How the Waves Platform could Surpass Ethereum
November 18, 2018
The Shardus project has an ERC20 token on the Ethereum network which we give to developers, advisers, promoter, bounty hunters and others who contribute to the project. We did not have an ICO or sell the token to investors. Our token is currently traded on Bancor.network as ULT (Unblocked Ledger Token). As part of rebranding the project name from Unblocked Ledger to Shardus, we need to deploy a new ERC-20 contract and move our tokens over to it, just so the name and symbol on the contract can be changed. This move along with the sporadic spikes in the ETH gas price is causing us to look at other platforms which we could move our token to. Ideally, the platform would have low fees for transfers, smart contract capability and an easy way to convert the token to other tokens and coins.
We are considering Stellar, Waves and EOS. So far, the Waves Platform seems like a pretty good candidate. It has many great features going for it:
- A new token can be created on the platform within a minute by filling out a form and paying a small fee of 1 Wave token.
- The platform has a built in decentralized exchange (DEX), where markets can be created to trade any token with any other token.
- The platform provides a web client, a desktop client, as well as an Android and iPhone app. These clients can be used to hold any token on the platform, transfer tokens and trade tokens on the DEX, as well as create a new token.
- The Waves platform will soon be deploying smart contract capability.
- The Waves blockchain, which is based on Proof-of-Steak, can process 1,000 transactions per second (TPS).
- Transaction fees are only 0.001 Wave. This means that fees would be just $0.01 if the Waves platform had a market cap of $1 billion with $10/Wave. More importantly the fees are stable and predictable being tied to the price of Wave and not sporadic being tied to the current load on the network, like Ethereum.
- The Waves platform provides a gateway to deposit/withdraw other coins and fiat currencies. Thus, tokens on Waves can be converted to tokens for Bitcoin, Litecoin, Dash, Ethereum, USD, Euro and much more. But it does require trusting the gateway provider.
- The Waves platform can be used to easily conduct an ICO. Just create a new token and setup a big sell order in the DEX for Bitcoin, Ethereum, USD or any other token.
- The Waves platform is ideal for airdrops and bounty campaigns due to the low transaction fees and fast transaction times. In addition it provides mass transfer transactions which can be used to simultaneously send funds to a maximum of 100 accounts with one transaction and save 50% on the transaction fees compared to sending each transaction separately. Contrast this with only one destination per transaction for Ethereum tokens. An airdrop to 10,000 addresses would currently cost about $2,000 ($0.20/Tx) using Ethereum and about $50 ($0.01/Tx) using Waves.
- Waves has an active team of over 50 developers.
With so much going for it, you would think that Waves would have a market cap similar to Ethereum. However, Waves currently has 1/100 the market cap of Ethereum. The popularity of Ethereum comes mostly from the ICOs being done on it. The real killer app for Ethereum has been the ERC-20 token standard which attracted ICOs to the platform.
Why isn’t Waves being used for ICOs? I’m not quite sure. Maybe it’s just because Ethereum was first and there might be some kind of network effect around ICOs. ICOs want to use the platform that has the biggest community of investors and the investors want to use the platform that has the most ICOs. Ethereum came out in August 2015 and Waves came out in June of 2016. It wasn’t until November 2015 that the ERC-20 token standard was proposed. In the fast moving world of crypto this span of seven months lead time may have made a significant difference. Being able to exchange between the ICO token and Ether directly on the same platform during the token sale makes Ethereum even more popular. An ICO could also do the same on the Waves Platform by using the Waves decentralized exchange to sell the ICO token for Wave directly, but since Wave is not easily converted to fiat, it is less attractive. ICO projects eventually need to pay expenses in fiat and having a large off ramp to fiat is very important. Getting Waves listed on fiat gateways such as Coinbase would improve the situation. The current fiat gateway provided by Waves, lacks the same level of trust.
Aside from thousands of ICOs token used to fund projects, there is an even bigger tsunami or tokens coming called reward tokens. These are tokens issued and redeems by brands and can be used to reward customers for loyalty with the brand. Imagine every franchise using reward tokens to attract customers; there could be millions of such tokens. The tokens could also be used to incentivize consumer behavior; such as redeeming the tokens at a higher rate during slow hours. Eventually a brand not having a token would be like a brand not having a Twitter or Facebook presence. Burger King has already experimented with this in Russia using the Waves platform. For a platform to succeed in the domain of reward tokens, the most important features would be fast transaction time, low transaction fees and the ability to easily and inexpensively convert tokens. For reward tokens these features would be much more important than network effect and a trustable fiat off ramp.
Waves is well positioned to be the platform of choice for reward tokens. It has transactions confirmations of about 1 minute, transaction fees less than one penny and a built in DEX for trading tokens. To improve the situation further, Waves could add the following features:
- Add the Bancor protocol to the platform to provide instant conversion between tokens with Waves as the hub token. This would be similar to Bancor.network smart contracts on Ethereum. However, building it directly into the Waves platform would provide a much better user experience due to lower fees and no failed transactions caused by varying gas prices.
- Add a built in stable coin and dividend coin backed by Waves. This would be similar to the Maker/Dai system on Ethereum. However, building it directly into the Waves platform would provide a much better user experience due to lower fees and no failed transactions caused by varying gas prices.
The Bancor protocol was developed by the Bancor project. It provides a mathematical formula for determining the price at which one token can be converted to another based on the amount of tokens available in reserve. It essentially eliminates the market maker between the buyer and seller with a smart contract that implements the Bancor formula. Think of it as ShapeShift, but with the company replaced by a smart contract. The users simply select what token they want to receive and what token they want to pay with and the contract sets the rate based on the Bancor formula. There is no need for a market maker. However, there is still the need to provide tokens to be placed in reserve. The market makers are replaced with liquidity providers. For placing tokens in reserve the liquidity providers receive a small fee of 0.2% on each trade.
It may seem that the Waves DEX is sufficient for allowing the platform users to trade between tokens. However, there is a big difference between trading and converting. Trading requires market makers to place orders. In a DEX there is a fee for placing an order and a fee for canceling orders. For a market maker or a trading bot that is constantly placing and canceling orders this gets to be quite expensive. This is perhaps why the many decentralized exchanges currently in operation have not been able to compete with centralized exchanges which allow placing and canceling orders at no cost. With converting there is no need to place orders. Tokens are just added to the reserve pool and the price is determined automatically based on a deterministic formula. Anyone that wants to convert simply sends one token to receive the other. There is liquidity at all times and there are no spreads. This also allows instant conversion from any token to any other token. Though it requires two transactions with the first token converted to a hub token and then the hub token converted to the second token, it would appear to the user as one seamless transaction. Converting rather than trading is the future of decentralized exchanges. In a world where the merchant can ask for payment in one token and the customer can chose to make the payment in another token, fast, reliable and cheap conversion between tokens is the enabling technology.
Providing a stable currency that is part of the platform can provide a trustless stable currency in the Waves ecosystem. Gateways could provide the service of accepting this stable currency and exchanging it for fiat and going the other way. This would not require having to trust the gateway. A stable coin that is part of the platform removes the need for pegged coins issued by gateways. The Maker/Dai system currently implemented as smart contracts on Ethereum provide the basis for how a stable coin can be created. A similar stable coin on the Waves platform along with gateways to provide fiat on/off ramps could allow Waves to become a more popular platform for ICOs.
Both the “instant token conversion” and “stable currency” features can be implemented to require Waves to be used as the reserve currency. For token conversion it would mean that every token that wants to be convertible to other tokens needs to provide Waves in reserve. For the stable coin feature creating the stable coin means placing Waves as the collateral. Both of these features would increase the demand for Waves. Having these feature built into the platform can provide a much better user experience in terms of speed, reliability and cost than having these features implemented in a smart contract.
Waves is well positioned to become a major platform for reward tokens as well as custom application tokens. The suggestions provided here can help it become even more popular. The Waves teams should investigate the smart contracts on Ethereum for Bancore and Maker/Dai and consider adding the features of these contracts directly into the Waves platform. These features combined with the many other features Waves already provides as well as the smart contract feature being adding makes Waves the ideal token platform for the Shardus tokens.