What Is VeChain?
VeChain is a blockchain platform designed to enhance supply chain management and business processes. Its goal is to streamline these processes and information flow for complex supply chains through the use of distributed ledger technology (DLT). The Vechain platform has two tokens: VeChain Token (VET) and VeChainThor Energy (VTHO). The former is used to transfer value across VeChain’s network, and the latter is used as energy or gas to power transactions.
- VeChain is a blockchain platform for business processes, such as supply chain and product lifecycle management, that aims to provide a 360-degree view of an organization by disintermediating information from data silos.
- In the future, it plans to become a platform for ICOs and for conducting transactions between Internet of Things (IoT) devices.
- VeChain has two tokens – VeChain token (VET) and VeChain Thor Energy (VTHO). The former is used to carry value from smart contracts on its blockchain while the latter is the underlying energy or gas used to power transactions.
VeChain’s white paper states that its goal is “to build a trust-free and distributed business ecosystem platform to enable transparent information flow, efficient collaboration, and high-speed value transfers” in business processes.
Supply chain data for business processes are currently compartmentalized in silos among multiple stakeholders. This affects information flow, which is again divided among stakeholders.
According to VeChain’s white paper, blockchain technology can break “asymmetric information problem and allow ownership of data to return to and empower its owner.” The VeChain platform claims to provide a 360-degree view of necessary information linked to a product and its business processes – such as storage, transportation, and supply – to authorized stakeholders and create greater market transparency.
For example, the 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 which 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.
History of VeChain
VeChain was founded in 2015 by Sunny Lu, former CIO of Louis Vuitton China. It started as a subsidiary of Bitse, one of China’s largest blockchain companies. VeChain is among the few blockchains that already has a substantial customer base among established companies. Initially, the VEN token functioned on the Ethereum blockchain. VeChain transitioned onto its own blockchain and rebranded itself in 2018. As part of the rebrand, the VEN blockchain became the VeChainThor (VET) blockchain in 2018.
Goals for the VeChain blockchain platform are outlined in its white paper. The initial target is to disrupt the supply chain industry by making data actionable and transparent. In the future, its blockchain plans to have dApps and initial coin offerings (ICOs) on VeChain and Internet of Things (IoT) platform.
To that end, VeChain has inked strategic partnerships over the years with several companies in order to help achieve this goal. Among these, the most important one is with accounting firm PricewaterhouseCoopers (PwC), which is also incubating VeChain. The blockchain company has also partnered with Chinese firm Jiangsu Electronics to develop custom RFID chips for use on its platform and car company Renault for its manufacturing operations. VeChain is also the government technology partner for Gui’an, an economic development zone for the Central Government.
VeChain Blockchain Platform
The VeChainThor blockchain platform is a public blockchain intended for “mass business adoption.” It has two tokens: VET and VTHO. VET is the VeChain token that is 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 available for investing by the general public.
The VTHO token stands for VeChainThor Energy (VTHO) and is also known as VeThor Energy. It is used to power transactions on VeChain and is equal to the cost of conducting transactions on its blockchain.
The concept is similar to that of Ethereum’s ether and NEO’s GAS in that developers need to budget for a certain number of underlying tokens (which are not exposed to the public) in order to conduct transactions for their decentralized applications. Per VeChain’s white paper, the two-token system was devised for effective governance and to have a predictable economic model for decentralized applications developers.
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. The transaction fails if their estimate turns out to be incorrect. VeChain’s white paper outlines several technical enhancements that its platform has made to overcome this problem.
For example, the VET blockchain allows Proof of Work to be conducted for every transaction. This means that the people conducting a transaction can mine more VTHO if their initial estimate was wrong.
The VeChainThor blockchain uses Proof of Authority as a consensus protocol. Per this protocol, votes are disbursed based on VET holdings and disclosure. VET holders without KYC and with 1 million tokens in their account are assigned 20% of all votes while VET holders with KYC and the same amount in their accounts are responsible for 30%.
There are 101 Masternodes responsible for reaching consensus on transactions in VeChain’s blockchain. This system is different from bitcoin, which requires all nodes to vote on a transaction before reaching consensus.
Anonymous nodes are not allowed, and disclosure of identity is an essential pre-requisite to becoming an Authority Masternode. According to VeChain’s white paper, this system uses less power and does not require a minimum number of validators to reach consensus.
The other type of masternodes in VeChain is economic masternodes. They do not produce blocks or ledger records. The white paper states that they are used as a check on power. This is done by allocating a certain number of votes to each economic masternode based on their VET holdings. Each 10,000 VET held by an economic masternode gets it a single vote.
The system of Masternodes centralizes voting rights in a decentralized system. But the founders of VeChain have said that their aim in designing this protocol is to achieve a balance between centralization and decentralization.