Author: GCR Research Team
Compiled by: Felix, PANews
Fantom was a major success story in DeFi in 2021, with its TVL peaking at $8 billion. But when chief developer Andre Cronje left and the bear market hit, Fantom lost its former glory. Now that Cronje has returned, Fantom has been rebranded as Sonic. This is not just a name change; it’s a new beginning.
This article will explore Sonic's core innovations, market reactions, and whether it will pave the way for Fantom's redemption.
What is Sonic
Sonic is not just a new name for Fantom. Sonic Labs CEO Michael Kong states that this is a complete reboot. It is a new chain based on new technology, using a brand new but fully compatible EVM virtual machine. The team is building a new blockchain from scratch because they cannot make the changes they want to the old blockchain. Kong explained: 'You can’t rebuild an airplane while it’s flying. It’s much easier to build a new airplane on the ground and then get it into the air.'
The new chain will process 10,000 transactions per second with confirmation times of less than one second. This is much faster than the L2 networks Sonic wants to compete with. While L2s are gaining popularity, locking up $34 billion, Sonic believes there are fundamental flaws in their model. According to Sonic Labs, these networks survive by earning money from sequencer fees, which they believe should belong to the developers—the ones truly building useful applications. They believe that the value created by application developers is not being properly compensated.
To address this issue, Sonic prioritizes developers. Its core feature is that developers can earn up to 90% of the gas fees generated by their applications. In addition, Sonic will provide developers with true control over their applications. They can set their own fee structures and create a smoother payment experience for users. Everything in Sonic is built around this idea: providing developers with the tools and incentives to build better applications. The chain supports languages like Solidity and Vyper, allowing developers to focus on innovation rather than learning new tools.
Sonic is set to launch in December 2024, joining the ranks of fast blockchains like Solana, Sui, and Aptos. While it may not have Ethereum's security like L2s, it offers something unique—the speed of a modern chain using Ethereum-familiar tools. This places Sonic in an interesting position: it is built for developers who need more performance than L2s can provide but want to stay within the Ethereum development environment. Currently, only Sei offers this, while Monad is trying to achieve it. Therefore, besides Ethereum L2s, these two chains may be Sonic's main competitors.
How does this technology work?
Sonic Virtual Machine
To eliminate the bottlenecks caused by EVM's lack of scalability, the Sonic Labs team has built their own version of EVM called the Sonic Virtual Machine. SVM is fully compatible with EVM but improves the way code execution is processed. When someone's code runs, SVM converts it into a more efficient format in the client. It looks for common patterns in the code and replaces them with optimized 'super instructions'. This allows everything to run faster without changing the way developers work. All common tools still work, and developers can continue to write using Solidity and Vyper, and the chain still supports Geth 1.4.
Sonic consensus mechanism
Sonic uses a consensus mechanism based on a Directed Acyclic Graph (DAG) and employs proof of stake. Unlike single chains where blocks must follow each other in order, each validator maintains its own local set of transaction blocks (called DAG). When transactions come in, validators bundle them into 'event blocks' and add them to the DAG.
Before creating a new event block, validators check two things: all transactions in the current block and some transactions they received from other validators. They then share these blocks with other validators through a process that does not require everything to happen in strict order.
Source: https://docs.soniclabs.com/technology/consensus
Unlike blockchain, this DAG-based approach does not require validators to process the current block being generated, which limits transaction speed and finality. Validators can freely create event blocks containing transactions and share these blocks with other validators on the network asynchronously, creating a non-linear transaction record. This enhances transaction speed and efficiency.
When validators create event blocks, they propagate them to other validators on the network. Once a majority of validators agree on a block, it becomes what is known as a 'root event block'. These root blocks then join the main chain, which is the final permanent record of all transactions agreed upon by everyone.
The entire process takes less than a second from start to finish. Transactions go through four steps: first, the user sends the transaction. Then, the validator puts it into an event block. Next, this block propagates until a majority of validators accept it. Finally, it becomes part of the main chain. When you check Sonic through a block explorer, you only see this final main chain. All the complex work of event blocks in the DAG is done in the background.
Each validator retains a copy of their main chain, which helps them process new blocks faster. This creates a clever balance: the DAG structure allows validators to work independently and quickly, while the main chain ensures that everyone ultimately receives the same final record.
Sonic token
Sonic (S) token will be a traditional L1 token - used to pay gas fees, participate in governance, and secure the network through staking. At launch, Fantom (FTM) can be converted to Sonic (S) at a one-to-one ratio. The total supply will start at 3.175 billion Scoins, matching Fantom's current total supply, with approximately 2.88 billion tokens circulating at launch.
Sonic aims to avoid early inflation of validator rewards. The chain will use the remaining Fantom block rewards to mint new coins for four years. When half of the network is staked, these rewards (about 70 million per year) will provide validators with a 3.5% return. After four years, the network will mint new tokens in each period to maintain a 3.5% reward rate.
Developer incentives
Sonic has created multiple programs to leverage its tokens to attract developers. The innovation fund allocates 200 million S tokens to help new projects based on Sonic. These tokens will be awarded as grants to developers creating innovative applications.
The fee monetization plan changes the way transaction fees work, but only applies to approved applications. Normal transactions on Sonic consume 50% of the fees, with 45% paid to validators and 5% sent to the ecosystem treasury. Developers can apply to join the fee monetization program. If approved, their applications will receive 90% of the fees generated, while validators receive the remaining 10%. This structure allows successful applications to generate sustainable income while supporting network security.
Airdrop
Sonic plans to distribute 190.5 million tokens through an airdrop to reward past Fantom users and future Sonic adopters. The team stated that they learned from previous user incentive activities—the focus is not just on rewarding a large amount of locked funds but on actual usage. This means that applications (like DEXs, NFTs, games, etc.) that do not necessarily require large amounts of TVL can also benefit from the user adoption metrics of this activity, not just DeFi applications like lending protocols and AMMs that require large TVL.
Fantom's historical activities and future participation in Sonic will be rewarded in this airdrop. Important past activities may include providing liquidity, validating, holding staked tokens (such as sFTMx), and using NFTs. Future eligibility criteria may include providing liquidity on Sonic staking, deploying contracts, participating in community activities, and using bridges. The exact criteria are still unclear, but based on information shared by the Sonic Labs team, it can be assumed that activities will receive higher rewards than passive liquidity provision.
Additionally, the 'Sonic Boom' program allows 30 projects to win additional airdrop allocations to distribute to their users.
Finally, this airdrop includes a novel claiming mechanism with a 270-day vesting period. The system releases 25% of the tokens on the first day, with the remaining 75% as NFT positions. Users can claim the remaining airdrop at any point, but if they redeem early, a portion of the tokens will be burned. The longer these positions go unclaimed, the fewer tokens will be burned upon redemption. Those who want immediate liquidity without burning tokens can sell their NFT positions in the market.
Source: https://docs.soniclabs.com/funding/airdrop
How is the market responding?
Since the release of Sonic in August 2023, Fantom's token has seen a slight increase. The price rose from $0.41 to $0.71, a 75% increase, while Bitcoin rose from $64,000 to nearly $100,000, about a 50% increase. While there is nothing particularly remarkable, it is still a decent performance, as Bitcoin outperformed many altcoins during the same period. However, it lags far behind the best-performing tokens like Sui, which saw a fivefold increase from $0.7 to $3.6, especially after Bitcoin recently broke its historical high. This indicates that the market seems skeptical about Sonic. Currently, the market is not exuberant.
The total value locked in the Fantom protocol has also shown no highlights. Despite the promised airdrop, the network's TVL remains stable at around $100 million, far below the $8 billion peak during the last bull market.
This situation may change when the Sonic mainnet launches, but recent history suggests caution. Other networks (such as Scroll) saw a temporary spike in activity during airdrop periods, but once the rewards dried up, that funding quickly evaporated. High initial activity or TVL growth at launch may indicate short-term interest rather than lasting adoption.
Future potential
Sonic is in a crowded race, where block space is more abundant than ever. While Ethereum L2s may not achieve the speed Sonic promises, their speed is sufficient to meet current demand. Therefore, most Solidity developers choose to build on these L2s, while other L1 networks struggle to attract builders and users. Sonic will face the same challenges.
The team emphasizes rewarding developers through gas fee sharing, but this practice also faces its own obstacles. History shows that this may not be the compelling feature Sonic hopes to achieve. Major applications like Uniswap, Aave, and Raydium have built successful businesses without gas rebates. NEAR Protocol tried a similar approach but with little effect, and it was not the incentives for developers that revived NEAR, but its focus on AI applications. Sonic’s anticipated low transaction fees complicate this challenge, as it will diminish the value of gas rebates.
For Sonic to achieve long-term success, it needs to attract applications with its superior speed and scalability. Consider today's DeFi protocols, perpetual DEXs, DePIN networks, and complex financial applications. The elements to achieve this are already in place—ample development and incentive funding, well-designed incentive programs, and one of the most inspiring leaders in DeFi, Andre Cronje. The team seems to understand this, and Andre Cronje is actively seeking collaborations with credit card companies and international banks.
Merely becoming another high-speed blockchain hosting a Memecoin casino does not ensure lasting success. While such activities may provide early momentum, Sonic needs to establish a foothold in a clearly defined niche market where its performance matters most. From the team’s carefully crafted incentive activities and airdrops to institutional expansion, there is some hope. However, achieving success in this competitive environment requires more than just good intentions. Sonic's future depends on translating these plans into practice to demonstrate the true value of its high-performance infrastructure.
Related reading: Fantom is about to launch the new chain Sonic. Can token swapping + MEME activate the ecosystem?
