Fantom’s FTM token does not burn enough tokens to be considered deflationary.
For some reason, Fantom (FTM) seems to have a reputation for burning coins and therefore being deflationary.
In reality however, this is a myth.
FTM is in fact an inflationary token that will see its supply continue to increase as time passes.
With the FTM being so much more than a simple store of value and actually required to facilitate the Fantom network, a level of inflation is required to fund both its health and maintenance.
While mainstream crypto users seem to have it in their heads that inflationary tokenomics are a bad thing, this actually couldn’t be further from the truth when it comes to networks with use cases such as Fantom’s.
In this latest section of our Fantom (FTM) guide, we debunk the myth that Fantom burns enough coins to be considered deflationary.
Fantom (FTM) is actually inflationary
As per the Fantom whitepaper, there are 3.175 billion FTM tokens.
In order to expand the Fantom ecosystem, an inflationary model is adopted.
Initially, this is set at a 5% annual inflation rate.
Where the FTM inflation goes:
- 20% of the total inflation is used to reward notes.
- 80% of the total inflation is used to incentivise Fantom users.
Keep in mind that this 5% inflation rate is expected to decrease over time, as more users join the network.
The Fantom system of governance does burn coins
Within the Fantom governance system, token holders have the opportunity to propose ways to improve the ecosystem, as well as vote on pending proposals.
Each FTM token you have staked, carries one vote and voting costs a mere fraction of 1 FTM.
So as you can see, any decision carried out on the network must first be approved by participants with stake.
Fantom’s governance system is completely permissionless and depending on how you view a token with a pre-mine going to founders and early investors, completely decentralised.
The future roadmap for the Fantom network is in the hands of FTM stakers with skin in the game.
When it comes to burning tokens, Fantom proposal submissions cost 100 FTM, which is burned in the process.
But while the Governance system on Fantom technically burns 100 FTM every time a proposal is submitted, this is a mere drop in the inflationary ocean.
Nowhere near enough to flip Fantom to a deflationary coin.
Final thoughts on Fantom burning coins
While Fantom burns coins during governance proposals and as discussed in earlier sections of this guide to Fantom (FTM), in some cases when unstaked prematurely, FTM is and will always be an inflationary token.
With Ethereum trying hard to push its own deflationary narrative, there’s always going to be interest in this aspect the tokenomics of competitors.
As Fantom continues to etch its place as one of the leading Ethereum killers, comparisons and questions surrounding them are only natural.
But ultimately the answer to this question is no.
Fantom doesn’t burn enough coins to be considered deflationary.
Best of probabilities to you.
Direct from the desk of Dane Williams.
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