SundaeSwap (SUNDAE), the first major decentralized exchange (DEX) on Cardano (ADA), believes it could crash the Cardano network when it launches its mainnet on January 20, 2022. Cardano is a Layer-1 blockchain with a $47B market cap but only $3M* total value locked (TVL) in its decentralized finance (DeFi) ecosystem.
It is unclear if Cardano can scale to meet the volume of a top-10 crypto project's DeFi ecosystem–it just launched smart contract support in fall 2021. MuesliSwap (MILK) currently generates most of Cardano's DeFi volume, but with only $3M in TVL it's not a good test of the stress SundaeSwap will bring.
In a deleted Medium post, SundaeSwap lays out the complications it expects at release. During testing, the SundaeSwap devs claim that Cardano could only handle ~0.15 transactions per second (TPS). That's ~100x slower than Ethereum and ~65,000x slower than Terra!
SundaeSwap is adjusting their release to account for the Cardano network bottleneck:
“We are launching with a Beta label because [...] the implementation of fully decentralized governance will not be immediately possible due to existing transaction size limits on the Cardano blockchain.”
Since SundaeSwap is preparing for massive delays on the Cardano network, the devs have built out a feature set to help investors understand where their transaction stands in the expected days-long backlog:
"Because we expect a large backlog during the first days of the protocol, we will be building out features to inform users on what the current backlog is, what the current throughput is, and where your order roughly stands in the queue."
Despite the delays, the SundaeSwap devs believe their DEX will be able to handle all transactions fairly:
"While orders (including swapping, providing liquidity and withdrawing liquidity) may take days to process, everybody’s orders will be processed fairly and in the order they were received and executable."
To its credit, Cardano is addressing its scalability issues, but the project's dev team is notoriously slow to release updates. Cardano is expecting to roll out Hydra, a sort of Layer-2 scaling solution, this year.
Cardano will probably be fine. Even without DeFi, Cardano has remained a top-10 crypto by market cap. It's hard to imagine a few hiccups harming Cardano if they come at the cost of developing a DeFi ecosystem.
* The $3M figure excludes TVL in the SundaeSwap testnet.