the recent crypto crash sent most altcoins to yearly low but there are a few which have remained resilient and one of these is Sonic which has been emerging as the next top layer one its upcoming airdrop of over 190 million s coins has resulted in exponential growth both in terms of price and total value locked and it looks like this growth is just getting started and that’s why today we’re going to to do a deep dive into Sonic including where it came from how it works what it’s planning and how high its s coin could go this cycle my name is Nick stay tuned I’ll start by saying that nothing in this video is financial advice it’s purely educational content intended to inform you about Sonic also do note that nobody at the coin Bureau team holds S as part of their crypto portfolios at the time of posting and of course we will be as objective as possible as always and if you want to know which will know that we’ve covered Sonic before that’s because Sonic was previously known as Phantom which we covered in May May last year Sonic is basically the new and improved version of phantom its main net launched in December and it’s been growing fast since January but first a bit of background Phantom was originally founded way back in 2018 by a South Korean computer scientist named an buik IT raised $41 million in an Ico that same year and it allegedly began as a vapor Weare it was promising to build cuttingedge Tech that didn’t actually work thankfully two crypto developers working on Phantom managed to build something that did these were Michael Kong and Andre cronier who became the de facto founders of phantom after an stepped away from the project in early 2019 Phantom’s main net subsequently launched in December 2019 under the hood Phantom used a novel proof of stake consensus mechanism called LA casus to secure a directed a cyclic graph or dag based blockchain this Tech combined with Phantom’s relative centralization made it possible to process 2,000 transactions per second which was a lot when Phantom first launched those of you who’ve been around since the previous cycle will know that Phantom was one of the top cryptos back then and this was arguably because of Andre who was famous for being the founder of a def fry project called year finance and is known for being one of the best defi developers in crypto Andre’s star power combined with Phantom’s e VM support essentially turned it into one of the top blockchains for defi which turned out to be a double-edged sword as you can see Phantom’s tvl exploded in 2021 and then imploded in 2022 when the crypto be Market started hitting defi hard ftms price action followed suit fall in by almost 95% in just a few months if that wasn’t bad enough Andre had reportedly left Phantom shortly before it crashed Andre subsequent revealed that he had never really left just that he had stepped out of the public eye even so it was very bad optics for FTM there was a silver lining though and that’s that in late 2022 after FTX collapsed and the crypto Market was at its lowest lows Andre revealed that the Phantom Foundation had a treasury worth more than $300 million consisting of crypto stable coins and other assets given Phantom 30 years of Runway fast forward to late 2023 when Phantom revealed the Sonic upgrade what’s interesting is that Sonic was originally intended to be just that an upgrade but by early 2024 Sonic had become a new blockchain separate from Phantom Michael revealed in an interview that large FTM investors had indeed pushed for this throughout 2024 Phantom put out multiple updates related to Sonic the most significant of these was the establishment of Sonic labs and the Sonic Foundation last May shortly after raising an additional $110 million not surprisingly many of the investors were defi Founders such as AR’s stun kicho what is surprising is that Sonic Labs is based in the Bahamas whereas the Sonic Foundation is based in the Cayman Islands for context Phantom was overseen by just one entity the Phantom Foundation the creation and location of these two new entities was likely for regulatory reasons to help the S coin list on us exchanges this this would explain why Andre has been vocally accusing us exchanges like coinbase of charging enormous listing fees on the flip side the fact that Sonic has positioned itself as a de facto layer 2 could be the reason why us exchanges with their own layer twos like coinbase have been hesitant to list s in any case you’ll recall that Sonic’s main net launched in December last year naturally this has led to lots of questions about what it means for Phantom and FTM holders the short answer is that Phantom will continue running and Sonic’s documentation notes that Sonic Labs will continue maintaining it Michael and Andre also mentioned in an interview last December that the one to1 swap from FTM TOS will last indefinitely I.E there is no end date however Sonic’s documentation specifies that it will not be possible to swap back from s to FTM from 90 days after Sonic’s main net launch so that’s March 18th mark your calendars and by the way guys if you enjoying this video so far be sure to smash that like button to let us know and don’t forget to subscribe and ping the notification Bell to make 100% sure you do not miss our next one now this all ties into how Sonic Works under the hood Sonic effectively uses an improved version of Phantom’s proof of stake dag based blockchain the first Improvement technically hasn’t been implemented yet and that’s the optimization of the laus consensus expected by Q3 of this year the second Improvement is already live and that’s how Sonic validators process blockchain data for reference transaction speed depends a lot on how quickly validators can add transactions to blocks and how quickly they can check previous blocks to ensure the new transactions they process are correct this is something that Andre and the Sonic team realized early on and it’s why they focused a lot of their development efforts on a storage protocol called Carmen which increases how quickly validators read and write transactions what’s fascinating is that common is open source but the code is licensed what’s even more fascinating is that we’ve seen other crypto projects like sui emerge with their own decentralized Storage Solutions in recent months which are analogous to Common Andre has claimed in inter views that these cryptos were inspired by Sonic’s Carmen but that Sonic managed to ship it first regardless the third Improvement is not really an improvement and that’s that Sonic has fewer validators than Phantom did Phantom had 65 whereas Sonic has just 40 the trade-off from this centralization is an increase in speed Sonic can process 10,000 transactions per second but hitting this will likely require lacus optimization on that note the fourth Improvement to Sonic is probably the most significant and that’s a change to the fee structure in short the Sonic blockchain has a function that allows whitelisted adaps to earn 90% of blockchain fees from transactions associated with that dep this is very significant and here’s why the reason why defi protocols like Unis swap for example are starting to launch their own layer 2os is because they’re only capturing a small small fraction of the transaction fees obviously most of these fees go to the validators which is good for the blockchain but bad for the DAP and blockchains need lots of daps to succeed this is something that the Sonic team is hyper aware of which is why the Sonic blockchain is tailor made for successful daps in this case that means given the most popular daps the ability to keep 90% of the blockchain fees in Practical terms this eliminates the need for these deps to to launch their own layer tws at the same time it incentivizes all top daps to launch on Sonic and when you have everything on one chain it means all the liquidity is on one chain and not fragmented between different chains in turn users of these daps get to enjoy the high speeds and low fees offered by Sonic it’s a winwin win for everyone now the fifth Improvement to Sonic follows from the fourth and is just as significant and that’s the Sonic Gateway as the name suggests the Sonic Gateway is a cross Chain Bridge between Sonic and ethereum in contrast to most cross-chain bridges the Sonic Gateway is secured by Sonic’s validators more importantly the Sonic Gateway has a builtin fail safe feature which makes it possible to withdraw any bridged assets on ethereum if the Sonic Bridge or blockchain goes down for more than 14 days the Sonic Gateway can also Bridge assets between ethereum and Sonic in as little as 10 minutes as I noted earlier this all puts Sonic in direct competition with ethereum’s layer tws as it practically turns Sonic into the best and only Layer Two that the best daps and their users need as a cherry on top most of the daps on ethereum that need layer twos are defi daps and Sonic’s specialty happens to be defi but back to the validators Sonic documentation notes that becoming a validator requires taking at least 500,000 s coins which works out to around $400,000 at the time of shooting fortunately delegation is possible with as little as One S coin and this yearly staken reward is 5.5% unfortunately any staked s is locked for 14 days and Sonic’s documentation notes that stakes from malicious validators are slashed what’s even more unfortunate is that Sonic no longer has onchain governance at least not yet some of you will know that Phantom had a truly novel onchain governance structure whatever the case this relates to Sonic’s tokenomics s is the native cryptocoin of the Sonic blockchain it’s used for staking and to pay for transaction fees when a transaction is related to a whitelisted Dap 10% of the fee goes to validators with the remaining 90% going to the DAP itself when the transaction is not related to a whitelisted Dap % goes to the treasury 45% goes to validators and 50% is burned the allocations are where things get a bit messy according to the Sonic light paper quote at Sonic’s launch the total supply of 3.175 billion s will correspond to the total supply of 3.175 billion FTM and the circulating supply of s will correspond to the circulating supply of FTM at the time FTM had a Max supply of 3.17 5 billion which was allocated as follows 40% to investors around 30% to stake in rewards 15% to advisors 10% to the team and the rest to the Strategic reserves notably these FTM allocations unlocked in 2020 except for stake in rewards which will continue for another few years however a few modifications to ftms tokenomics were made as part of the migration 2s for starters an additional 190 million were minted for the airdrop which works out to around 6% of ftms total Supply next new s coins will start being minted 6 months after Sonic’s main net launch and this will last for 6 years this new s coin minting will amount to 1.5% of the initial supply of 3.175 billion and its purpose is to help grow Sonic’s ecosystem how much this increases inflation depends on how much of these s coins are used whatever coins are not used will be burned so the inflationary effects should be minimal be that as it may I’ll remind you that the entirety of ftms initial allocations finished vesting way back in 2020 in theory this means that s’s initial allocation should be the same or similar in practice onchain analysis suggests that ftms distribution is very different from what it was and the same is true for S according to Sonic scan the top five wallets hold almost 95% of ‘s Supply to be fair the largest wallet with 40% is the stake in contract but ‘s Supply is still heavily concentrated in the top four wallets this suggests that Sonic is dominated by Wales and other onchain analytics seems to confirm this is the case the giveaway is the enormous discrepancy between daily transactions and total value locked before and and after the migration to Sonic prior to the migration Phantom was averaging around 400,000 transactions per day according to FTM scan meanwhile its tvl was flat at around $90 million since its launch Sonic has averaged around 600,000 transactions per day according to Sonic scan at the same time though Sonic’s tvl has grown by more than 100 times in the last two months from 6 million to over 600 million this discrepancy combined with s’s distribution suggests a strong whale presence the catch is that this tvl may not be coming from s Wales per se it’s likely that some if not most of this tvl is mercenary Capital looking to farm the S airdrop which is currently worth $140 million according to Sonic documentation 25% of the first round of s air drops will occur in June 2024 5 the remaining 75% will rest after 270 days but can be claimed earlier with a burn penalty seen right over here and this begs the question of how much potential s has given its change in Supply Dynamics and ftms past price could have the answer a phantom hit a market cap of over8 billion and FTM hit a price of over $3 in 2021 it’s safe to assume that s will become at least as big as FTM did if not bigger if s becomes as big as FTM did then a market cap of 8 billion would translate to an S price of around $3 which makes sense given that many investors have this price in mind and could even start selling before this level is approached if s can surpass this price however $10 could be their next Target an S price of $10 would give Sonic a market cap of over $20 billion which is high but not farfetched especially given the circumstances objectively Sonic seems to be the most logical choice for both users and daps in ethereum’s ecosystem and it could take a lot of tvl and activity from the layer 2s the caveat is that Sonic seems to be missing a few critical ingredients for this to happen aside from s needing to be listed on larger us exchanges like coinbase Sonic is still lacking native stable coin support and this could also be circumstantial evidence of a strong whale presence on Sonic as stable coin issuers appear to be hesitant to launch native stable coins on such blockchains a BNB being another example when you consider how much defi activity is dependent on stable coins you realize that native stable coin support will be necessary for Sonic to reach its full potential without native stable coin support it’s unlikely Sonic will hit that $10 Target it will likely be closer to the $3 Target I mentioned and this pertains to Sonic’s upcoming Milestones I’ve mentioned a few of these already such as the upgrade to Lisas which is expected in Q3 and the first wave of s air drops in June besides that Sonic’s two main goals are to maximize the number of deps and users on its blockchain in an interview last year Michael H that the Sonic Gateway bridge will eventually add support for other blockchains and confirm that defi will continue to be the primary focus of the chain but it should be noted that Sonic isn’t discriminating they’ll likely take anyone and everyone who will bring the users in an interview last year Andre also revealed that Sonic is working with other crypto projects to introduce onchain credit scores that will allow for more advanced defi utilities such as under collateralized loans Andre also revealed that he’s planning on launching Protocols of his own and in an interview last year Michael and Andre revealed that they expect to see more social F and decentralized streaming daps launch on Sonic without giving too many specifics a recent developments also suggest Sonic is trying to get Traction in the gamei and AI agents Niche all we’re wondering is whether the Sonic blockchain will be able to handle these use cases with its current capacity from our perspective Sonic could become a victim of its own success much like salana did during the last cycle I’ll remind you that Phantom once experienced an outage in early 2021 and this of course brings me to the challenges that we foresee for Sonic the first challenge is competition it’s evident that Sonic is seeking to compete with ethereum’s layer 2os in case you missed the memo there are over 150 l2s and Counting While most of these are low quality some are high quality and very well funded although it would be logical for daps and users to switch to using Sonic the world isn’t always logical and some would say this is particularly true when it comes to crypto I take the first mover Advantage for instance once users are comfortable on a blockchain it’s hard for them to switch even if it makes logical sense and this ties into the second challenge that we foresee for Sonic and that that’s adoption those of you who were around during the previous cycle will recall that there was quite a bit of controversy around Phantom’s ecosystem the tldr is that there were some not so Savory characters playing around over there when you combine this with how aggressively FTM pumped and dumped chances are that there are many developers and investors thinking that rather not be part of the sequel so to speak in Phantom’s defense these things were mostly outside of its control but again uh most people they don’t think that deeply and this relates to the third challenge we foresee for Sonic and that’s gatekeeping this is something that’s becoming increasingly common in crypto and it’s something that Andre has highlighted in interviews Once Upon a Time the purpose of crypto projects was to replace intermediaries with trustless protocols most crypto projects today seek to become the new intermediaries and this is laun a result of how involved institutions have gotten in crypto institutions don’t want trustless protocols that collect zero fees they want maximum fee revenue and the result is projects like Unis swap launching their own layer twos another consequence of this though is that you’ve seen crypto companies and projects go against their own economic interests for the sake of the economic interests of their investors and partners a perfect example here is coinbase CEO Brian Armstrong recently suggested allowing coinbase users to access every coin or token via the centralized exchange by offering access to tokens listed on dexes even though this is in the economic interests of coinbase and its users it’s unlikely to happen in a meaningful way because it would substantially increase the number of altcoins this would result in competition for retail Capital which would hurt the VC coins that are launched on Sexes like coinbase this is a long-winded way of saying that even if Sonic does everything right it may be prevented from reaching its full potential purely because there are other large players in the crypto industry who do not want their Investments or the Investments of their Partners to be negatively affected by this competition it’s crazy to think that crypto has come to this stage but it’s something that needs to be underscored not just for s holders but for crypto investors more broadly not only is the playing field becoming more crowded but it’s becoming inherently less competitive which requires a different kind of analysis if we ever see Andre publicly throwing in the towel again chances are that it will be because of this Dynamic with all that being said though we believe that Sonic has what it takes to take on the layer twos and emerge as the ideal scalin solution for ethereum this is simply because its strategy is radically different from what every other crypto is doing and crypto’s history suggests that using new strategies tends to be the winning strategy let’s just hope that Sonic’s competitors and their Affiliates don’t uh rig the game if you’ve made it this far then congratulations you’ve made it to the end this must mean you enjoyed the video so why don’t you watch our latest one right over here or if you’re not sub subscribe to the channel yet you can do that right over here that’s me for now see you next time
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