Boil potatoes until tender; remove skins. Slice them about 1/4" thick and put in a large bowl with chopped onion.
Fry bacon until crispy and break into pieces. Reserve 1/4 cup of bacon for topping.
Mix sugar, vinegar, and water in a saucepan and bring it to a boil. Remove from heat.
Add bacon to the sauce.
Mix thickening like you would for gravy. Return saucepan to stovetop and bring sauce to a second boil.
Gradually add thickening to sauce. Remove sauce from heat, and pour over potatoes and onion.
Gently mix. Sprinkle remaining bacon on top.