The Dapp Experience of Ethereum vs. VeChain
“A journey of a thousand miles begins with a single step.”
- A Chinese Proverb
This article analyzes the dapp experiences on both Ethereum and VeChain in their current form.
Introduction
Ethereum and VeChain represent advancements in distributed ledger technology that allow for the creation of globally accessible software applications. Each platform provides unique advantages for developers to build groundbreaking products. Smart contract platforms empower developers to leverage trustless immutable transactions and build decentralized applications (dapp). Dapps are different from standard applications in at least three ways: (1) they run on a peer-to-peer network, (2) data is not stored in centralized servers, and (3) no single entity maintains unilateral control of the system. Ethereum leads the smart contract platform race, with companies and developers in western communities showing a strong preference for building on Ethereum. Ernst & Young, Accenture, Microsoft, Compound, and Uniswap all build on Ethereum. VeChain holds a strong presence in China with collaborations including Walmart China, Shanghai Gas Group, and PwC China & Hong Kong. VeChain developers designed VeChainThor to enable businesses of all sizes to easily integrate blockchain solutions. The VeChainThor public blockchain eases pain points that commonly appear in most smart contract platforms today through Designated Gas Payer and Multi-Task Transaction. Ethereum and VeChain’s current trajectory place them as the platform of choice in the West vs East.
Ethereum
Since Ethereum’s mainnet launch in 2015, it has possessed the first-mover advantage for smart contract platforms. A large developer community initiates dapp development and successful dapps attract users. This creates a positive feedback loop where future teams desire to build on Ethereum, since it offers an active ecosystem with a major key element: users. Consensys estimates that there are 99 million unique Ethereum addresses and 32,000 daily active dapp users (ConsenSys, 2020). Although these numbers are small compared to centralized tech juggernauts, Ethereum’s user base overwhelmingly dominates the blockchain space with successful dapps in decentralized finance (DeFi), gaming, and non-fungible tokens (NFT).
Ethereum’s economic usage erupted in 2017 through ICO’s and 2020 witnessed another explosion of financial activity when DeFi protocols introduced liquidity mining incentives. Demand for block space caused ether’s (ETH) price to rise, since ETH serves as the value-settlement token, and it “is the mechanism for ensuring incentive alignment between the Ethereum network” (Hoffman, 2019). Gwei offers a pricing mechanism for transaction fees, and it is the most common denomination of ether: 1,000,000,000 Gwei = 1 ETH.
VeChain
VeChain, based in Shanghai, designed a different approach with their network by utilizing a dual-token system. VeChain Tokens (VET) offer governance privileges and “serve as a value-transfer medium”, and “VeThor (VTHO) represents the underlying cost of using the VeChainThor blockchain” (VeChain Foundation, 2019). VTHO embodies energy while VET embodies smart programmable money used to govern the network. Each transaction on VeChainThor requires the consumption of VTHO. The protocol awards 30% of the VTHO from each block to the authority node responsible for validating. The remaining 70% VTHO is burnt. Each 1 VET automatically generates .000432 VTHO per day. VET functions similarly to an oil rig that extracts energy, while VTHO compares to drilled oil. This economic design attaches a monetary value to VET if the platform offers solutions that increase demand for VTHO.
VeChainThor possesses tools that make onboarding developers, businesses, and users to blockchain simple. Two of the most prominent features include Designated Gas Payer (VIP-191) and Multi-Task Transactions (MTT). VIP-191 enables users without a digital wallet to interact with VeChainThor since it “allows someone other than the sender to co-sign a transaction in order to pay for the transaction fee” (Totient, 2019). A major obstacle for new users, especially non-technical ones, is the requirement that users already own digital assets before using a dapp. VIP-191 solves this through Fee Delegation, where users can delegate a separate party to pay the network fee. Dapps can take advantage of VIP-191 and pay transaction fees on behalf of their users. VeChainThor delivers convenience for developers through MTT, which allows multiple actions to initiate inside one transaction. Actions group together in clauses. Each clause contains three fields: (1) To — the recipient’s address, (2) Value — the transfer amount, and (3) Data — the executing payment or smart contract interaction (VeChain Foundation, 2018). An example of MTT includes the VeChain Foundation distributing 600 VET as a holiday gift to all node holders. One single transaction processed 1,500 clauses and sent 600 VET to 1,500 separate addresses. MTT provides a wide range of flexibility and power to develop complex dapps without facing high gas fees and scalability issues.
MetaMask vs. Sync
Both blockchain ecosystems provide self-hosted wallets with connectivity to hardware devices. Ethereum dapps mainly use MetaMask, while VeChain utilizes Sync. MetaMask offers availability on iOS and Android. Supported browsers with the MetaMask extension include chrome, firefox, brave, and edge. Sync v1 users can download the desktop application on MacOS, Windows, and Linux.
Using MetaMask offers an experience that even rivals standard centralized applications today. The chrome browser extension allows users to seamlessly connect to blockchain protocols when surfing the web. Having only one account with one private key to access all Ethereum dapps provides a superior experience, compared to applications that require their own setup process, each with their own separate login credentials. The simplistic experience of entering a new dapp for the first time and interacting with it immediately once you connect with MetaMask always seems magical. Dapps eliminate the repetitive process of account creation and email verification found in centralized applications.
MetaMask provides access to advanced features, including Ethereum testnets, setting maximum Gwei, and specifying the transaction nonce. Editing nonces proves vital when facing transactions stuck in pending. If raising the Gwei fails, users can clear stuck transactions by creating a new transaction, sending 0 ETH to the same wallet address, and copying the same nonce from the stuck transaction.
The Ethereum community urgently needs to address scalability and high transaction fees. I am confident ETH 2.0 will solve these issues, but estimates conclude that Eth 2.0 phase 1.5 is 18–24 months away. Rollups offer a near-term solution to increase scalability and reduce transaction fees, but development work on them continues. Optimistic rollups (OR) and ZK-rollups (ZKR) are two popular solutions that bundle multiple transactions (essentially rolling them together) and execute them in a single transaction on Ethereum’s second layer. The Optimistic Virtual Machine provides full compatibility with the EVM and allows “seamless interoperability between dapps and smart contracts” (Ethereum Optimism, 2020). An honest majority must exist for OR to correctly function, and it optimistically assumes layer 2 validators act truthfully. ZKR requires validators to submit a Zero-Knowledge Proof in all state transitions, which “proves there exists a series of transactions correctly signed by owners” (Gluchowski, 2019). Information submitted with zero-knowledge proof removes the ability for malicious actors to process invalid data. However, this requires more difficult computing, and ZKR’s current state only functions with certain EVM applications while OR can process all Ethereum smart contracts. Rollups remain one of the best near-term scaling solutions for Ethereum, which allows all network participants to experience faster transaction times with lower fees.
MetaMask serves a crucial role for any user who wishes to participate in the Ethereum ecosystem. The intuitive user interface and easy connectivity to any Ethereum dapp directly from a web browser provides an exceptional experience. Major credit must also be given to the developer that programmed the MetaMask fox to follow your cursor during login. The feature always excites me and makes me want to jump right into the decentralized web.
Similar to MetaMask, Sync offers access to all VeChain dapps with one account. Sync 2 promises to alleviate my biggest concern regarding dapp accessibility, but the application still remains in testing. Sync’s desktop application appears similar to a web browser, which contains multiple tabs and allows users to easily move from one dapp to the next. VeChain users can enter App Hub and discover all major dapps. Dapp submissions to App Hub require a submission form, but this step ensures dapps comply with certain rules since VeChain (the company) maintains Sync. Many in the blockchain space will cry afoul, but this step screens dapps since scammers constantly produce fake websites that mimic real protocols. App Hub provides a safety guard for new users. However, everyone must always do their own due diligence when using dapps, including ones found in App Hub.
Sync dapps require users with a hardware wallet to sign a free certificate every single time before entry. The repetitive process of connecting a hardware device and signing certificates feels bothersome. I prefer MetaMask’s ability to enter dapps without connecting a hardware device. MetaMask only requires hardware devices when signing a transaction. This flexibility allows me to login to my favorite Ethereum dapps without always having to reach for my hardware device. Even though I wish to spend more time on VeChain dapps, I find myself more on Ethereum, since those dapps offer simpler points of entry.
Decentralized Finance on Ethereum
9.4 million ETH remains locked in DeFi and totals $40.1 billion (DeFi Pulse). Ethereum builds strong DeFi network effects through composability, since it “allows smart contracts to easily reference each other and unlock the ability to create more complex products” (Wilson Withiam, 2020). Composability generates a vibrant ecosystem of dapps that can interact with each other and introduce new innovative products. Lending protocols, stablecoins, and a decentralized exchange (DEX) serve as three critical pieces of infrastructure necessary within DeFi. Ethereum impressively boasts multiple credible options in all categories, thus minimizing harm should one protocol unexpectedly fail.
Compound, a lending protocol built on Ethereum, launched the 2020 summer DeFi craze with the start of COMP’s liquidity mining incentive. Liquidity mining attracts users to “supply liquidity to decentralized financial applications and receive rewards” (CoinList). On June 15th, Compound activated liquidity mining, and users automatically earned COMP tokens through usage of the platform. This created a surge in deposits, and the total value locked increased by $450 million in two weeks (DeFi Pulse, 2020). I previously supplied only one digital asset and quickly deposited four additional crypto assets. All five digital assets now earn interest along with COMP liquidity mining rewards.
Ethereum based DEX’s experienced a meteoric rise in 2020. Uniswap, the largest DEX, “saw approximately $15.4 billion in volume” in September and even surpassed Coinbase’s monthly trading volume (The Block, 2020). Uniswap encompasses the epitome of blockchain’s potential. It’s a global protocol that allows anyone to trade digital assets, supply liquidity, and is governed entirely by UNI token holders. Uniswap offers an intuitive process to supply liquidity and allows any user to generate passive income from their digital assets.
Prior to DEX’s, trading assets held in self-custody required multiple steps:
1. Create an account on an exchange and KYC
2. Login to your self-hosted wallet and 2FA for the centralized exchange
3. Move the asset from your wallet to the exchange and pay a network fee
4. Place a trade and pay a trading fee
5. 2FA to submit a withdrawal, pay a withdrawal fee and or network fee
Compare this to trading on a DEX:
1. Launch the DEX
2. Connect your wallet
3. Place a trade and pay a trading fee plus network fee
Gas prices on Ethereum can rapidly spike when network usage increases. To avoid slippage and slow confirmations, DEX traders often use high Gwei. This drives away from the ethos of DeFi, since it favors wealthier individuals who can afford to pay high Gwei. High gas fees represent the largest drawback to using Ethereum’s DeFi ecosystem. I counter the claim of some Ethereans that high Gwei is positive since it represents high demand. These same Ethereans even celebrate when Gwei skyrockets. A significant spike in gas fees signifies a failure in Ethereum’s architecture to handle high demand, and it pushes out lower-income demographics from using the network. Dapp users represent a tiny fraction of the entire human population, and the small quantity of users today already breaks Ethereum’s network limits. Ethereans dream of scaling dapps to billions of people. To achieve this goal, the network needs a stronger architecture that reduces transaction costs, or it risks competitive smart contract platforms taking market share from Ethereum as users migrate to other protocols that offer lower fees.
Decentralized Finance on VeChain
Each transaction on VeChainThor requires a minimum of 21 VTHO. The dual token model allows the network to “maintain stable and predictable transaction costs (in fiat)” (VeChain Foundation, 2019). This allows projects to conduct forward-looking budget calculations on transaction expenses. Stable transaction expenses allow developers more time to focus on building successful products rather than wasting time on solutions (integrating rollups) to counter high fees. The VeChain foundation possesses two tools to counter a long term price spike in VTHO: “adjust variables such as reducing the minimum amount of VTHO needed for a transaction and increasing the generation rate of VTHO per VET” (Yorke). This allows businesses and projects to transact on VeChainThor without experiencing market volatility.
Vexchange serves a critical function in VeChain’s ecosystem and compares similarly to Uniswap’s key position in Ethereum. Vexchange offers trading to all major tokens on VeChain. This DEX proves immensely useful and allows me to take advantage of compound interest every time I exchange my passively earned VTHO for VET. The 8Hours Foundation recently launched early access to VIMWorld, an NFT powered ecosystem of gaming. The NFT’s in VIMworld require Eight Hours Tokens (EHrT) to level up. Even after VIMworld’s early access launch, it remains difficult to find exchanges that trade EHrT. Vexchange remains the only widely available option to obtain EHrT. Without Vexchange, I could not participate in VIMworld and I would be missing out on VeChain’s most popular NFT gaming dapp.
Vexchange’s connection with VeChainThor provides cheap gas rates for trading. Exchanging $100 worth of VET to VTHO on Vexchange costs $1.04 while trading $100 of ETH to DAI on Uniswap costs roughly $71.10. However, using Vexchange comes at the cost of participating in a smaller DeFi ecosystem. Eight total digital assets exist on Vexchange while Uniswap offers thousands of trading pairs.
Similar to DEX’s on Ethereum, liquidity providers (LP) can supply digital assets to Vexchange. Vexchange can improve with a better user interface and user experience. For example, there is no dashboard to view your liquidity pools or account analytics, and the process for withdrawing liquidity is not intuitive. The stats tab always brings up a failed internet page, and I cannot view exchange statistics. This starkly contrasts to Uniswap, where users can easily analyze all features mentioned above. Vexchange needs a dedicated section where LP’s can view historical data and analyze their pools. LP’s generate more revenue on Ethereum, but traders pay higher fees and VeChain LP’s receive less rewards while traders pay less gas fees.
Uniswap achieves higher volumes due to additional DeFi services built on Ethereum including dollar pegged stablecoins and lending protocols. Vexchange naturally suffers from weaker volumes since VeChain’s DeFi ecosystem needs improvement. A dollar pegged VIP-180 token should represent the VeChain community’s first priority if they desire to build a successful DeFi ecosystem. This would allow market participants to move into a stable unit of account without leaving VeChainThor. Once a network creates a stablecoin, lending protocols can utilize it to build decentralized financial services. Without key DeFi infrastructure on VeChain, Vexchange faces a difficult path to even come close to matching Uniswap’s volume. Although DeFi consumes most of the attention today, not all dapps will serve a financial use case and projects engaging in high transaction volume will appreciate lower gas fees found on VeChainThor.
Non-Fungible Tokens
NFT’s allow digital objects to represent a unique digital item that cannot replicate, similar to rare baseball cards and comic books. While both VET and ETH easily trade on exchanges, NFT’s symbolize collectible digital items. For centuries, artists created physical art through paintings, sculptures, ceramics, and countless other fields. Famous art pieces can sell for millions, and many stay heavily guarded in museums. 21st century artists create digital art and use blockchain to enforce security, ownership, and scarcity. Beeple, a 3D artist, shocked the fine art community when his NFT “sold for $69 million at Christie’s” and the record shattering sale proves that NFT’s can find product-market fit (Kastrenakes, 2021). Ethereum mainly utilizes the ERC-721 token standard for NFT’s while VeChain uses VIP-181. I own a variety of NFT’s on both blockchains including an Ethereum Name Service (ENS), the Infinite Machine Proof of Pre-Order token, and gaming NFT’s.
NFT transactions contain data and require additional computational energy. This adds severe negative effects for using NFT’s on Ethereum. Camila Russo, author of The Infinite Machine, halted minting NFT’s to people who pre-ordered her book due to high gas fees. Several months passed until my NFT finally arrived. My second NFT, an ENS domain, required a $50 gas fee to register. This makes it brutally inhibitive to lower-income demographics who wish to use NFT based dapps but cannot afford to pay exorbitant fees. DeFi users may overlook high fees since it offers profitable opportunities; however, gaming attracts general users who simply wish to play games.
Axie Infinity, Ethereum’s most popular gaming dapp, allows players to maintain sole ownership of their digital pets called axies. Each individual axie represents an NFT, and certain actions (including axie and land purchases) require a network transaction. I spent days carefully researching for the best land plot NFT that fit within my budget. Unfortunately, the transaction failed to confirm and continuously attempted to process even after I raised the Gwei. The NFT was at risk of slipping out of my hands due to a stuck transaction. Most dapps do not yet offer customer support and Ethereum does not have a hotline. I discovered the solution for stuck transactions mentioned earlier after scouring reddit threads and support articles. These self-initiated technical steps will surely dissuade a regular user from ever using the dapp again.
I conduct most of my Ethereum transactions on Sunday, since Gwei drops much lower compared to business hours during the week. Using Ethereum once a week severely limits my usability of dapps. No one should experience delayed NFT drops or submit transactions at a specific time in order to avoid high network fees.
VeChain’s decision of using VTHO to consume energy provides major benefits to all network participants. A huge weight of worry leaves every time I switch from Ethereum to VeChain, since I never have to think about network congestion or gas fees. My automatic VTHO generation funds all actions I perform on VeChainThor. With Ethereum, however, any fees paid foregoes future profit from ETH appreciation. Low cost transactions incentivizes greater network participation, since entities can constantly use the network without incurring large costs. John Dempsey, the previous CEO of VIMworld, stated “if we were to run our business on Ethereum, we would have to pay more than $400,000 in gas fees” (VeChain Foundation, 2020). These savings not only pass to dapp projects, but also to users.
VIMworld brings players to a digital realm with every game character represented by a unique VIM and all VIMs live as an NFT on VeChainThor. To level up VIMs, players must feed their VIM, which requires a network transaction. Feeding VIMs engages a multi-task transaction with a $2.06 fee. This provides a superior user experience compared to Ethereum dapps, where users commonly submit separate costly transactions to enable and execute. VIMworld’s affordable transactions allow players of all income levels to participate and Fee Delegation opens accessibility to a larger audience. Non-crypto users avoid the burden of having to learn how to buy digital assets; instead, anyone can start a VeChain dapp and immediately start interacting without ever knowing that blockchain infrastructure powers the backend.
Conclusion
Many in the blockchain space believe one chain will rule them all. I counter this argument and envision that each global region will have its own dominant smart contract platform. Similar to the evolution of internet companies from the early 2000’s with Amazon vs. Alibaba, Twitter vs. Weibo, and Google vs. Baidu, I believe this decade will introduce Ethereum vs. VeChain. Ethereum and VeChain both have experienced development teams, and their success fuels passionate entrepreneurs to build dapps.
Nearly all DeFi dapps exist on Ethereum due to composability, successful existing protocols, and a large active user base. These users overlook high gas fees, since several legitimate dapps offer lucrative returns with blue chip examples including Compound, Uniswap, Balancer, YFI, Aave, and more. Ethereum holds a first mover advantage in the smart contract race, developer mindshare, and the DeFi sector. To date, no smart contract platform comes close to competing with Ethereum’s DeFi market. Eventually, I foresee other smart contract platforms gaining DeFi market share, but it remains uncertain when, how much, or if this will even occur. Until then, Ethereum will continue to remain the leader — its vast lead cements itself as the premiere platform for financial dapps. However, to fully realize the goal of democratizing financial services, Ethereum developers must introduce higher throughput and affordable network fees.
Blockchain bestows liberty to developers to create any dapp they can imagine, and many will create experiences outside of finance. VeChainThor’s infrastructure gives developers the freedom to develop complex smart contracts with superior flexibility. Integrating VIP-191 allows users to delegate a separate address to pay transaction fees. This drastically decreases the barrier of entry for dapps and allows non-technical people and businesses to easily interact with blockchain. MTT offers an advanced method to execute multiple actions inside clauses that combine into a single transaction. Not only does MTT allow for flexible smart contract operations, but it also efficiently reduces transaction costs while increasing overall throughput. VeChain’s native protocol features, VIP-191 and MTT, bring advantages to dapps that focus on use cases outside of finance.
Dapps that require DeFi activity or a large user base at launch will find a home in Ethereum’s vast ecosystem. However, both large economic activity and users come with the tradeoff of lower throughput and high transaction fees. Dapps running on VeChainThor can execute significantly more transactions at a fraction of the cost of Ethereum. However, VeChain’s user base, network effect, and developer mindshare remain much smaller. Both smart contract platforms continue development efforts to improve blockchain performance, and they are both leaders in their respective global region. Ethereum and VeChain aspire to make it simple for every day users to interact with blockchain and ultimately open the door for global adoption. I believe within five years the crypto community will witness its first major successful dapp that launches blockchain to millions and possibly billions of people. The million-dollar questions are: Which one will be the first? and On what platform will it be built?
Huge thank you to Jesus Najera, Ben Yorke, Linda Xie, and Ariella Senzamici for their feedback on this article. I’m always open to constructive criticism on my pieces and I’d be delighted to connect with you on Twitter.
Twitter: @tmccarthyv94
Please consider donating if this article helped you in anyway. Thank you and hodl strong.
Stay Humble & Stack Sats
Bitcoin: bc1qjnr7zcg66vw72mvgv6k2az5e5zwx8w0sg8u4l9
Ethereum: 0x0477F4AF28A961e94fFc828B3DAA356b0DC0698f
DAI & USDC: 0x0477F4AF28A961e94fFc828B3DAA356b0DC0698f
VeChain & VTHO: 0x6f1E6a7Ab6A1F250B20608c37034A353cC23F686
Disclaimer: The contents of this article should be considered solely for educational purposes. Do not treat anything here as financial advice. Please do your own research before investing in digital assets. The author holds a long term position in both VET and ETH.
Works Cited
CoinList. (n.d.). What is liquidity mining? From CoinList: https://coinlist.co/help/what-is-liquidity-mining
ConsenSys. (2020, June 3). Ethereum by the Numbers — May 2020. From ConsenSys: https://consensys.net/blog/news/ethereum-by-the-numbers-may-2020/
DeFi Pulse. (2020, January). DeFi Pulse. From https://defipulse.com/
Ethereum Optimism. (2020, January 15). Optimism. From Ethereum Optimism: Medium: https://medium.com/ethereum-optimism/optimism-cd9bea61a3ee
Gluchowski, A. (2019, November 4). Optimistic vs. ZK Rollup: Deep Dive. From Matter Labs: Medium: https://medium.com/matter-labs/optimistic-vs-zk-rollup-deep-dive-ea141e71e075
Hoffman, D. (2019, September 20). Ether is the Best Model for Money the World has Ever Seen. From The Defiant Substack: https://thedefiant.substack.com/p/ether-is-the-best-model-for-money
Kastrenakes, J. (2021, March 11). Beeple sold an NFT for $69 million. From The Verge: https://www.theverge.com/2021/3/11/22325054/beeple-christies-nft-sale-cost-everydays-69-million
The Block. (2020, October 4). Uniswap’s monthly trade volume exceeded Coinbase’s in September. From The Block: https://www.theblockcrypto.com/linked/79775/uniswap-coinbase-monthly-volume-september
Totient. (2019, May 16). VIP191: The Key to Mass Adoption. From Medium: https://medium.com/@totientlabs/vip191-the-key-to-mass-adoption-1beccd902a78
VeChain Foundation. (2018, April 29). Part 1: Introducing the VeChainThor Blockchain Transaction Model. From Medium: https://vechainofficial.medium.com/introducing-the-vechainthor-blockchain-transaction-model-b9944a0b6703
VeChain Foundation. (2019, December 31). VeChain Whitepaper 2.0. From VeChain: https://www.vechain.org/whitepaper/#bit_65sv8
VeChain Foundation. (2020, September 29). VeChain’s Superior Platform Enables A Flourishing NFT Ecosystem. Migrate and Build Your Project On VeChainThor Now! From Medium: https://medium.com/vechain-foundation/vechains-superior-platform-enables-a-flourishing-nft-ecosystem-e5c834c86494
Wilson Withiam, R. W. (2020). ETH 2.0: The Next Evolution of the Cryptoeconomy. New York, NY: Messari, Inc. .
Yorke, B. (n.d.). The Dual–Token Model, Tokenomics, and Basic Supply & Demand. From VeChain101: https://vechain101.com/tag/supply-demand/
