Author: GCR Research Team
Compilation: Felix, PANews
Fantom was a significant success story in DeFi in 2021, with its TVL peaking at $8 billion. However, when chief developer Andre Cronje left and the bear market hit, Fantom lost its former glory. Now that Cronje has returned, Fantom has rebranded as Sonic. This is not just a name change, but a new beginning.
This article will explore Sonic's core innovations, market reactions, and whether it will open the path to redemption for Fantom.
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 EVM-compatible virtual machine. The team is building a new blockchain from scratch because they could not make the changes they wanted to the old blockchain. Kong explains, 'You can't rebuild an airplane while it's flying. It's much easier to build a new airplane on the ground and then bring 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 aims to compete with. While L2s are becoming increasingly popular, locking in $34 billion, Sonic believes their model has fundamental issues. According to Sonic Labs, these networks survive on the money earned from ordering fees, which they believe should belong to the developers—the people actually building useful applications. They feel the value created by application developers is not being adequately compensated.
To address this issue, Sonic puts developers first. 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 fast blockchain space alongside Solana, Sui, and Aptos. While it does 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 provide but want to stick to the Ethereum development environment. Currently, only Sei provides this, while Monad is attempting to achieve it. Therefore, besides Ethereum L2s, these two chains may be Sonic's main competitors.
How does the technology work?
Sonic Virtual Machine
To eliminate the bottleneck caused by EVM's lack of scalability, the Sonic Labs team built their own version of EVM, called the Sonic Virtual Machine (SVM). SVM is fully compatible with EVM but improves the way code execution is handled. When someone's code runs, SVM converts it into a more efficient format on the client side. It looks for common patterns in the code and replaces them with optimized 'super instructions.' This makes everything run faster without changing the way developers work. All commonly used tools still work, and developers can continue to write in Solidity and Vyper, and the chain still supports Geth 1.4.
Sonic Consensus Mechanism
Sonic uses a directed acyclic graph (DAG)-based consensus mechanism and employs proof of stake. Unlike a single chain where blocks must follow each other in order, each validator maintains its own local set of transaction blocks (called a 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. Then, they share these blocks with other validators through a process that does not require everything to happen in a strict order.
Source: https://docs.soniclabs.com/technology/consensus
Unlike blockchains, this DAG-based approach does not force validators to process the currently generating blocks, which would limit transaction speed and finality. Validators can freely create event blocks that contain transactions and share these blocks asynchronously with other validators on the network, creating a non-linear transaction record. This enhances transaction speed and efficiency.
When a validator creates an event block, it propagates throughout the network to other validators. Once a majority of validators agree on a block, it becomes known as the 'root event block.' These root blocks are then added to 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 a transaction. Then, the validator places it in an event block. Next, this block propagates until a majority of validators accept it. Finally, it becomes part of the main chain. When you look at Sonic through the block explorer, you will only see this final main chain. All the complex work of event blocks in the DAG happens in the background.
Each validator retains its own copy of the main chain, helping 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 everyone ultimately receives the same final record.
Sonic Token
Sonic (S) tokens will be a traditional L1 token - used to pay gas fees, participate in governance, and secure the network through staking. When Sonic launches, 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. About 2.88 billion tokens will be in circulation at launch.
Sonic hopes to avoid early inflation of validator rewards. The chain will use the remaining Fantom block rewards instead of minting 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 these four years, the network will mint new tokens in each period to maintain a 3.5% reward rate.
Developer Incentives
Sonic has created multiple plans to attract developers to utilize its tokens. An innovation fund has allocated 200 million S tokens to help new projects based on Sonic. These tokens will be awarded as grants to developers who create innovative applications.
The fee monetization plan changes how transaction fees work, but it only applies to approved applications. Normal transactions on Sonic consume 50% of the fees, with 45% going 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, with validators receiving the remaining 10%. This structure allows successful applications to earn sustainable income while supporting network security.
Airdrop
Sonic plans to distribute 190.5 million tokens through airdrops, rewarding past Fantom users and future Sonic adopters. The team states they have learned from previous user incentive activities—focusing not just on rewarding a large amount of locked funds, but on actual usage. This means that applications that naturally do not require a large TVL (like DEXs, NFTs, games, etc.) can also benefit from user adoption metrics from this activity, not just DeFi applications like lending protocols and AMMs that require a significant 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 (like sFTMx), and using NFTs. Future qualification criteria may include providing liquidity on Sonic staking, deploying contracts, participating in community activities, and using bridges. The exact criteria are not yet clear, 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, some tokens will be burned. The longer these positions go unclaimed, the fewer tokens will be burned upon redemption. Those who want immediate liquidity but do not want to burn tokens can sell their NFT positions on the market.
Source: https://docs.soniclabs.com/funding/airdrop
How is the market reacting?
Since Sonic's release 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 went from $64,000 to nearly $100,000, an increase of about 50%. While there is nothing particularly noteworthy, this is still a decent performance, as Bitcoin outperformed many altcoins during the same period. However, it lags far behind top-performing tokens like Sui, which saw its price increase fivefold from $0.7 to $3.6, especially as Bitcoin recently broke its historic high. This indicates that the market seems to be skeptical about Sonic. Currently, there is no feverish enthusiasm in the market.
The total value locked in the Fantom protocol has also shown little promise. Despite the promise of airdrops, the network's TVL remains stable at around $100 million, far below the peak of $8 billion during the last bull market.
This situation may change when the Sonic mainnet launches, but recent history suggests caution. Other networks, like Scroll, saw a temporary spike in activity during airdrops, but once rewards dried up, those funds quickly dissipated. 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 richer than ever. While Ethereum L2 may not achieve the speeds promised by Sonic, their speeds are sufficient to meet current demand. As a result, 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 shared gas fees, but this practice also faces its own obstacles. History has shown that this may not be the standout 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 had little success; ultimately, it was not its incentives for developers but its focus on AI applications that revived NEAR. The anticipated low transaction fees for Sonic 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. Think of today's DeFi protocols, perpetual DEXs, DePIN networks, and complex financial applications. The elements to achieve this are in place—substantial development and incentive funds, well-designed incentive programs, and one of DeFi's most inspiring leaders, Andre Cronje. The team seems to understand this, and Andre Cronje is actively seeking partnerships with credit card companies and international banks.
Simply becoming another high-speed blockchain hosting a memecoin casino does not guarantee lasting success. While such activities may provide early momentum, Sonic needs to establish a strong foothold in a clear niche market where performance is what matters most. From the team's carefully designed incentive programs and airdrops to institutional expansions, there is some hope. However, succeeding in this competitive environment requires more than just good intentions. Sonic's future depends on turning these plans into practice to demonstrate the true value of its high-performance infrastructure.
Related Reading: Can Fantom's upcoming launch of the new chain Sonic activate the ecosystem with coin swapping + MEME?
