VeChain Financial Executive Report Vol. 9

Transparency, Fairness, Openness

With the aim of transparent communication on our achievements in creating tangible economic value, we are excited to present the ninth VeChain Foundation Financial Executive Report. This financial report covers a fruitful quarter from August 2019 through to October 2019.

On October 24th, Chinese President Xi Jinping announced the nation’s full embracement of blockchain technology, hailing it as “an important breakthrough for independent innovation of core technologies”. Enterprises and industry leaders around the world now have their focus on the adoption of blockchain technology in real working use-cases and applications, and as a result, VeChain has received even more interest and attention globally due to our unparalleled track record in enterprise adoption and blockchain applications focusing on real business value creation. It confirms our strategy of being an enabler and making blockchain technology as easy as possible for businesses to adopt.

As always, we sincerely welcome the community to hold us to the commitment of transparency, including but not limited to the rigorous monitoring and usage of our funds, and the development process of all aspects within the VeChain Foundation.

The report structure is as follows:

1. VET Supply Overview

2. VeChain Foundation Expenditure (use of proceeds)

3. Notes

i) Enterprise Investor Pool

ii) Co-Founders, Development Team

iii) The Operation, Technological Research and Development

iv) Business Development

v) Compliance & Legal

vi) Ecosystem Development

1. VET Supply Overview

At the end of October, the VET circulating supply was 63,439,279,106 which accounts for roughly 73.2% of the total supply, compared with 72.7% of last quarter end. Within the VET circulating supply, 22,161,653,627 VETs were in the soft-lockups, which makes about 25.6% of the total supply. It marked a 1.5% increase over the last quarter. In addition to the team lockup, we have seen X Nodes and Economic Nodes increase their holdings which signifies the continued long term confidence of the key stakeholders in the VeChain Ecosystem. By the end of this reporting period, around 47.6% of the VET total supply is free to trade on the open market.

Note:

* The soft-lockup categories are as follows:

• Authority Masternode collateral — each Authority Masternode keeps at least 25 million VETs;
• X Nodes staking — each X node keeps a minimum amount of VET based on four different tiers;
• Economic Nodes staking — each economic node keeps a minimum amount of VET based on three different tiers;
• Team Lockup — According to the whitepaper 5% of the total VET supply is allocated to co-founders and development team, and this pool is released quarterly over a two year period. However, in this reporting period the executive team as well as some of the team members voluntarily locked 356 million VETs, which is 69% of the total amount allocated to the team in this quarter. As of October 31, 2019, over 3 billion VETs have been locked up by the team to show the commitment to VeChain’s long term success.

** The ecosystem reserve was acquired through the VeChain Foundation Buyback initiative as of the end of October. This reserve will be used to facilitate the long term growth of the VeChain ecosystem. However, the Foundation BuyBack wallet was later involved in a theft in December 2019, more details regarding the ecosystem reserve will be disclosed in the next quarterly financial report.

2. VeChain Foundation Expenditure (use of proceeds)

We summarized below the USD value of the expenditure in fiat or BTC/ETH for the reporting period. For the spending in BTC or ETH, the USD value was booked based on the rate when the transaction occurred. In many situations our service providers and partners prefer to receive VET as direct payment or investment compared to using fiat or BTC/ETH. Therefore, the total expenditure for operation, technological and business development comprises a combination of direct VET payment and use of proceeds (fiat, BTC/ETH) depending on the associated parties’ preference.

3. Notes

i) Enterprise Investor Pool

During this reporting period, we continued evaluating the offerings on hand and are looking for institutional partners who could bring fundamental change, or value, to the long term development of the ecosystem. Around 30 million VETs were purchased from the enterprise investor pool. As always, the partners invested in this pool are subject to lock-up and looking at holding the VETs for long term purposes.

ii) Co-Founders, Development Team

In this period, the Foundation distributed 514 million VET as ninth quarterly rewards to the team. During this reporting period, 3 full-time employees joined us in our development and operation team. Same as previous periods, the executive team will continue locking up 100% of their rewards gained in this period. In addition, some of the team members opted to lock up their allocated tokens to show the commitment to VeChain’s long term success. In total, out of the portion allocated to the team in this quarter, about 356 million VETs, around 69%, were locked up voluntarily after being released from the Foundation reserve.

iii) The Operation, Technological Research and Development

During this period, a notable number of improvements were announced to the public, highlighting our technological achievements and developments, as follows:

• VeChainThor v1.1.3 and v1.1.4 were released with improvements on the blockchain performance and compatibility.
• We released the new Sync desktop wallet and dApp browser. With the new VeChain Sync Official Ledger Wallet Interface, Ledger users are able to use their Ledger VeChain wallet address in Sync to access their VET and VIP180 tokens, interact with dApps and sign transactions.
• The VeChainThor Wallet v1.4.3 was released during this period. This updated version enables users to input custom URLs in the Discover tab, switch between mainnet and testnet, and reorder the asset list based on your preference.
• We have announced VeChain Builders, a dedicated new section on the VeChain official website, which allows users to easily navigate and explore blockchain-related information and toolsets to address their pain points and lower their adoption efforts. With the launch of VeChain Builders platform, community developers, startups, enterprises and more will have a one stop source to find applications and useful information relating to VeChain, and even communicate with other ecosystem builders.

iv) Business Development

During this period, VeChain has been relentlessly promoting the VeChain ToolChainTM platform and the enterprise use cases built on top of it. One of the major global blockchain event, the Shanghai International Blockchain Week 2019 was held on September 21. Due to VeChain’s leading role in the enterprise blockchain adoption with abundant real use cases in various industries, Sunny Lu, Co-founder and CEO of VeChain, as well as partners such as Renato Grottola, Global M&A and Digital Transformation Director in DNV GL-Business Assurance and Member of VeChain Foundation Steering Committee; Antonio Senatore, Global CTO at Deloitte Blockchain and Member of VeChain Foundation Advisory Board were invited to the summit to represent VeChain and it’s enterprise solutions as keynote speakers.

Highlights from the business development and marketing events (August, 2019 — October, 2019)

• VeChain hosted the VeChain ToolChain Day at Shenzhen (August 11)
• Kevin Feng attended AMA at Coin 98, one of the biggest blockchain community at Vietnamese, and introduced VeChain to the Community (August 16)
• Chin Qian, Chief Business Officer at VeChain, attended the 1st Important Product Tracing Expo (Shanghai) and showcased My Story™ and VeChain ToolChainTM (August 21)
• Sunny Lu introduced the Carbon Credit platform on Codice RAI, Italy (August 21)
• Vechain supports TRIBE Accelerator’s OpenNodes, a web-based engagement platform, to foster innovation and collaboration in the blockchain community (August 27)
• Kevin Feng delivered a speech of “Insights on Blockchain Application Ecosystem” at the 2019 MiiXCon Global Blockchain App Eco-developer Summit (August 30)
• Kevin Feng introduced VeChainThor blockchain and enterprise-level blockchain solution to Fudan-BI (Norway) MBA students when they visited VeChain’s Shanghai office (August 30)
• VeChain Project Manager, Perkins Chen introduced VeChain enterprise-level blockchain solutions at workshop hosted by Tribe Accelerator (September 3)
• General Manager of SE Asia & Australasia, Sarah Nabaa attended the Seeds & Chips Global Food Innovation Summit in Melbourne, Australia and introduced VeChainThor blockchain (September 3)
• Sunny Lu attended workshop hosted by Peninsula Corporate Innovation, introduced VeChain ToolChainTM, and shared opinion on blockchain mass adoption (September 13)
• VeChain Technical Director, Albert Ma shared successful use cases that VeChain has implemented in the industry at the workshop co-hosted by Fenbushi capital and bloXroute Labs (September 16)
• Sunny Lu, Co-founder and CEO of VeChain, as well as partners such as Renato Grottola, Global M&A and Digital Transformation Director in DNV GL-Business Assurance and Member of VeChain Foundation Steering Committee; Antonio Senatore, Global CTO at Deloitte Blockchain and Member of VeChain Foundation Advisory Board were invited to the Shanghai International Blockchain Week 2019 as keynote speakers (September 17)
• VeChain hosted the VeChain ToolChain Day at Chengdu (September 21)
• Sunny Lu and Kevin Feng attended the workshop hosted by Fudan MBA Blockchain Club, and shared opinion on blockchain technology, ecosystem development and business adoption (September 22)
• Kevin Feng delivered a speech of “How Blockchain Enables Corporate Transformation” to Delegation of Norwegian enterprises at DNV GL China (September 23)
• General Manager of Europe, Jerome Grilleres attended Startupbootcamp FastTracks event at Paris, and shared successful use cases that VeChain has implemented (September 26)
• General Manager of Europe, Jerome Grilleres attended the Choose Paris Region Closed Door Discussion, and introduced VeChain ToolChainTM (October 8)
• General Manager of Europe, Jerome Grilleres attended Blockwalks 2019 Europe Summit at Bratislava (October 10)
• General Manager of SE Asia & Australasia, Sarah Nabaa attended the Demo day for the corporate accelerators of Digital Business Innovation Center (DBIC), and shared cutting edge innovation concept (October 15)
• General Manager of Europe, Jerome Grilleres attended Startupbootcamp FastTracks event at Shanghai, and shared successful use cases that VeChain has implemented at the luxury industry (October 17)
• Ecosystem Manager, Arnaud Bauer attended GDST Seafood Trackathons co-sponsor by VeChain, and introduced VeChain ToolChainTM APIs and how to develop dApp on VeChainThor blockchain (October 21)
• Chief Operation Officer, Kevin Feng and Chief Business Officer, Chin Qian introduced VeChain technical development and successful cases to the delegation of the Commercial Section of the Norwegian Embassy in China. (October 25)
• General Manager of Europe, Jerome Grilleres and Ecosystem Manager Dimitrios Neocleous attended the Decentralized 2019 Conference co-hosted by University of Nicosia (UNIC) and BitShares at Athens, and showcased successful VeChain ToolChainTM implementation cases. (October 31)
• VeChain hosted the BUIDLer Assembly Event at San Francisco Blockchain Week 2019 and showcased The New VeChain Builders Website (October 31)

v) Compliance & Legal

VeChain hires professional service providers in cybersecurity and legal to ensure products and solutions we offer are secure and compliant with regulations, which we believe is the prerequisite of mass adoption by global enterprises.

vi) Ecosystem Development

Since the launch of the Foundation Grant Program, the Foundation team has been working very closely with community developers to discuss project plans, go to market strategy and set milestones for the development. We were happy to see projects that were accepted and supported by the Grant Program including VeriArti, Realitems, Everscore have been pushing forward the projects following their roadmap and achieved significant developments in both technical and business aspects.