A self-described Fantom maximalist has alleged that ‘loyal, OG stakers’ of at least 200 million fantom tokens (FTM) experienced a forced liquidation to the benefit of the Fantom Foundation. He somehow claimed to have found ‘the biggest rug pull on Fantom ever’ even though he offered no blockchain evidence.

As if the story wasn’t difficult enough to believe, he further claimed that this ‘rug pull’ was funding Fantom’s assistance of an entirely new blockchain, Sonic.

To start, there are a few things that are certainly true, without the above conjecture. Fantom is indisputably committed to a new blockchain, Sonic. Furthermore, Fantom is pegging FTM with a 1:1 convertibility promise for S, Sonic’s new proprietary token. The well-funded Fantom Foundation is also contributing 200 million FTM and promising a 100 million airdrop of S tokens to hype the launch.

Fantom ‘stable’ coin doubles in price overnight

Returning to the Fantom maxi’s incredible story, they claim it all started with Fantom’s not-so-stable stablecoin FUSD, which has been worth anything but $1 for years. Trading wildly between $0.18 and $0.97, FantomUSD is the center of the controversy.

Because most FTM token holders staked FTM via Fantom’s default staking protocols, some of which supported the price of FUSD, stakers who bet on the price of FUSD when it was closer to $1 have been penalized with liquidations over the years as the price of FUSD has thrashed much lower.

Specifically, on June 5, when Fantom announced a change in support from FUSD to a bridged version of Coinbase’s stablecoin, USDC.E, FUSD was trading below $0.45. In support of the transition to USDC.E (which was actually worth $1), Fantom leaders announced an incentive to allow borrowers against FUSD to repay their borrowings with USDC.E. 

This bullish announcement doubled the price of FUSD north of $0.95 overnight. While great for FUSD token holders, it was catastrophic for FUSD borrowers, who suddenly had to repay double the amount of collateral to repay FUSD.

The most popular type of collateral borrowed against FUSD was, of course, Fantom’s own FTM. This, in the opinion of one Fantom maxi, was a de facto and off-blockchain ‘forced liquidation’ of FTM stakers.

The ‘liquidation,’ which doesn’t have blockchain evidence because it occurred merely as a pricing scheme, underscored ‘the fUSD disaster, which was a major mistake by the FTM team,’ according to the theorist.

Zooming out reveals more liquidation

In the end, whether or not one believes this narrative, whether FTM token holders were liquidated to the benefit of the Fantom Foundation or to the benefit of earlier sellers is merely semantics.

The unfortunate reality for Fantom is that it has lost 98% of its locked assets since its peak — and the price of FTM has only fared mildly better over the years. Ultimately, whether by liquidation or a steady decline in price, most of Fantom’s value transferred from FTM bagholders to sellers in February 2022.

For context, the Fantom blockchain first gained popularity after Avalanche developer Daniele Sestagalli and his partner Andre Cronje endorsed it in late 2021. At the time, the two men were in the process of building their largest, doomed project: Wonderland.

Wonderland, an ultra-high yield DeFi project that boasted a time-to-Lamborghini calculator on its homepage, is down 99.9% from its peak in January 2022. Sestagalli eventually admitted that he concealed the involvement of Omar Dhanani, a.k.a. Michael Patry, a.k.a. 0xSifu in managing Wonderland’s treasury. Dhanani was a co-founder of QuadrigaCX, a failed Canadian crypto exchange.

Read more: Wonderland leader should’ve never trusted Michael Patryn with $1B crypto

Frog Nation: A community of losers

Wonderland was part of a collection of Sestagalli’s and Cronje’s so-called ‘Frog Nation’ projects that have destroyed incredible sums of money for its members.

• Popsicle Finance (ICE) is down 99% from its all-time high.
• Abracadabra (SPELL) is down 98% from its all-time high.
• Betswap (BSGG) is down 99% from its all-time high.
• Wonderland (wMEMO) is down 99.9% from its all-time high.
• Yearn Finance is down 93% from its all-time high. 

Fantom has fared no better. Sestagalli called for ‘Fantom Season’ in January 2022 — a few weeks before Fantom’s peak valuation, of course. After peaking near $8 billion in total value locked (TVL) around March 1, 2022, Fantom’s TVL is down 98% to under $140 million today. FTM has lost two-thirds of its value over the same period.

This week’s allegation, however bombastic, of a supposed off-blockchain liquidation via a USDC.E-for-FUSD repayment pricing scheme only adds insult to Fantom’s community members’ existing injuries.

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The post Fantom stablecoin watcher alleges ‘liquidation’ scheme appeared first on Protos.

Upstart blockchain Fantom (FTM) overtook rival Avalanche (AVAX) in daily transaction count once more in the first week of 2022. Both are popular networks for decentralized finance (DeFi).

Fantom’s daily transaction count eclipsed Avalanche’s in the first few days of the year, reported Delphi Digital, with its lead growing over the past few days.

Avalanche led Fantom in transaction count for some of 2021’s fourth quarter, but on Thursday:

• Fantom processed 853,422 transactions.
• Avalanche saw 737,200 transactions
• Ethereum processed 1.21 million transactions, about 40% more than Fantom.

FTM’s market capitalization has doubled over the last 30 days alone. The $9-billion protocol now has $5.77 billion in total value locked (TVL), a popular albeit misleading measure of DeFi popularity.

Many attribute the surge in Fantom usage to a series of endorsements by Avalanche core developer Daniele Sestagalli.

Almost 45% of Fantom’s TVL was kept in token bridge Multichain at press time.

Fantom’s older competitor, Avalanche, has slid in value 16% over the past seven days to a $22-billion market capitalization.

Avalanche also hosts third-party DeFi apps like liquidity protocols Aave and Spell, and decentralized exchanges Pangolin and Trader Joe.

At current prices, users have locked $11 billion worth of AVAX into its DeFi protocols. Lending platform Aave is the most dominant on Avalanche, currently managing 25% of its TVL, according to DeFi Llama.

Celebrity DeFi devs drive Fantom interest

Fantom describes itself as a low-cost blockchain for launching decentralized applications (dapps) with Ethereum compatibility.

The 80-plus dapps launched on Fantom include NFT marketplaces Artion, ZooCoin, and PaintSwap; and decentralized exchanges Spooky Swap, Curve, and Morpheus Swap.

New projects launching on Fantom are driving its momentum. Sestagalli and his confidante, Yearn Finance’s Andre Cronje, announced on Thursday they intend to launch a new token on Fantom.

The duo created TIME, SPELL, ICE, and MIM — Avalanche tokens with a $6-billion combined market cap.

FTM holders can stake their tokens to earn yield. FTM stakers can earn APY of up to 13% and auto-compound rewards.

Fantom also enables the staking of stablecoins with APRs between 30% and 60%, which Delphi Digital’s Joo Kian reckons has helped attract users of late.

Another fledgling multi-chain DeFi protocol, Hundred Finance, is also gaining traction with its new, Fantom-based Voting Escrow Token (“ve-token”) to help stakers manage voting power.

In November 2021, Fantom reported significant growth from its FTM Incentive Program, including a 600% increase in TVL, and a 300% increase in daily transactions and active users since its announcement last August.

Fantom recently made some of its code open-source and offers APIs and oracles for dapp developers.

The blockchain’s official wallet includes synthetic assets that represent crypto assets outside of the Fantom ecosystem.

This feature relies on price oracles and Fantom’s native “fSwap” exchange. Users can also use “fLend” to loan and borrow FTM and Fantom’s native stablecoin, fUSD.

High yield, ultra-high risk

Risks of DeFi platforms like Avalanche and Fantom include unaudited code, exploitable bugs, insufficient risk disclosures, aggressive marketing tactics, and occasional exit scams.

Fantom dubiously claims that its “Lachesis” consensus algorithm is superior to Bitcoin’s Nakamoto consensus.

The project states that its algorithms are Byzantine fault tolerant, allegedly enabling it to withstand attacks by malicious or faulty nodes comprising up to one-third of its network.

For its part, Avalanche brags its testnet can support up to 4,500 transactions per second across thousands of pruned nodes.

However, Avalanche’s mainnet currently processes around 10 transactions per second, according to SnowTrace (Ethereum handles around 14 per second, Fantom under six).

The primary allure of DeFi protocols are their high yields. Positioned as an alternative to traditional bank accounts, these platforms advertise annualized yields on tokens with double-digit percentages.

Aggressive protocols advertise triple-digit and even higher yields while burying the risk of default within terms of service documents.

Read more: [Terra starts year as top-two DeFi ecosystem, beating Binance Smart Chain]

As a factor of the “traditional finance” 0.09%, risk-free interest rate, DeFi’s high-yield products are hundreds, thousands, or even millions of times more likely to default than a bank account.

Forensic security company Chainalysis reports that orchestrators of rug pulls and DeFi exploits stole $3.2 billion in 2021.

Chainalysis cites the lack of code audits across DeFi as a significant factor in at least 68% of those losses, amounting to at least $2.2 billion.

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Edit 11:50 UTC, Jan 9: Corrected millions to billions in final paragraph.

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