Author: Frank, PANews
From the once-star public chain Fantom to the current Sonic Labs, 2024 can be described as a year of major changes on this Layer1 chain: the foundation was renamed, the mainnet was upgraded, and the token was exchanged. Fantom is trying to complete a "second startup" with a series of actions. However, from the decline in TVL to less than $100 million, the continuous controversy over issuance, and the lingering shadow of cross-chain security, Sonic still faces many doubts and challenges. Can the high performance of the new chain be realized? Can the token exchange and airdrop save the ecosystem?
Telling the story of performance, returning to the market with the sub-second public chain
On December 18, 2024, the Fantom Foundation was officially renamed 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 the most important technical narrative for Fantom. On December 21, just three days after the launch, official data showed that the Sonic chain had already produced 1 million blocks.
What is the secret behind the "speed"? According to the official introduction, Sonic has made in-depth optimizations to the consensus layer and the storage layer, introducing technologies such as live-pruning, node synchronization acceleration, and database weight loss, allowing nodes to confirm and record transactions with a lighter burden. Compared to the old Opera chain, the official said that the 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 worth noting that "high TPS" is no longer a new concept in the public chain competition, but it is still one of the core indicators that attract users and project parties. A fast and smooth interactive experience can often lower the threshold for users to use the blockchain, and also provide possibilities for complex contracts, high-frequency transactions, metaverse games, and other application scenarios.
In addition to "high performance", Sonic stated that it fully supports EVM and is compatible with mainstream smart contract languages such as Solidity and Vyper. On the surface, "self-developed virtual machine vs. EVM compatibility" was once a watershed for new public chains, but Sonic chose the latter, and the benefit is that the development threshold for developers is low. As long as the smart contracts originally written on Ethereum or other EVM chains, they can be directly deployed to Sonic without major changes, saving a lot of adaptation costs.
Facing the highly competitive public chain market, abandoning EVM often means having to re-cultivate developers and users. Obviously, Sonic hopes to "inherit" the Ethereum ecosystem on the basis of strong performance, so that projects can be deployed as quickly as possible. From the official Q&A, the Sonic team has also considered other routes, but based on the judgment of industry inertia, EVM is still the choice with the greatest "common denominator" meaning, which can help quickly accumulate the number of applications and user base in the early stage.
In addition, Fantom once stumbled in the Multichain incident, so Sonic's cross-chain strategy is also closely watched. The official technical document lists the Sonic Gateway as a key technology, and specially introduces the security mechanism. Sonic Gateway adopts the method of validators running client nodes on both Sonic and Ethereum, with decentralized and tamper-proof "Fail-Safe" protection. The "Fail-Safe" mechanism is designed in a special way: if the bridge does not report "heartbeat" for 14 days, the original assets can be automatically unlocked on the Ethereum side to protect user funds; by default, cross-chain is packaged every 10 minutes (ETH→Sonic) and 1 hour (Sonic→ETH), and can also be triggered immediately by paying a fee; Sonic's own validator network operates the gateway by running client nodes 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 the design point of view, Sonic's main updates still hope to attract a new round of developers and capital through "hardware configurations" such as million-level TPS, sub-second settlement, and EVM compatibility, so that this veteran public chain can return to the market with a new image and performance.
Token Economics: Left-Hand Issuance, Right-Hand Burning
In fact, the topic that the community is discussing the most at the moment is Sonic's new token economics. On the one hand, the 1:1 exchange model for FTM seems to be a simple transfer. On the other hand, the airdrop plan 6 months later, which is equivalent to an additional 6% token issuance (about 190 million), is also considered by the community as a practice that dilutes the token value.
When Sonic was first launched, it set the same initial supply of 3.175 billion as FTM, ensuring that old token holders can obtain S at a 1:1 ratio. But a closer look will reveal that issuance may only be part of Sonic, and there are also many practices regarding total supply balance in the token economics.
The official document shows that starting from six months after the mainnet launch, 1.5% (about 47.625 million S) will be issued annually for network operations, marketing, DeFi promotion, and other purposes, and this will continue for six years. But if the tokens are not used up in a certain year, they will be 100% burned to ensure that only the issued part is actually invested in construction, and not hoarded by the foundation.
In the first four years, the 3.5% annualized validator rewards of the Sonic mainnet will mainly come from the unused FTM "block reward share" of the Opera, so as to avoid large-scale minting of new S at the start-up stage, causing malicious inflation. After four years, the issuance of new tokens will be restored at a rate of 1.75% to pay for block rewards.
In order to hedge the inflationary pressure brought by this part of the issuance, Sonic has designed three burning mechanisms:
Fee Monetization Burn: If the DApp does not participate in FeeM, 50% of the Gas fees generated by users on that application will be directly burned; this is equivalent to levying a higher "deflationary tax" on applications that do not join the revenue sharing, encouraging DApps 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, a portion of the airdrop shares will be deducted, and these deducted shares will be directly burned, reducing the circulation of S in the market.
Ongoing Funding Burn: The 1.5% annual issuance for network development, if not used up in the year, will also be 100% burned; this can prevent the foundation from hoarding tokens and also limit the long-term occupation of tokens by certain members.
Overall, Sonic tries to ensure the development funds of the ecosystem through one hand of "controllable issuance", and suppress inflation through the other hand of multiple "burning" points. The most noteworthy is the "burning" under the FeeM mechanism, because it is directly linked to the participation degree and transaction volume of DApps. This means that the more applications do not participate in FeeM, the greater the on-chain deflationary force; on the contrary, the more FeeM applications, the less the "deflationary tax", but the developer's revenue sharing will increase, forming a dynamic balance between profit sharing and deflation.
TVL is only 1% of its peak, can the token refund + airdrop regain the DeFi momentum?
The Fantom team once shone brightly in the 2021-2022 bull market, but Fantom's on-chain performance has not been ideal in the past year. Fantom's current TVL is only around $90 million, ranking 49th among DeFi public chains, while its TVL once reached around $7 billion at its peak. The current data is only about 1% of the peak period.
Perhaps to revive the DeFi ecosystem, Sonic has specially launched the Fee Monetization (FeeM) mechanism, claiming that it can return up to 90% of the network's Gas fees to project parties, allowing them to obtain continuous revenue based on actual on-chain usage without relying too much on external financing. This model borrows the "revenue sharing based on traffic" practice of Web2 platforms, hoping to encourage more DeFi, NFT, GameFi and other developers to come to Sonic and stay.
In addition, the official has set up a 200 million S token airdrop pool, and launched two gameplay: Sonic Points, encouraging ordinary users to actively interact, hold or accumulate certain historical activities on Opera; Sonic Gems, an incentive for developers, encouraging them to launch attractive DApps with real usage on the Sonic chain. The S used for the airdrop also incorporates mechanisms such as linear vesting, NFT locking, and early unlocking burning, trying to find a balance between airdrop and medium-long term stickiness.
Mainnet launch, 1 million block milestone, cross-chain Bridge preview. These news items have indeed increased Sonic's exposure in the short term. However, the current reality is far from the prosperous and peak era of the ecosystem. Currently, the full competition of Layer2, Solana, Aptos, Sui and other public chains has already ushered in an era of thriving multi-chain. High TPS is no longer the only selling point. If Sonic cannot unleash one or two "flagship projects" within the ecosystem, it may be difficult to compete with other popular chains.
However, the launch of Sonic has received the support of some industry-leading projects. In December, the AAVE community proposed a proposal to deploy Aave v3 on Sonic, and Uniswap also announced that it has completed deployment on Sonic. In addition, Sonic can also directly inherit the 333 staking protocols on Fantom as the ecological foundation. These are advantages compared to a pure new public chain.
Relying on performance and high incentives to bring back capital and developers? The answer may depend on whether Sonic can deliver convincing results in terms of specific application landing, governance transparency and cross-chain security by 2025. If everything goes well, Sonic may have the chance to recreate the glory of Fantom in its heyday. If it is limited to concept speculation, and unable to solve internal contradictions and security concerns, this "second entrepreneurship" may also fade into obscurity in the multi-chain battle.
