What is VeChain and the VET cryptocurrency?

23.08.2022

Beginner

#Logistics #Tracking #VeChain

Key points

VeChain is a blockchain platform offering B2B solutions for supply-chain management, anti-counterfeiting and the automation of other business processes.
The project uses two cryptocurrencies: the native VeChain coin (VET) and VeThor (VTHO), which is required to pay transaction fees.
Founded in 2015, VeChain is a pioneer in blockchain-based product authentication and retail tracking and now has offices in China, the European Union, the United States, Japan and Singapore.
The company has long-standing partnerships with major international corporations — BMW, BYD, Walmart and others — as well as with government bodies in China and elsewhere.

Who founded and funded VeChain?

The VeChain startup was founded in 2015 in Singapore by Sunny Lu, a former senior manager at Louis Vuitton China, and Zhen Zhang, who had worked at Deloitte and PricewaterhouseCoopers.

In 2017, the non-profit VeChain Foundation was registered to develop and support the blockchain platform, attract partners and grow the VeChain ecosystem.

At the token sale of the native VET coin that same year, VeChain raised $22m. Investor interest was bolstered by several large partnerships already in place, including with the German carmaker BMW.

In spring 2018, across three corporate rounds, VeChain raised funding from PricewaterhouseCoopers (PwC), DNV GL, Haitao Capital, BlockVC and IOSG Ventures.

Initially, a VeChain prototype ran on Ethereum, but in summer 2018 the team launched the VeChainThor mainnet. In subsequent years the project opened subsidiaries in China, the European Union, the United States and Japan. In February 2022 the VeChain Foundation opened its headquarters in San Marino, underscoring the importance of the European market.

Why does VeChain use two cryptocurrencies, and what do they do?

In 2017 the creators of VeChain issued 1bn VEN tokens on Ethereum. Nine percent were sold in a private sale for early investors and a further 41% were allocated for a public ICO that raised $20m. After the VeChainThor blockchain launched, VEN was swapped for native VET at a 1:100 ratio.

Today the VeChainThor blockchain uses two native tokens — VeChain Token (VET) and VeThor Token (VTHO).

The total supply of VET is about 86.7bn tokens, nearly 70% of which were distributed to early investors and token-sale participants; the remaining 30% were used to develop the VeChain ecosystem and reward developers.

VET has four core functions:

means of payment: VET is used for transfers on the VeChainThor blockchain;
collateral — the token is required to run any VeChain node;
staking — when held in a node wallet, VET generates VTHO. For every 10,000 VET on node addresses 4.32 VTHO are produced per day;
governance — nodes can participate in network governance in proportion to the VET they hold. All 101 authority masternodes share 40% of the total votes.

VeThor Token (VTHO) is used to pay transaction fees on VeChainThor. Seventy percent of all VTHO fees are burned, with the remaining 30% rewarded to authority masternodes.

VeChain Token (VET) is among the top 50 cryptoassets by market capitalisation. Both cryptocurrencies trade on all major crypto exchanges.

What is the VeChainThor blockchain?

All VeChain solutions run on the VeChainThor blockchain, built on an original Proof-of-Authority consensus mechanism. This is a modified Proof-of-Stake algorithm in which block production and transaction approval are handled by network nodes.

On VeChainThor, Authority Masternodes cannot be anonymous: before contributing to the blockchain’s stability, security and efficiency, each candidate is vetted by the VeChain Foundation for technical requirements and identity. The blockchain is maintained by 101 such nodes, each requiring a 250m VET stake.

VeChainThor has three types of economic nodes and four types of X-nodes. They do not validate transactions or produce blocks and do not require high‑performance hardware, but they support ecosystem stability and produce VTHO (the second asset in the ecosystem).

Node requirements vary by type: minimum stakes range from 600,000 to 15m VET; reward “maturation” times range from 10 to 90 days; and different bonuses apply.

The number of nodes is capped: as of August 2022 there were 1,665 economic nodes and 2,430 X-nodes. The right to run a node is confirmed by corresponding NFT, which are traded on a dedicated marketplace.

New blocks on VeChainThor are produced every 10 seconds. According to the developers, at these parameters the network can process up to 10,000 transactions per second. The VeChain Foundation can also fine‑tune block times and throughput as needs change.

The VeChainThor blockchain has a virtual machine based on the Ethereum Virtual Machine (EVM) and supports Solidity smart contracts. The network allows the issuance of user tokens, including NFTs, and supports decentralised applications.

How do VeChain’s blockchain solutions help businesses?

VeChain was among the pioneers in building and deploying blockchain solutions for logistics, product authentication, retail and other business processes.

The approach rests on digitising physical objects: each tracked item is assigned a unique identifier (VeChain ID). A smart contract creates the corresponding record on VeChainThor. The item bears a medium (an NFC chip, RFID tag or QR code) containing the VeChain ID, or IoT sensors record data on the item’s location and condition.

Interaction with VeChainThor and stored data is available via an API that VeChain provides to partners. It enables real‑time tracking of items: their movement through distributors’ warehouses, the time and place of sale, and other actions.

Depending on their needs, enterprises can choose different types of blockchain products:

a base platform for which applications must be developed in‑house;
a mid‑level low‑code platform assembled from ready‑made software modules;
a turnkey application tailored to the client and ready for deployment.

Since its founding, VeChain has worked on pilots with more than 200 companies worldwide. A few notable examples:

in partnership with BMW, developed the VerifyCar app, which records vehicle usage data (mileage, insurance and service entries) on-chain, easing interactions with service centres;
in 2018 it introduced the BrightCode platform, built on VeChainThor for the Bright Food corporation. Using a QR code, consumers can obtain verified information about product origin;
Walmart China in 2019 announced a joint project with VeChain to track the authenticity and safety of food products;
that same year, authorities in the Chinese province of Shuangjiang approved use of the VeChain network to track tea supply chains;
in early 2021, e‑cigarette maker PuffBar decided to use the VeChain platform to combat counterfeits;
VeChain is developing an agricultural traceability platform for the government of China’s Inner Mongolia province. Several enterprises in the region already use the system.

Which decentralised apps run on VeChain?

Although VeChain initially focused on B2B solutions, the proliferation of decentralised ecosystems spurred the development of decentralised finance (DeFi) on VeChainThor, which offers high throughput.

According to VeChainStats, as of August 2022 the VeChain ecosystem had issued about 30 user tokens. Several dozen DeFi applications operate on VeChain, including the decentralised exchange VexChange, as well as the virtual world Vulcan Verse and blockchain games. More than 30 NFT collections have also been issued on VeChain, many of them clones of popular Ethereum series.

In May 2022, VeChain, in partnership with asset‑tokenisation firm Stable, launched a native stablecoin, VeUSD, fully backed by the US dollar. The collateral for VeUSD is held in a trust account managed by Prime Trust. As of August 2022, VeUSD’s market capitalisation was about $5.5m.

How is VeChain developing?

Since its founding, VeChain has worked actively with universities worldwide to build blockchain solutions for healthcare and environmental protection. Academic partners include Tsinghua University, Stanford University, the Massachusetts Institute of Technology, the Oxford Mathematical Institute and City University of Hong Kong.

One notable example was the use of VeChainThor in healthcare and efforts to curb the spread of COVID‑19.

In September 2020, VeChain, in partnership with DNV GL, launched VeTrust, an application including a checklist for hygiene and safety that hotels can use during room sanitisation and food preparation for guests. In China, more than 200 hotels and public venues were connected to the system.

In addition, municipal authorities in a number of Chinese provinces used VeTrust to visualise infection‑risk management in 95 residential compounds with a combined population of over 300,000.

In early 2022, the VeChain Foundation announced VeCarbon, a platform to measure and manage carbon emissions. The product helps enterprises pursue carbon neutrality, emissions targets and sustainability goals. It is used at several companies and was also tested in electric vehicles from Chinese carmaker BYD, where drivers could earn small rewards by selling their carbon credits.

From August 2022, VeChain’s partner on the VeCarbon project became a technology partner with Amazon Web Services (AWS).