Article reprinted from: Frank
Author: Frank, PANews
From the once-star public chain Fantom to today's Sonic Labs, 2024 can be described as a year of significant changes for this Layer1 chain: foundation renaming, mainnet upgrade, token swap. Fantom is attempting to complete a 'second startup' with a series of actions. However, with the TVL dropping to less than $100 million and ongoing controversies over issuance, along with the unresolved shadows of cross-chain security, Sonic still faces many doubts and challenges. Can the new chain's high performance deliver results? Will the token swap and airdrop save the ecosystem?
Telling a performance story, returning to the market with sub-second public chains
On December 18, 2024, the Fantom Foundation officially renamed itself as Sonic Labs and announced the launch of the Sonic mainnet. As a new public chain known for sub-second transaction speeds, performance naturally became the most important technical narrative for Fantom. Just three days after launch on December 21, 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 deeply optimized both the consensus layer and the 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 official claims that the node synchronization speed has increased by ten times compared to the old Opera chain, and the cost of large-scale RPC nodes can be reduced by 96%, laying the foundation for a truly high-performance network.
It is worth noting that while 'high TPS' is no longer a novelty in public chain competition, it remains one of the core indicators for attracting users and project parties. Fast and smooth interaction experiences typically lower the barrier to entry for users in blockchain, also providing possibilities for complex contracts, high-frequency trading, and metaverse games.
Beyond 'high performance', Sonic claims to fully support EVM and be compatible with mainstream smart contract languages such as Solidity and Vyper. On the surface, 'self-developed virtual machine vs. EVM compatibility' was once a dividing line for new public chains; however, Sonic chose the latter, which means that the threshold for developers to migrate is low. Smart contracts originally written on Ethereum or other EVM chains can be directly deployed to Sonic without major modifications, saving a lot of adaptation costs.
Facing a fiercely competitive public chain market, abandoning EVM often means needing to re-cultivate developers and users. Clearly, Sonic hopes to 'easily' inherit the Ethereum ecosystem on the foundation of strong performance, allowing projects to land as quickly as possible. From the official Q&A, it appears that the Sonic team also considered other paths, but based on their judgment of industry inertia, EVM remains the choice with the greatest 'greatest common divisor' significance, helping to rapidly accumulate the number of applications and user base in the initial stage.
Furthermore, Fantom once stumbled in the Multichain incident due to cross-chain issues, so Sonic's cross-chain strategy is also under close scrutiny. The official technical documentation lists the cross-chain Sonic Gateway as a key technology and specifically introduces its security mechanisms. Sonic Gateway operates using validators running clients at both Sonic and Ethereum ends, 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 to protect user funds; by default, cross-chain packaging occurs every 10 minutes (ETH→Sonic) and every hour (Sonic→ETH), but can also be triggered instantly for a fee; Sonic's own validator network operates the gateway by running clients on both Sonic and Ethereum. This ensures that Sonic Gateway is as decentralized as the Sonic chain itself, eliminating the risk of centralized manipulation.
From a design perspective, Sonic's main update still hopes to attract a new round of developers and funds through tens of thousands of TPS, sub-second settlement, and EVM compatibility, allowing this veteran public chain to return to the market's view with a new image and performance.
Tokenomics: Left hand issuance, right hand destruction
In fact, the most discussed topic in the community right now is Sonic's new tokenomics. On one hand, the 1:1 exchange model for FTM seems to be a straight transfer. On the other hand, the airdrop plan six months later, which corresponds to an additional issuance of 6% of tokens (about 190 million), is also seen by the community as a method of diluting token value.
When Sonic first launched, it set an initial supply (total volume) of 3.175 billion tokens, the same as FTM, ensuring that old token holders could receive S at a 1:1 ratio. However, a closer look reveals that the issuance may only be part of Sonic’s overall tokenomics, which also contains a lot of practices regarding total volume balance.
According to the official documentation, starting six months after the mainnet launch, 1.5% (about 47.625 million S) will be issued annually for network operations, marketing, DeFi promotion, etc., continuing for six years. However, if this portion of tokens is not fully used in a given year, it will be 100% burned to ensure that only the issued part is actually invested in development, rather than hoarded by the foundation.
In the initial four years, Sonic's mainnet's 3.5% annual validator reward mainly comes from the unused FTM 'block reward share' from Opera, thus avoiding a large amount of new S being minted at the start, causing malignant inflation. Four years later, the issuance of new tokens will be resumed at a rate of 1.75% to pay block rewards.
To hedge against the inflationary pressure caused by this portion of issuance, Sonic has designed three burning mechanisms:
Fee Monetization Burn: If a DApp does not participate in FeeM, 50% of the Gas fees generated in transactions within the application will be directly burned; this is equivalent to imposing a higher 'deflation tax' on applications that do not join the revenue-sharing, encouraging DApps to actively participate in FeeM.
Airdrop Burn: 75% of the airdrop share requires a 270-day vesting period to be fully obtained; if users choose to unlock early, they will lose a portion of the airdrop share, and those 'withheld' shares will be directly burned, thus reducing the circulation of S in the market.
Ongoing Funding Burn: 1.5% annual issuance for network development; if not fully used that year, the remaining tokens will also be 100% burned; this can prevent the foundation from hoarding tokens and limit the long-term squeeze of certain members on the tokens.
Overall, Sonic attempts to ensure ecological development funds through 'controllable issuance' while simultaneously suppressing inflation through multi-point 'burning'. Among them, the 'burning' under the FeeM mechanism is particularly noteworthy, as it is directly linked to the participation level of DApps and transaction volume, meaning that the more applications that do not participate in FeeM, the greater the deflationary pressure on-chain; conversely, with more FeeM applications, 'deflation taxes' decrease, but developer revenue sharing increases, forming a dynamic balance between profit sharing and deflation.
TVL is only 1% of its peak; can cashback + airdrops regain DeFi momentum?
The Fantom team once shone during the bull market of 2021-2022, but over the past year, Fantom's on-chain performance has not been ideal. Currently, Fantom's TVL is only about $90 million, ranking 49th among DeFi public chains, while its TVL once reached about $7 billion during its peak. The current data is only about 1% of the peak period.
Perhaps to revitalize the DeFi ecosystem, Sonic has specially introduced the Fee Monetization (FeeM) mechanism, claiming to return up to 90% of the network Gas fees to project parties, allowing them to gain sustainable income based on actual on-chain usage without overly relying on external financing. This model draws on the Web2 platform's 'revenue sharing based on traffic' approach, hoping to encourage more DeFi, NFT, and GameFi developers to come to Sonic and stay.
Additionally, the official has set aside airdrop pools of 200 million S tokens and launched two gameplay options: 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' incentives, encouraging them to launch attractive and genuinely used DApps on the Sonic chain. The S used for airdrops also incorporates mechanisms such as 'linear vesting + NFT locking + early unlock burning', trying to find a balance between airdrops and medium to long-term retention.
Mainnet launch, 1 million block milestone, cross-chain Bridge announcement. These news indeed boosted Sonic's visibility in the short term. However, the current reality is that the prosperity of the ecosystem is far from the peak era. The full competition from public chains like Layer2, Solana, Aptos, and Sui has already ushered the market into an era of multi-chain diversity. High TPS is no longer the only selling point. If Sonic cannot unleash one or two 'flagship projects' within the ecosystem, it may struggle to compete with other popular chains.
However, the launch of Sonic has still received support from some industry star projects. In December, the AAVE community proposed a plan to deploy Aave v3 on Sonic, and Uniswap also announced that it has completed deployment on Sonic. In addition, Sonic can directly inherit the 333 staking protocols from Fantom as its ecological foundation. These are advantages compared to a purely new public chain.
Can performance and high incentives bring back funds and developers? The answer may depend on whether Sonic can deliver a convincing result in terms of specific application landing, governance transparency, and cross-chain security by 2025. If all goes well, Sonic may hope to recreate the glory of Fantom in its heyday. However, if it remains merely a concept hype, failing to resolve internal contradictions and security concerns, this 'second startup' may also fade into obscurity amidst the multi-chain melee.
