Written by: Frank, PANews
From the once star public chain Fantom to the current Sonic Labs, 2024 can be considered a year of bold reforms for this Layer1 chain: the foundation has been renamed, the mainnet upgraded, and token swaps have occurred. Fantom is attempting to complete a 'second entrepreneurship' with a series of actions. However, with TVL dropping to less than 100 million USD, ongoing controversies over the increase in supply, and the shadow of cross-chain security still looming, Sonic continues to face many doubts and challenges. Can the high performance of the new chain deliver? Can token swaps and airdrops save the ecosystem?
Telling a performance story, leveraging sub-second public chains to return to the market.
On December 18, 2024, the Fantom Foundation officially changed its name to Sonic Labs and announced the launch of the Sonic mainnet. As a new public chain known for its sub-second transaction speed, performance naturally becomes Fantom's most important technical narrative. By December 21, just three days after the launch, official data showed that the Sonic chain had already produced 1 million blocks.
So what is the secret to being 'fast'? According to the official introduction, Sonic has made deep optimizations to both the consensus layer and storage layer, introducing technologies such as live-pruning, node synchronization acceleration, and database slimming, allowing nodes to confirm and record transactions with a lighter burden. The officials claim that compared to the old Opera chain, node synchronization speed has increased by 10 times, and the cost of large-scale RPC nodes can be reduced by 96%, laying the foundation for a truly high-performance network.
It is noteworthy that 'high TPS' is no longer a novelty in public chain competition, yet it remains one of the core indicators for attracting users and project parties. A fast, smooth interactive experience can usually lower the barrier for users to blockchain, and provide possibilities for complex contracts, high-frequency trading, metaverse games, and other application scenarios.
Beyond 'high performance', Sonic claims to fully support EVM and is compatible with mainstream smart contract languages such as Solidity and Vyper. At first glance, 'self-developed virtual machine vs. EVM compatibility' was once a dividing line for new public chains; however, Sonic chose the latter. The benefit of this approach is that the migration threshold for developers is low; as long as the smart contracts were originally written on Ethereum or other EVM chains, they can be directly deployed to Sonic without major modifications, saving a lot of adaptation costs.
In the face of a fiercely competitive public chain market, abandoning EVM often means needing to re-cultivate developers and users. Clearly, Sonic hopes to 'smoothly' inherit the Ethereum ecosystem on the basis of strong performance, allowing projects to land as quickly as possible. From the official Q&A, the Sonic team has also considered other routes, but based on their judgment of industry inertia, EVM remains the choice with the 'greatest common divisor' significance, helping to quickly accumulate the number of applications and user base in the initial stage.
Additionally, Fantom previously stumbled in the Multichain incident due to cross-chain issues, thus Sonic's cross-chain strategy is also under scrutiny. The official technical documentation lists the cross-chain Sonic Gateway as a key technology and specifically introduces its security mechanism. Sonic Gateway adopts a method where validators run clients on both Sonic and Ethereum, providing decentralized and tamper-proof 'Fail-Safe' protection. The design of the 'Fail-Safe' mechanism is quite special: if the bridge does not report a 'heartbeat' for 14 days, the original assets can be automatically unlocked on the Ethereum side, ensuring user funds; packaging cross-chain occurs by default every 10 minutes (ETH→Sonic) and every hour (Sonic→ETH), and can be triggered immediately for a fee; Sonic's own validator network operates the gateway by running clients on both Sonic and Ethereum. This ensures that the Sonic Gateway is as decentralized as the Sonic chain itself, eliminating the risk of centralized manipulation.
From a design perspective, Sonic's main update aims to attract a new round of developers and funding through high TPS, sub-second settlement, and EVM compatibility, allowing this veteran public chain to return to market visibility with a new image and performance.
Token economics: left hand increase supply, right hand burn
In fact, the topic that the community discusses the most is Sonic's new token economics. On the one hand, the 1:1 exchange of FTM seems equivalent to a shift. On the other hand, the airdrop plan after six months is seen by the community as a method of diluting token value, as it equates to an additional issuance of 6% of tokens (approximately 190 million).
When Sonic was just launched, it set an initial supply of 3.175 billion tokens (total supply) identical to FTM, ensuring old token holders could obtain S at a 1:1 ratio. However, upon closer examination, the increase in supply may just be part of Sonic, which also contains many practices regarding total supply balance in its token economics.
According to official documents, starting six months after the mainnet launch, an annual increase of 1.5% (approximately 47.625 million S) will be issued for network operations, marketing, DeFi promotion, etc., continuing for six years. However, if this portion of tokens is not used up in a given year, they will be 100% destroyed to ensure that only the increased supply is actually invested in construction, rather than hoarded by the foundation.
In the first four years, the 3.5% annualized validator rewards for the Sonic mainnet mainly come from the unused FTM 'block reward shares' from Opera, which avoids large-scale minting of new S at the start, causing malignant inflation. After four years, the issuance of new tokens will resume at a rate of 1.75% to pay block rewards.
To hedge against the inflationary pressure brought by this increase in supply, Sonic has designed three burning mechanisms:
Fee Monetization Burn: If a DApp does not participate in FeeM, 50% of the Gas fees generated by users in that application will be directly burned; this is equivalent to imposing a higher 'deflation tax' on applications that do not join the revenue-sharing cooperation, encouraging DApp owners to actively participate in FeeM.
Airdrop Burn: 75% of the airdrop shares require a 270-day vesting period to be fully obtained; if users choose to unlock early, they will lose a portion of the airdrop shares, which will be directly burned, thereby reducing the circulation of S in the market.
Ongoing Funding Burn: A 1.5% annual increase for network development will be 100% burned if not used within the year; this avoids the foundation hoarding tokens and limits some members' long-term occupation of the tokens.
Overall, Sonic attempts to ensure ecological development funding through a 'controlled increase in supply' while suppressing inflation through multiple 'burns'. The most noteworthy aspect is the 'burning' under the FeeM mechanism, as it is directly linked to the degree of DApp participation and transaction volume, meaning that the more applications that do not participate in FeeM, the greater the on-chain deflationary effect; conversely, the more FeeM applications there are, the 'deflation tax' decreases, but developers' share will increase, forming a dynamic balance between profit-sharing and deflation.
TVL is only 1% of its peak; can refunds + airdrops regain DeFi momentum?
The Fantom team once enjoyed a moment of glory during the 2021-2022 bull market, but in the past year, Fantom's on-chain performance has not been ideal. Fantom's current TVL is only about 90 million USD, ranking 49th among DeFi public chains, while at its peak, Fantom's TVL was as high as about 7 billion USD. The current data is only about 1% of its peak.
Perhaps to revive the DeFi ecosystem, Sonic has specially introduced the Fee Monetization (FeeM) mechanism, claiming it can return up to 90% of the network Gas fees to the project party, allowing them to gain continuous revenue based on actual on-chain usage without overly relying on external financing. This model draws on the 'traffic revenue sharing' practices of Web2 platforms, hoping to encourage more developers in DeFi, NFT, GameFi, etc., to come and stay on Sonic.
Additionally, the official has set up a 200 million S token airdrop pool and launched two gameplay mechanisms: Sonic Points, which encourage ordinary users to actively interact on Sonic, hold, or accumulate a certain historical activity on Opera; and Sonic Gems, aimed at developers, encouraging them to launch attractive and genuinely used DApps on the Sonic chain. The portion of S used for the airdrop also integrates mechanisms such as 'linear vesting + NFT locking + early unlocking destruction', attempting to find a balance between airdrops and medium-to-long-term stickiness.
Mainnet launch, 1 million block milestone, cross-chain Bridge preview. These news items have indeed boosted Sonic's visibility in the short term. However, the current reality is that the prosperity of the ecosystem is far from its peak. Currently, the full competition from Layer2, Solana, Aptos, Sui, and other public chains has already entered an era of multi-chain blooms. High TPS is no longer the only selling point. If Sonic cannot explode one or two 'flagship projects' within the ecosystem, it may struggle to compete with other popular chains.
However, the launch of Sonic has still gained support from some industry star projects. In December, the AAVE community proposed a plan to deploy Aave v3 on Sonic, and Uniswap also announced it has completed deployment on Sonic. Additionally, Sonic can directly inherit 333 staking protocols on Fantom as its ecological foundation. These are advantages compared to a completely new public chain.
Can relying on performance and high incentives bring back funds and developers? The answer may depend on whether Sonic can deliver convincing results in specific application landing, governance transparency, and cross-chain security by 2025. If all goes well, Sonic may be expected to recreate the glory of Fantom in its heyday. However, if it remains at the level of conceptual speculation and fails to address internal conflicts and security concerns, this 'second entrepreneurship' may end up being plain amid the multi-chain melee.
