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What is VeChain (VET)?

January 12, 2022
by Leon Marshall,

Article Recap

VeChain aims to provide something different, centered around already established businesses. Product safety, counterfeit goods, production, logistics, delivery, quality control – VeChain’s specialty is an array of services to simplify supply chain management.

As blockchain technology becomes more and more saturated, VeChain aims to provide something different, centered around already established businesses. Product safety, counterfeit goods, production, logistics, delivery, quality control – VeChain’s specialty is an array of services to simplify supply chain management. It features two tokens that enable all of its functions across the board – VET’s price volatility moves the overall market cap while VTHO fees paid to miners are used internally. Despite the growing competition of blockchains, VeChain takes an approach whose target group already puts the blockchain into its plans for the future.

Where does VeChain come from?

Louis Vuitton is one of the largest fashion brands in the world and it has well made an impact worldwide, including China, where many imitation products come from. As a former chief information officer of Louis Vuitton China, in 2015, Sunny Lu teamed up with Jay Zhang in an attempt to create a blockchain that could focus on exterminating the promiscuous issues stemming from counterfeit goods. Believe it or not, the “fakes” industry makes $461 billion a year and it is stepping up its game quality-wise as well. And that’s where unique product identities and tracking systems, courtesy of yours truly, VeChain, come into play. 

In 2017, VeChain distributed its cryptocurrency and raised $20 million by selling 1 billion tokens. The initial tokens called VEN were swapped at a 1:100 ratio for VET tokens with the launch of the VeChainThor blockchain. Having a main-net means that the protocol widens its capacity of offering solutions from strictly dApps to more general options. For instance, BMW’s odometer fraud in automobile sales uses VeChain, as does LVMH use it to track luxury leather goods and Walmart – to track food provenance. The latest updates on the blockchain’s development status are posted in its Medium blog.

 

How does VeChain function?

Everyone is aware of PoW and PoS, but PoA is a less common consensus mechanism. Proof-of-authority is utilized by VeChain Thor for transaction adding and verification. Authority Masternodes are the users that verify and add transactions and the requirement to become one is staking at least 25 million VET, in addition to submitting sensitive information pertaining to their identity to the VeChain Foundation, led by Sunny Lu himself. 

With the PoA mechanism, there is no concern over the scalability of the blockchain. However, it requires a form of centralization to perform user verification. This part is being developed so that a more randomized creation process can be achievable Companies using VeChain can develop their own dApps and to do it easier than ever, they can utilize the VeChain ToolChain software dev kit, which may lead to progress in the randomization of the numbers.

And when it comes to native token numbers, VeChain has two. VET is used for value storing and transferring, while VTHO is meant for transactions on the blockchain. In separating the two, VET’s price volatility is separated from the internal fees and computational costs. As a result, VTHOR’s flexible supply adjustment capability comes in to save the day and provide stable fee rates for transactions within the network. And when demand for VTHO rises due to dApps that require using it as a payment method, demand for VET usually naturally follows, going up in value due to its limited supply of 86.7 billion coins.

Miners earn VTHO fees to crunch numbers and perform complex calculations, and the amount they receive is proportional to the level of complexity of the problems, which need to be solved by using processing power. VET tokens, on the other hand, can be used as stake by Authority Masternodes to gain access to voting on the network, and together with that, they can decide on future upgrades, while receiving a reward in VTHO per block.

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What is VeChain capable of?

Sensor chips, linked to the blockchain, are used for physical products that need to be identified. This way, a unique ID is given to every product, usually through NFC (near-field communication), QR codes, or RFID (radio frequency identification).

You buy a luxurious handbag and you want to be certain it is authentic. Well, sensors leave records at every stage of the supply chain and those records are permanent. Item shipped to the wrong location? The blockchain will have records of where along the supply chain this mistake occurred. Fraud concerns? A small chip is placed inside the handbag and can be scanned to report on every step of the product’s journey, which can also be used as proof of authenticity even after re-selling the goods.

VeChain’s sensor chips are already prepared to function on a mass scale. They have been in use since 2015 when NFC tracking chips began being used in a French luxury brand’s handbag products. A year later, the Renault car company implemented VeChain’s history tracking services to monitor for any issues during the production of cars. Odometer fraud is a problem that used car buyers do not need to think about as much when they can see a full account of the vehicle. Future collaborations, such as the recently announced partnership with BMW, with other car companies and different industries, VeChain is up to stay relevant in the future and is likely to continue to expand.

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