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VeChain Overview: The Business Blockchain
Pros
Focused on enterprise solutions to real-world problems in the supply chain
5-star rated Blockchain Service Certificate from TÜV Saarland
Partnered with PriceWaterhouseCoopers (PwC), Walmart China, and other major corporations in China
Partnerships with government agencies in China
Founded by the former CIO of Louis Vuitton China
Cons
Many larger corporations, such as IBM, are also working on blockchain solution for supply chain
It’s unclear if a blockchain with its own native crypto token is needed to achieve VeChain’s stated goals
VeChain uses proof-of-authority, which is much more centralized than other alternatives
There is one centralized company behind VeChain
VeChain actually has two different tokens, VET and VTHO, which causes unnecessary confusion
VeChain Overview
VeChain is a relic from the days when many executives in the corporate world were dismissing bitcoin but embracing the underlying technology behind the cryptocurrency. Founded in 2015, VeChain is a blockchain project that focuses on helping enterprises solve issues around trust and transparency in various supply chains around the world. So far, the network has enabled large companies to better track carbon credits and protect against the proliferation of counterfeit goods.
The company behind VeChain has offices in China, Europe, the United States, Singapore, and Japan, and it has strong relationships and live partnerships with a variety of government and corporate entities in China. VeChain plans to focus on the further growth and development of these partnerships over time. There are two separate crypto tokens involved in VeChain: VET and VTHO. VET is the token used for payments, while VTHO is used to pay for gas on the network (similar to ETH in Ethereum).
VeChain Ratings
Supply
- Max: 86,716,263,400.00
Network Speed
- Rating: Medium
- Transactions Per Second: 10,000 (Max)
Disbursement
Rating: Very Low
Reason: The disbursement of VET tokens is extremely centralized. According to VeChain Stats, the cold wallet of cryptocurrency exchange Binance holds more than 15 billion VeChain tokens. Most of the other top ten largest addresses on the network are also cryptocurrency exchanges, including Binance’s affiliate in the United States. Two addresses owned by Binance account for more than a quarter of the entire circulating supply of VET. Additionally, the VeChain Foundation holds a large balance of VET that it uses to support the ecosystem. There are less than 300,000 VeChain addresses that have greater than or equal to 1 VET in them.
Developer Engagement
Rating: Medium
Reason: Like many other centralized projects in the cryptocurrency space, VeChain has a foundation behind it that is willing to pay developers to build VeChain applications and generally engage with the project as a whole. While there is some active development around VeChain, it needs to be remembered that this is not something developers are working on because they find it interesting or they’re “scratching their own itch.” It’s unclear how much of this developer engagement is organic, as centralized blockchain solutions for corporate supply chains is not something that people to decide to work on in their free time.
Liquidity
Rating: Medium
Reason: VeChain generally floats around the top 20 cryptocurrencies based on overall market cap with billions in value so there is significant liquidity. It’s also listed on numerous exchanges around the world.
History of VeChain
VeChain was founded back in 2015 at a time when enterprise blockchain solutions were receiving even more hype than Bitcoin. This was the peak of the “blockchain not Bitcoin” era. VeChain was originally founded by former Louis Vuitton China CIO Sunny Lu as a part of a bigger blockchain technology company known as Bitse.
The VET token was originally launched as an ERC-20 token on Ethereum, and it was known as VEN before the ticker name was changed to VET. This move to the VET token was part of a VeChain rebranding process that took place in 2018 and included the launch of VeChain’s own native blockchain. It is common for projects like these to raise funds via Ethereum with nothing more than a token and a white paper before moving to their own networks.
Looking back on the original white paper, the vision for VeChain was always to focus on supply chain solutions for large corporations. In this regard, VeChain has definitely achieved some success through its partnerships with major, global brand names like PwC and Walmart.
How Does VeChain Work?
Some people are quickly confused when they hear that VeChain has two different native tokens on its network, but the reality is the way the tokens function is rather simple after you get to learn about the differences between them. The two tokens on VeChain are VET and VTHO. VET is basically the currency of the VeChain blockchain, while VTHO acts as a sort of gas token to pay for smart contracts (think ETH on Ethereum). VTHO stands for VeChainThor Energy, as the VeChain blockchain rebranded to VeChainThor after the launch of a variety of new features.
The two-token system developed by VeChain was actually built to solve a problem that is still seen in the Ethereum ecosystem today. Since there is only one native token, ETH, on Ethereum, developers face a problem in that they have a hard time estimating the amount of ETH they need for a particular transaction. The VeChain white paper describes a number of different ways this has been solved in the VeChainThor blockchain.
In terms of how the actual VeChainThor blockchain works, the system is extremely centralized by cryptocurrency standards. For one, neither proof-of-work and proof-of-stake are to be found as consensus mechanisms on VeChain. Instead, proof-of-authority (PoA) is used to give VeChain greater control over the overall network and make sure that it is operating properly. In fact, VET holders who are not willing to go through a Know Your Customer (KYC) process are limited to a total of 20% of the stake in VeChain consensus. In fact, there are only 101 master nodes that take care of transaction ordering on the VeChainThor blockchain. None of these master nodes are allowed to be anonymous. The founders of VeChain have said their goal is to reach a balance in terms of efficiency and decentralization with the way their blockchain is structured, but the large level of permission required to become a master node and general centralization of the network puts into question whether a blockchain or native crypto token is needed for this system to work.
Where to Buy VeChain
Like most other crypto assets, the best place to purchase VeChain’s VET token is via a cryptocurrency exchange. Since VeChain was founded all the way back in 2015, it has had plenty of time to proliferate throughout the entire crypto ecosystem and get listed on the largest exchanges in the world. Here are some of the major crypto exchanges where you can buy VeChain:
- Bitcoin.com Exchange
- Binance
- HitBTC
- Crypto.com Exchange
- Huobi Global
- KuCoin
- Bitfinex
- DigiFinex
- Gate.io
The Advantages
The main advantage of VeChain is for large companies that have the need to improve the level of transparency involved in their supply chains. This is one of the few blockchain technology companies that set out to solve a real world problem with their tech stack, and the evidence shows that they’ve been able to offer something of value to the various government and corporate institutions they’ve partnered with over the past years.
It’s difficult to argue against the utility of a platform that has partnerships with the likes of PwC, Walmart, and various government agencies in China. It’s possible that the laser focus on supply chain dynamics could prove beneficial for VeChain in carving out its own niche in the long run.
Another key benefit of VeChain is that it has a strong, reputable founder. Just like Vitalik Buterin with Ethereum and Justin Sun with Tron, there is a face behind VeChain, and that face is former Louis Vuitton China CIO Sunny Lu.
The Disadvantages
There are a large number of different disadvantages of VeChain, and most of them revolve around the relative centralization this project has when compared to other blockchain projects on the market.
For one, there are a number of large, traditional tech companies working on blockchain-related solutions for supply chain problems, with the most notable example being IBM. Many of these alternatives to VeChain do not actually have their own native crypto tokens because the creation of a new crypto asset was deemed unnecessary by the teams behind the projects. In fact, it’s unclear if blockchain is anything more than a buzzword when it comes to solving issues related to supply chains.
VeChain’s use of proof-of-authority while also having its own native crypto token is a bit perplexing. In proof-of-work systems like Bitcoin (or even proof-of-stake systems) there is a need for an underlying cryptocurrency in the network in order to incentivize potentially-anonymous miners (or stakers) to put work into processing transactions and increasing the security of the network. It’s unclear why a cryptocurrency is needed in a setup like VeChain’s because the master nodes are not allowed to be anonymous and much of the network is completely regulated by VeChain.
While the use of two crypto tokens (VET and VTHO) is touted as an advantage by VeChain (and it may very well be), it likely confuses many potential users as well. That said, there are ways for app developers to iterate around the need for two cryptocurrencies on the VeChainThor blockchain.
VeChain Frequently Asked Questions
Yes, VET is mostly for business applications. The main use of VeChain is for tracking the integrity of real-world, physical products throughout the supply chain. Examples of this type of business application include the verification of free trade foods and guarding against the development of markets for counterfeit goods.
Despite the fact that VET is mostly a utility token for use by businesses on the VeChain network, any individual is able to speculate on the VET price via a variety of cryptocurrency exchanges.
VeChain, which is the blockchain behind the VET token, was originally founded by the former Louis Vuitton China CIO Sunny Lu. The project was originally part of Bitse, which is a blockchain technology company based in China.
VET is not necessarily a direct competitor to Ripple because the two projects are going after two completely different use cases. While VET mostly has to do with the supply chain aspect of business, Ripple is more focused on improving the global financial system through the use of improved financial technology. That said, both projects have definitely used the acquisition of enterprise clients as a way to grow their businesses. It should also be noted that Ripple and VeChain are rather similar from a structural perspective in that they both rely on blockchain networks that look extremely centralized when compared to something like Bitcoin. Both projects also have a heavy focus on regulatory compliance.
Yes, part of the way that the VeChainThor blockchain works is that VTHO tokens get destroyed when they are used for actions on the network. When each transaction fee is paid in VTHO, 70% of those tokens are destroyed, while 30% of the tokens get paid to an authority node. There is no burning involved with VET coins. That said, the VeChain community once agreed to burn 727 million VET coins because they were stolen by a hacker.
One of the main uses cases of VeChain right now is tracking the authenticity of particular goods. For example, if a new luxury shoe was created by a shoe company and became quite popular as a collectible, there would also undoubtedly be a large number of counterfeit shoes that popped up on the market. One of the main ideas with VeChain is that these luxury shoes could be tracked from the time they are produced all the way to the store shelves on the other side of the world to verify their authenticity.
Yes, VET coin holders are able to stake their VET in any compatible wallet. Stakers receive VTHO tokens as rewards. The mobile VeChain wallet is the best option for staking VET, although Atomic Wallet is also a useful alternative if you’re interested in using a multi-cryptocurrency wallet for your staking needs.
