five or six of them will emerge as front runners in the coming years, leaving the others trailing behind.
So, what characteristics might help a smart contract crypto stand out from the pack? Here are a few of them -- and how Fantom fares:
- Speed and cost. Fantom's website says the network can process thousands of transactions per second, with each one costing a fraction of a cent. This is fast, but not as fast as Solana, which can process more than 50,000 transactions per second.
- Adoption. Real-world usage is going to be crucial for any smart contract platform, and Fantom has a couple of interesting partnerships. For example, in June it announced that Uzbekistan would use its technology to modernize the country's IT infrastructure. It's also attracted several DeFi projects and has $850 million in total value locked (TVL) on the system.
- Technology. Fantom says that it has solved Ethereum's scalability problem by giving each application its own blockchain, making it a network of networks. Its directed acyclic graph (DAG) differs from other blockchains in that transactions can be processed in parallel rather than more traditional cryptos that use a single processor.
Threats to Fantom
In addition to competition from other smart contract cryptos and a possible short-term price drop, the main longer-term threats to Fantom are increased DeFi regulation, technical hitches, and wider technical developments.
Fantom is positioning itself as a DeFi hub and has already attracted some important projects. However, DeFi is one area that has regulators around the world worried. The concern is that DeFi projects are offering bank-like products without the same level of consumer protection as actual banks. A crackdown on DeFi could impact applications on Fantom's network.
The technology behind Fantom is also relatively untested, and a technical glitch could damage investor confidence. In terms of wider technical developments, blockchain tech is developing at a rate of knots. Fantom is one of several newer cryptos that seek to solve Ethereum's problems. But be aware that there may well be even better projects in the pipeline. In years to come, these -- or other emerging technologies -- may supersede even Fantom's solutions.
The cryptocurrency market as a whole is creeping back to the highs we saw in May, sparking fears we might be about to see another big crypto price dip. On top of this, investors should be cautious about buying tokens that have just hit all-time highs. The price may continue to increase, but there are no guarantees.
However, in the longer term, Fantom is an interesting crypto project that already has real-world applications and deserves its place among the top smart contract platforms.
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.
Emma Newbery owns Solana, Polkadot, Ethereum, and Cardano.