What Is VeChain (VeChainThor)?
VeChain is a robust blockchain ecosystem aimed at revolutionizing supply chain management and business processes. With its dual-token system—VeChain Token (VET) and VeChainThor Energy (VTHO)—the platform facilitates value transfer and operational efficiency. Founded by Sunny Lu, VeChain is not only breaking silos in corporate data management but is also paving the way for Web3 development and sustainable business practices.
KEY TAKEAWAYS
VeChain is a blockchain platform designed to enhance supply chain management and facilitate business processes.
The VeChain ecosystem utilizes two tokens, VET and VTHO, to support value transfer and transaction fees, respectively.
Founded in 2015, VeChain was initially focused on supply chains but now also supports decentralized applications and IoT.
VeChain's partnerships with industries, such as PwC and Renault, emphasize its utility in enhancing product verification and traceability.
Through its proof-of-authority consensus algorithm, VeChain aims to improve the efficiency and security of its blockchain network.
The Origins and Evolution of VeChain
VeChain was founded in 2015 by Sunny Lu, the former chief information officer (CIO) of Louis Vuitton China. It started as a subsidiary of Bitse, one of China's largest blockchain companies, and is among the few blockchains with a substantial customer base among established companies.
VeChain's goal is:
...to enable people to engage with sustainability every day. [VeChain] will do this by putting more power in their hands to make impactful, informed decisions that influence the fundamental environmental and societal factors underpinning our existence as humans, such as access to healthy food, clean water, and fresh air. With ever-evolving technologies like blockchain, [VeChain] will help people develop real, meaningful partnerships with organisations, governments, and enterprises.1
Initially, VeChain targeted enterprises, attempting to disrupt the supply chain industry by making data actionable and transparent. It has since redirected its path to include more than an ecosystem for supply chains, and includes the ability for developers to create dApps, cryptocurrencies and tokens, mechanisms for the Internet of Things (IoT), and targets people and businesses intent on creating a more sustainable global society and economy.
Strategic Partnerships of VeChain
VeChain has inked strategic partnerships over the years with several companies to help achieve its goals. Among them is an agreement with PricewaterhouseCoopers (PwC) for VeChain's blockchain-powered solutions to be used by the accounting firm's client base to improve product verification and traceability.
VeChain has also partnered with Renault, Microsoft, and Viseo to create a digital car maintenance book that cannot be tampered with. VeChain is the technology partner for Gui'an, a development zone of the Central Chinese Government.23
VeChain partnered with UFC to add NFC devices to official boxing gloves. These chips store an NFT on the VeChainThor blockchain, verifying glove authenticity and documenting the fighter and fights they were involved in.4
Understanding the VeChainThor Blockchain
Initially, the VEN token functioned on the Ethereum blockchain but transitioned to its own blockchain and rebranded itself in 2018. As part of the rebrand, the VEN blockchain became the VeChainThor (VET) blockchain.
VeChainThor uses a proof-of-authority algorithm called proof-of-authenticity. Authority Masternodes are selected through a vetting process where identities are verified, and a financial stake is required.5
FAST FACT
The AMs validate transactions, propose new blocks, and are paid for their work in gas (transaction) fees. There are 101 master nodes responsible for reaching consensus on transactions in VeChain’s blockchain.
Anonymous nodes are not allowed, and disclosure of identity is an essential prerequisite to becoming an Authority Master node. According to VeChain’s white paper, this system uses less power and does not require a minimum number of validators to reach consensus.
Exploring Further Node Types in VeChain
Besides AMs, VeChain includes economic and X master nodes. These nodes do not create blocks or ledger records but serve as a power check.
Any user can become an economic node by meeting the required VET balance. Each 1 million VET held by an economic master node gets a single on-chain governance vote.
X-nodes are only available to users who purchase VET on the secondary market. These nodes generate 0.000432 VTHO per VET staked. X-nodes also have on-chain voting rights.67
Insights Into VeChain's Tokenomics
The VeChainThor blockchain platform has two tokens: VET and VTHO. VET is the VeChain token used to carry value or “smart money” from smart contracts. In other words, transactions on decentralized applications occurring on VeChain’s blockchain will use VET. It is also available for purchase by the general public.
The VTHO token represents VeChainThor Energy (or VeThor Energy). It is used to pay for transactions on VeChainThor. The concept is similar to Ethereum’s ether in that dApp developers need to budget for token usage. Per VeChain’s white paper, the two-token system was devised for effective governance and to have a predictable economic model for decentralized application developers.8
In its current form, Ethereum lacks such a model because the price of ether, its native gas token, is volatile. As such, developers have to estimate the amount of ether required for a transaction, which is a challenge requiring constant adjustments. VeChain’s white paper outlines several technical enhancements its platform has made to overcome this problem.
For example, the VeChainThor blockchain allows Proof of Work (PoW) for every transaction. This means that the people conducting a transaction can select to mine more VTHO if their initial estimate was wrong or they want to pay a validator more to have their transaction included in a block (for faster confirmation).9
Practical Applications of VeChain Technology
VeChain's platform can be used to track quality, authenticity, storage temperature, transportation medium, and last-mile delivery of a medicine pack or an alcohol bottle right from the manufacturing facility through to the final delivery to the end customer. To accomplish this goal, VeChain uses smart chips or Radio Frequency Identification (RFID) tags and sensors that broadcast key information onto the blockchain network that can be accessed in real-time by authorized stakeholders.
The application of sensors means that all parameters related to the product can be constantly monitored, and problems, if any, can be communicated back to the relevant stakeholders. Manufacturers and customers are informed if a drug packet is stored outside a prescribed temperature range, allowing for service improvements and better quality control.
In another example, the VeChain platform can enable automobile owners to own their data and use it to negotiate better terms and policies with their insurance companies.
Additionally, VeChain can be used to develop decentralized applications and other apps that contribute to the growing Web3 concept. Web3 is often described as the next iteration of the internet, where centralized control of access, data, and information is replaced by a distributed network infrastructure. In other words, the way users interact with the web will not change much, but how it works behind the scenes will change.
Is VeChain Still a Good Investment?
It depends on your market outlet and whether you believe VeChain's model will equate to growth and longevity. The blockchain has potential and is being used by some noteworthy entities, so some investors may consider it a good investment.
What Is VeChain Used for?
VeChain is a multipurpose blockchain that can be used to create everything from tracking materials and transactions to creating decentralized applications.
Is VeChain a Dead Project?
As of July 2024, VeChain was still actively developed and used by several entities, including UFC. It also provides business, development, and sustainability grants for new projects.10
The Bottom Line
VeChain stands out as an actively developed enterprise blockchain platform, leveraging its ecosystem for creating tokens, cryptocurrencies, and decentralized applications. It enhances business operations by enabling efficient supply chain management and tracking systems. VeChain's strategic partnerships with companies like PwC and Renault, along with its collaborations in industries such as automotive and sports, underscore its commitment to innovation and real-world application. By offering a dual token system with VET and VTHO, VeChain ensures a stable economic model for developers, distinguishing itself in the competitive blockchain landscape
