Cronje Says DeFi Saved Fantom: ‘We Are Cash Flow Positive’

Blockworks November 28, 2022
Updated 2022/11/28 at 6:05 PM
7 Min Read
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Andre Cronje, a long-serving figure in the DeFi space, says the Fantom blockchain project he advises is cash-flow positive, earning more than $10 million in annual revenue.

Cronje shared a blog post on Monday that claims the Fantom team maintains more than $300 million in assets without specifying how much is considered liquid. “We are still scaling up,” Cronje said.

Fantom’s reported treasury, as yet unproven on-chain, is made up of around 450 million FTM ($85.7 million). There’s also $100 million in stablecoins and $100 million in undisclosed cryptocurrencies, as well as $50 million in non-crypto assets, per Cronje’s post.

Fantom is a Layer-1 blockchain compatible with Ethereum Virtual Machine (and Ethereum dapps). The network competes with the likes of Solana, Avalanche and Polygon for Ethereum’s market dominance.

Cronje’s blog works to reassure investors the Fantom Foundation’s solvency while detailing its financial history. The non-profit firm, which currently employs over 40 staff according to RocketReach, has an annual salary burn rate of $7 million. Cronje expects Fantom’s coffers to last for another 30 years without touching its FTM stash.

DeFi strategies are currently bringing in $6 million per year for the Foundation, said Cronje, revenue it uses to buy its own FTM tokens. Yield farming on Compound and Synthetix were cited as previous plays.

Transaction fees alongside validator and delegate earnings brings Fantom’s total yearly revenue beyond the $10 million mark, although that figure excludes capital gains tax and appears based on FTM’s current valuation.

Cronje returns to Fantom as it struggles to maintain growth

Cronje’s re-emergence comes as Fantom’s native asset flounders along with much of the crypto space. FTM is down more than 90% year to date, dropping from $2.25 to less than $0.20. FTM’s market cap is now less than $500 million, ranked 73rd by CoinGecko.

Cronje is a prolific DeFi developer, credited with creating projects such as Yearn Finance, SushiSwap and Cream V2. He deactivated his Twitter account after declaring departure from the crypto space in March — about two months after the pseudonymous CFO for DeFi collective Frog Nation, Sifu, was outed as QuadrigaCX co-founder Michael Patryn.

Cronje, while heralded for his commitment to the core tenets of decentralized finance, has faced criticism for launching crypto projects only to leave them abruptly. On LinkedIn, the South African-native has been listed as an “architect” at Fantom Foundation for the past month, having made his unofficial comeback in late October. Blockworks has reached out for comment.

But Fantom’s total value locked is suffering even more than its token price — just $424 million is staked inside Fantom DeFi protocols, down from more than $8 billion in March, a 95% reduction, per DeFiLlama.

For scale, there’s $23.5 billion locked in Ethereum’s DeFi apps and more than $5.25 billion in BNB Chain’s, with the former losing about 70% of its TVL since March.

Fantom initially raised $40 million in a June 2018 token sale, Cronje said, which mostly brought in ether worth between $450 and $700 at the time (now valued at close to $1,200). The project was left with just $5 million in operational capital, however, having sold its ether for US dollars at significantly less than its raise value.

Fantom and solana’s native tokens have practically tracked each other over the past three years (toggle linear and logarithmic scale at the top of the chart)

Cronje said the Fantom Foundation was earning more than $1 million per week by February 2021. The crypto market was roaring back then: DeFi tokens were surging, bitcoin was approaching $60,000 for the first time and yield farming was still lucrative.

In the same month, the project sold 81.5 million FTM to Sam Bankman-Fried’s now-bankrupt trading unit Alameda Research for nearly $35 million ($0.428831 per token), as well as an additional 10.4 million FTM to Blocktower for $5 million. FTM is now worth less than half of that price.

Cronje said Alameda sought further participation but Fantom opted against it. He also said the team declined to pay $300 million to an unnamed exchange for a listing and $100 million to an NFT marketplace for integration.

Fantom prefers to buy FTM over selling it

Fantom now opts to buy its own token rather than exchange it for partnerships, integrations or crypto exchange listings, according to Cronje.

He claimed that unlike most of Fantom’s competitors, its foundation owns a relatively small amount of FTM’s supply — at launch less than 3%.

On the other hand, Messari indicates Fantom’s founders, team and advisors collectively garnered roughly 20% of the token supply, more-or-less in line with Avalanche and Solana. Polygon’s team however kept almost 42% of the initial supply, per Messari.

In any case, based on Cronje’s blog post, Fantom’s FTM stash now equals around 18% of the circulating supply. And despite recording $50 million in losses throughout the Terra-inspired market chaos in May, Cronje appears confident the project can weather the bear market.

“If your entire revenue model is selling your token, you are doing a disservice to yourself, your blockchain, and your supporters,” Cronje said. “If [DeFi] didn’t exist, we would likely not be operational today. I believe the same is true for many companies out there.”

“Crypto is dead. Long live crypto.”

David Canellis contributed reporting.

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