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How Ethereum nearly killed VGO, the world’s most popular DApp

Aug 22, 2018

Ethereum: The DApp Killer, and not in a good way

We like Ethereum. We really do. We are impressed with the passion and creativity of the Ethereum development community. We used Ethereum for our WAX Token generation event. In fact, the founders of WAX were the second largest buyers in the Ethereum crowd sale back in 2014. Suffice to say, we are big fans.

But even supportive fans have to occasionally call out the shortcomings of the projects they love. So here it is: Ethereum is a DApp killer. And by DApp killer we mean it may very well kill your DApp.

That criticism may seem unnecessarily harsh. But from our personal experience at WAX, operating a successful DApp on the Ethereum mainnet can be hazardous to your DApp’s health. More precisely, if you launch a DApp on the Ethereum mainnet and it becomes successful (‘successful’ as in lots of customers wanting to immediately use it) you may experience periods of crippling delays and fees.

This isn’t just a theoretical observation. A few weeks ago we witnessed the birth and near death of a wildly popular new DApp. That DApp — known as VGO — initially launched on the Ethereum blockchain. And then it almost died.

The problem was not the DApp. VGO was an instant hit. The problem was a case of sudden and massive congestion on the Ethereum mainnet because of one bad actor — a company appropriately called FCoin.

Fortunately, this story has a happy ending. VGO got off the Ethereum mainnet within 72 hours of its implosion. It then relaunched on the alpha WAX blockchain. VGO is now the most popular DApp in the world. All is good, but the VGO story provides a cautionary tale for any would be blockchain DApp entrepreneur. Here it is.

How Ethereum nearly killed VGO, the world’s most popular DApp.

VGO launched in June 2018 to the delight of item traders who were frustrated with restrictions that they experienced when trading other similar items. VGO items are one-of-a-kind weapons that can be collected, traded, bought, sold, or played in games like The Forge Arena. At launch, VGO skins were generated from Ethereum smart contracts.

But VGO’s very existence was threatened by the massive congestion on the Ethereum network shortly after launching in June 2018, discouraging customers and obliterating profits just as it was taking off in popularity. This happened because a tiny project called FCoin crippled the Ethereum blockchain, impacting all users of the network who found themselves faced with extreme transaction delays and an exponential increase in gas fees for more than a week.

The DApp that felt the most pain from these problems was the DApp that was processing more transactions than any other on the Ethereum blockchain at the time. That DApp is VGO.

VGO’s growth was strangled by the Ethereum blockchain’s problems. Moving off of Ethereum has allowed it to thrive. And since, it has been extremely successful since launching just two months ago — not only for a blockchain-based project, but on a mass-market consumer scale.

The graphs below reveal VGO’s size compared to other blockchain game DApps and compared to all DApps combined. VGO is the top DApp by transaction volume surpassing the weekly volume of other DApp games & collectibles combined by over 26x and of all other DApps combined (including Exchange Dapps) by over 4.5x

VGO is the top DApp by volume, surpassing all other DApp Games & Collectibles combined by over 26x*
VGO is the top DApp by volume, surpassing all other DApp Games & Collectibles combined by over 26x*
VGO is the top DApp by volume, surpassing the weekly volume of all other DApps combined (including Exchange Dapps) by over 4.5x**
VGO is the top DApp by volume, surpassing the weekly volume of all other DApps combined (including Exchange Dapps) by over 4.5x**

But starting on June 30, VGO customers experienced sudden and intolerable 17+ hour transaction times and an extraordinary jump in fees. The VGO customers affected included not only regular players, but also YouTubers and Twitch streamers who earn their living entertaining viewers through their live or recorded video content. That entertainment value is, to say the least, severely diminished when one transaction takes the better part of a day to complete. And behind the scenes, the operators of the VGO DApp saw their profits obliterated as their transaction fees soared from $0.50 to a whopping $5+ in gas fees.

If one tiny and irresponsible actor like FCoin can render the entire Ethereum network nearly useless for days on end, how can legitimate e-commerce businesses like VGO be expected rely on it?

No business-minded DApp operator can feel comfortable migrating to blockchain rails based on how these permissionless mainnets operate today. Not when transaction times and fees can unexpectedly spike over 100%. Entrepreneurs who have built their business models assuming a certain range of fees and processing speeds won’t survive when those fees jump 10x. A typical consumer won’t wait most of the day to successfully complete a transaction. And it doesn’t seem likely that consumers will embrace the concept of toll fee volatility in order to speed up congested networks. It’s just not how existing non-blockchain networks have evolved.

But there is a solution.

Purpose-built blockchains are a necessity in order for DApps to achieve broad consumer adoption.

As it is designed, Ethereum can not achieve the reasonable service level performance that any successful DApp and its customers rightfully expect.This is why purpose-built blockchains are the future of blockchain-based games and other DApps.

Case in point: to survive the congestion and to prevent the Ethereum blockchain from unexpectedly bringing VGO to a screeching halt again in the future, VGO moved off the Ethereum network and on to a purpose-built blockchain that could support its considerable volume — the alpha WAX Blockchain.

VGO could have moved from Ethereum to a temporary solution like Zilliqa or Loom, but these weren’t viable solutions for the project. Zilliqa is months away from its mainnet release. Loom requires the use of Metamask, a huge impediment to the success of any DApp. Side note on Metamask — the CEO of the company behind CryptoKitties said that 99% of customers abandon the process due to Metamask-related issues.

When VGO made the switch to the alpha WAX Blockchain, average transaction times went from 17+ hour delays to 2 seconds. Fees became negligible. Just as important, those key performance metrics remained reliably consistent. The WAX Blockchain eliminated the problems that plagued VGO when it was on the Ethereum blockchain.

Parting Thoughts

If the Ethereum network is unable to support even one DApp that has achieved strong commercial success, how can we expect it to be the backbone of the entire DApp industry? The short answer is that we can’t. The only reason most people are not aware of Ethereum’s crippling shortcoming as a business network is that up until now no DApp has achieved any reasonable, sustained success. You may be thinking “what about CryptoKitties?” It still makes headlines but take a look at the data below. It had a brief run as a curious phenomenon and then quickly faded away:

CryptoKitties users and volume, December 2017 to August 2018
CryptoKitties users and volume, December 2017 to August 2018

As an industry, we have lots of problems to solve. VGO exposed some of these problems simply because it has been successful. So let’s not waste the precious — and rare — information that VGO’s experience has provided us. VGO has been a gift of sorts, the proverbial canary in the coal mine. Now we’ve been warned. Ethereum will not provide what the DApp industry needs. Purpose-built blockchains, on the other hand, do offer a workable solution. Case in point — the alpha WAX Blockchain, which has reliably supported the most popular DApp in existence.

* Source: Based on 339 NFT games/collectibles tracked by dappradar.com. Excludes gambling sites. Total average daily transactions extrapolated based on daily ETH volume and average ETH per transaction. (6/19/18–8/6/18)

** Source: Based on 748 DApps tracked by dappradar.com, including exchanges, marketplaces and gambling sites. Total average daily transactions extrapolated based on daily ETH volume and average ETH per transaction. (6/19/18–8/6/18)

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