VeChain: Blockchain-powered Solution to Your Problems?
A compact introduction to fundamentals of VeChain ecosystem and its VET and VTHO tokens.
What is VeChain?
VeChain is a company enabling other businesses and enterprises to deploy blockchain-powered solutions to their real-world problems and issues. It lowers barriers of entry to the industry by providing wide array of tools (e.g. VeChain ToolChain) that allow others to build and implement blockchain technology without having to start from scratch.
VeChain is built on the VeChainThor blockchain, which is a high-speed, smart contract enabled distributed ledger, aiming to support both private and mass-market decentralized applications (Dapps). It makes use of two-token economic model, which separates operational costs from speculation.
The whole project was founded in 2015 and launched in 2016, with Sunny Lu, current CEO of VeChain, as a co-founder.
Since the beginning of the project, VeChain has continued to grow, collecting many achievements on its way and reaching one milestone after another — from partnership with major global companies to introductions of new additions to the VeChain ecosystem.
It currently has an impressive list of strategic partners including such names as BMW, Renault, PwC, H&M, Walmart, DNV GL and others. Recently, in July 2021, the Republic of San Marino used VeChain’s public blockchain to release national digital vaccine passport.
Economic model
As mentioned above, VeChain uses two-token economy system to protect operational costs of the platform from speculation. These two tokens, VET and VTHO, form the basis of VeChain’s ecosystem:
VET, VeChain, is used for speculation, business and financial activities. VeChain states: The function of VET is to serve as a value-transfer medium, or in other words, smart money, to enable rapid value circulation within the ecosystem. VET has a fixed supply of 86,712,634,466 tokens.
VTHO, VeThor, on the other hand is used to pay for internal, blockchain-level operations — those can be transaction costs (gas fees) or smart contract executions. Supply of VTHO isn’t fixed, instead, the tokens are constantly generated at a certain velocity via holding VET tokens. As VeChain states: This was established to allow any user with VET to make transactions at no extra cost if the user holds the tokens for long enough.
For more in-depth explanation of VTHO generation, please refer to the equations, taken directly from VeChain’s whitepaper, below:
It is important to at least briefly mention that while VET is Proof-of-Stake token, VeChain is also using a Proof-of-Authority (PoA) consensus mechanism, meaning a network of 101 Authority Masternode operators maintain the protocol, keep the VeChainThor blockchain governance policy and securely process transactions and execute smart contracts. To become a Masternode, one has to go through extremely thorough KYC checks under the guidance of steering committee and, additionally, has to actively contribute to the growth of the platform.
These Masternodes are rewarded in VTHO for their contribution to the system: 70% of transactions (gas) fees is burned, while the remaining 30% is paid to the node operators.
VeChain’s use cases
VeChain offers wide variety of different tools with VeChain ToolChain being the main one, but definitely not the only one.
The question now is: How can this translate to the real world? What problems can VeChain help solve?
Addressing counterfeit protection for high value products. VeChain allows brands and companies to digitize their products on the blockchain by creating a unique blockchain identity and linking it to the physical product, making it easy to trace and verify its authenticity. Reebonz, an online luxury marketplace and platform in Southeast Asia and Pacific Asia region, integrated this solution to establish the provenance and digital ownership of the products on its platform.
VeChain and DNV, along with few other companies, initialized a digital low carbon emission ecosystem in 2019 which addresses and potentially solves issues of current carbon emission reduction.
VeChain and BMW Group created a digital vehicle passport VerifyCar, aiming to counter odometer mileage frauds in the secondary car market by leveraging blockchain to record vehicle ownership, usage and servicing histories.
Blockchain can also be used to trace and establish provenance of food and beverages. All supply chain participants can collaborate on a single platform, which will lead to increased consumer confidence, improved transparency in the supply chain, better quality control and reduced costs for third party verification services. Information about the product will be stored and secured via blockchain and anybody will be able to view it instantly by scanning a QR code. Walmart is using this solution for several product lines in China.
This was just a few examples of VeChain real-world blockchain applications, there are many more possibilities and areas where service like this can improve current situation or solve real issues.
Personal experience
I have learned about VeChain quite late, sometime during 2019. Since then however, it has become one of my most favorite projects in crypto-realm and I am excited to see how it will continue to grow in the future.
