Introduction

VeChain is China’s first blockchain-based platform for genuine product identity verification and transparent supply chain management. It is also the first public blockchain to be widely adopted by enterprises, with the project starting around the same time as Ethereum in 2015. VeChain is an enterprise-grade L1 IoT smart contract platform that combines decentralization and centralization, breaking the notion that public blockchains are not conducive to real-world business applications. VeChain helps enterprises maximize cost efficiency while managing supply chains, assets, traceability, anti-counterfeiting, and other business needs. Consumers can also use VeChain’s traceability and anti-counterfeiting features for safer product usage. Additionally, the VTHO rewards obtained from the platform can offset some living expenses, such as electric vehicle charging fees. VeChain is one of the few blockchain projects that align with sustainable development goals (SDGs).

What is VeThor?

VeThor (VTHO) token is one of the two tokens used on the VeChainThor public blockchain, the other being $VET. $VTHO represents the cost of using the VeChainThor blockchain and is primarily used to pay for transaction fees on VeChainThor, including transfer transactions and smart contract transactions. $VTHO is generated over time by users holding $VET, and both $VTHO and $VET can be traded on the market.

The VeThor token is a VIP-180 standard token, which Ethereum’s ERC-20 has now replaced. It outlines a set of common APIs that all tokens on VeChainThor can follow to transfer tokens and allows tokens to be approved so other on-chain third parties can use them safely.

What are VeChainThor and VeChain？

VeChainThor’s Chinese name is “唯链雷神区块链” (Weilink Leishen Qukuailian), while VeChain is simply “唯链” (Weilink).

VeChainThor serves as the mainnet blockchain of the VeChain platform and forms the technical foundation of the VeChain ecosystem. It operates as an open public blockchain that allows anyone to transact or participate in application development. VeChainThor supports various decentralized applications (dApps) and services. The platform utilizes a dual token system and operates on a Proof of Authority (PoA) consensus mechanism, integrating smart contracts and meta-transaction capabilities.

VeChain is an enterprise-grade blockchain platform anchored in the Sustainable Development Goals (SDGs). It aims to provide efficient, fast, and cost-effective blockchain solutions for global enterprises and governments. It focuses on four key areas: anti-counterfeiting, supply chain management, asset management, and customer experience. VeChain has also become the first widely adopted public blockchain by enterprises and governments.

Key Milestones in Project Development

The launch of the Ethereum blockchain in 2015 marked a significant year for blockchain technology. It was also the year the VeChain project began. In 2018, VeChain underwent a major rebranding. As of 2024, VeChain has released its Whitepaper 3.0. The following diagram and explanation provide key milestones.

Source: vechain.org/journey

VeChain’s parent company is BitSE. BitSE is a member of the Trusted IoT Alliance (TIOTA), founded in 2017 by major enterprises to establish standards and guidelines and promote innovation and development in related technologies.

The VeChain project was launched in 2015. PricewaterhouseCoopers (PwC), one of the world’s four largest accounting firms, was the first institutional investor and signed a strategic cooperation agreement with VeChain on May 31, 2016.

How is VeChainThor Different From Other Public Blockchains?

VeChainThor is a blockchain-as-a-service platform capable of issuing and supporting blockchain-enabled NFC chips, RFID trackers, QR codes, and other IoT or supply chain application use cases.

The demand and challenges of enterprises adopting blockchain

Blockchain, as the foundation of next-generation information technology, VeChain’s vision is to lower barriers and leverage blockchain technology to help existing enterprises create value and solve real-world economic issues. In the early market, blockchain applications were predominantly focused on the financial sector, such as exchanges, cross-border payments, and interbank settlements, with little involvement in non-financial sectors. Public blockchains were rarely adopted by enterprises or consumer-centric large-scale applications. In the enterprise blockchain domain, most companies still look towards private or permissioned blockchains because products on public blockchains are often seen as complex and less conducive to business.

VeChain initially started with a consortium chain approach, but after two and a half years of research and development, it identified four main obstacles hindering enterprise adoption of blockchain technology. These factors are also the challenges VeChain aims to address through its platform features:

• Lack of robust governance framework: Many public blockchains lack a clear governance model.
• Lack of comprehensive economic model: Existing economic models often tie transaction costs to the overall blockchain valuation, creating a conflict where increased blockchain usage drives token values higher, contradicting efforts to reduce enterprise usage costs.
• VeChainThor and corresponding infrastructure services: A mature ecosystem should not only consist of blockchain technology experts; there is a shortage of individuals who can effectively bridge technology with business applications in the blockchain ecosystem.
• Lack of regulatory compliance and adaptability to change

What are the differences between public blockchains and private blockchains?

A public blockchain is a blockchain where anyone in the world can read, send, and confirm transactions effectively. Anyone can participate in the consensus process. Public blockchains are characterized by the protection of users from developer influence, default public data visibility, slower speed compared to private chains, and relatively higher costs. In contrast, a private blockchain restricts write permissions to a single organization. Both read and external access permissions are limited. Fast transaction speeds and lower costs characterize private blockchains.

A consortium blockchain is a blockchain where pre-selected nodes control the consensus process. For example, a consortium blockchain could comprise 10 financial institutions, each acting as a node. Confirmation from at least 5 of these institutions is required to validate each block.

VeChain initially took a consortium blockchain approach but later realized the necessity of a public blockchain. However, the early understanding of enterprise blockchains was limited, leading most enterprises to prefer consortium, private, or permissioned blockchain types.

How does VeChainThor Operate?

VeChain adopts a decentralized approach in its overall design and technical operations, ensuring efficiency and iterative improvements. Technically, VeChainThor operates with decentralized execution, decentralized community operations, and centralized governance for key upgrades. Project upgrades require validation through a majority vote from verified nodes.

Technologically, VeChainThor implements Blockchain-as-a-Service tailored for enterprises of all sizes, capable of processing a high volume of transactions per second. This setup provides scalable solutions for handling large-scale transaction processing needs.

Regarding its economic model, the VeChain platform utilizes $VET for value transfer and $VTHO for transaction fees and smart contract operations. This separation helps stabilize costs for enterprises using blockchain technology, mitigating market volatility impacts.

Regarding governance structure, the VeChain Foundation has established a Strategic Decision Committee, pivotal within the Proof of Authority (PoA) consensus mechanism. To enhance security, it employs Verifiable Random Function (VRF) to randomly select committee members locally, preventing inconsistencies from potentially malicious nodes.

VeChain fosters a blockchain ecosystem in business development where different industries can integrate based on mutual requirements, enhancing collaboration across diverse sectors.

VeChain’s innovations and technologies are geared towards achieving widespread adoption and sustainability. Foundational technologies include PoA 2.0 (an iteration of Proof of Authority), meta-transaction capabilities, transaction fee delegation protocol, on-chain governance mechanisms, built-in smart contracts, and developer tools, all of which enhance blockchain flexibility and usability.

Underlying Technologies

The VeChain platform infrastructure can be divided into three layers: the interconnect layer, the first-layer blockchain, and the applications and technical components driving and connecting all ecosystems.

• The interconnect layer digitizes real-world information by capturing sensor data and linking it to the blockchain. This includes IoT devices, QR codes, NFC and RFID chips, or VR technologies.
• Layer 1 blockchain operates at the foundational level, handling transactions and storing data received from the interconnect layer. Smart contracts running on the blockchain support collaborative activities among multiple parties.
• Applications and services include built-in blockchain and public services that provide infrastructure services, streamline and standardize application development, and incorporate common protocols and interfaces. Examples include VeVID for KYC, VeVOT for voting, VeSCC for contract certification, VeSCL for smart contract libraries, and various other technical protocols such as sidechains, cross-chains, data feeds, and oracles.

You can refer to the ecosystem diagram from the whitepaper 3.0 below, which provides an overview of the entire VeChain platform operating model.

Source: whitepaper 3.0

PoA 2.0 Authenticity Consensus Algorithm

PoA, or Proof of Authority, is a consensus mechanism considered suitable for private networks. It involves a small number of pre-approved validators, characterized by very low energy consumption. PoA 2.0 Authenticity Proof Consensus Algorithm, introduced by VeChain in 2022, is an upgraded version based on PoA. It innovatively combines PoA with Nakamoto consensus and Byzantine Fault Tolerance (BFT).

In its latest Whitepaper 3.0 in 2023, VeChain mentions that PoA only provides probabilistic security for transactions, meaning the likelihood of being attacked and disrupted is minimal (though not nonexistent). As the network scales, this possibility increases. To ensure ultimate data security while providing high throughput and scalability to meet evolving enterprise needs, VeChain designed a finality tool called “Finality with One Bit” (FOB). FOB enables dual consensus mode execution based on advanced consensus algorithms like Viewless BFT (VLBFT, formerly Leaderless BFT).

In summary, the PoA 2.0 consensus mode introduces two new mechanisms: a committee approval mechanism and a block finalization mechanism. It primarily combines the advantages of Nakamoto and BFT frameworks while mitigating their respective weaknesses. Utilizing VRF for random sourcing and a passive block finalization process, FOB ensures block finality, guaranteeing that it cannot be altered or reversed once a block is added to the blockchain.

Trading Model

Meta-Transaction Functionality

VeChainThor implements Enhanced Transactions (TX) with unique identifiable features and Multi-Task Transactions (MTT). Users can control transaction cycles, decide when to execute or abandon transactions, and execute multiple tasks within a single transaction, even under high-capacity blockchain operations.

Transaction Fee Delegation

The TX Fee Delegation mechanism allows ordinary users to use decentralized applications (dApps) without purchasing cryptocurrencies directly. It enables direct payment of TX fees incurred during interactions with dApps. Additionally, it includes the Multi-Party Payment (MPP) protocol and the Specified Gas Payer protocol, where MPP allows on-chain accounts to send TX payment fees to specified accounts. VeChainThor is the first public blockchain to successfully implement the TX fee delegation mechanism.

Built-in Smart Contracts

Smart contracts are decentralized applications built on blockchain that automatically execute contract parameters: if Event A occurs, then Transaction B is executed. VeChainThor blockchain deploys seven built-in smart contracts, including Authority Masternode, Operation Interface, On-chain Governance, TX Execution, MPP Execution, and querying specific account information for automated operations.

Economic Mechanism

VeChain adopts a dual-token economic model. While VeChain is not the only project with a dual-token economy, its design primarily targets commercial applications, especially in supply chain management and enterprise-level applications. This distinguishes it from projects like NEO or Axie, which also use dual-token economics. VeChain’s dual-token design helps separate the costs of using blockchain from market speculation, thereby insulating transaction fees from direct market fluctuations. This structure maximizes assistance in helping enterprises control application costs.

VeChain’s dual-token model: $VET and $VTHO

• $VET (VeChain Token):
  • Usage: As a medium of value transfer, holders of VET can participate in network governance and voting. VET token holders also have the right to generate VTHO.
  • Function: To facilitate value transfer, stabilize the network, and ensure security, and decentralization.
• $VTHO (VeThor Token):
  • Usage: Paying transaction fees and network usage fees (e.g., running smart contracts).
  • Generating metho: Generated automatically by holding VET tokens, the generation rate (v) is proportional to the amount of VET held.
  • Function: Separating transaction fees from network operational costs ensures network stability and efficiency.

Source: whitepaper 2.0

The maximum supply of $VET tokens is 86,712,634,466, while $VTHO has no maximum supply. $VTHO is demanded for executing smart contracts and paying transaction fees. Because $VET represents usage rights on the VeChainThor blockchain, the model is designed so that holding $VET automatically generates $VTHO. Essentially, users who hold $VET for a sufficient duration and consume less $VTHO than what is generated will incur very low costs on the VeChainThor blockchain, almost approaching zero.

Blockchain usage operates on two levels: lower levels involve blockchain operations such as token transfers and smart contract executions, while higher levels involve more complex business and financial activities by developers and application owners.

The key determinants of usage costs are twofold: the generation rate of $VTHO (v value) and the Gas price within $VTHO (p value). Transaction initiators can flexibly adjust the p value when submitting transactions on VeChainThor.

To prevent the p-value from falling below the minimum cost of transaction execution, the current p-value is set at p = 1 VTHO/Kgas. A higher p value prioritizes transaction order but consumes more $VTHO, and vice versa. The average p value is influenced by the number of active applications running on the blockchain and the number of regular transactions by users.

The VeChain Foundation closely monitors the market and estimates supply and demand for $VTHO. Adjustments to economic model variables are made based on governance decisions.

Governance Model

Currently, VeChain has 101 core authority nodes. Internally, governance is divided between a Steering Committee and stakeholders, both of which hold voting rights. Stakeholders, who are the PoA authority node operators, fall into three categories: Active Authority Masternode Holders (AM), Economic X Node Holders (XN), and Economic Node Holders (EN). Each category has varying requirements for minimum VET staking amounts, grades, and authority ratios. For more detailed information, refer to the Whitepaper 2.0. The Steering Committee serves as VeChain Foundation’s governing body, elected by stakeholders with voting rights. It formulates key policies and selects a Chairman to oversee the foundation’s operational departments. However, foundational issues that could significantly impact stakeholders require all stakeholders to vote via the VeVote platform, covering topics such as

• Selecting a new Board Steering Committee,
• Fundamental changes to the VeChainThor consensus mechanism, excluding updates or upgrades to the existing PoA consensus,
• Modifying the VTHO generation rate through VET holdings,
• Other matters deemed by the Board Steering Committee to require a vote by all stakeholders

Source: whitepaper 2.0

Team and Investors

Team Background

VeChain has a strong team with offices worldwide. CEO Sunny Lu, former CIO of Louis Vuitton China, brings extensive IT leadership experience. VeChain currently operates offices with over 100 employees globally. Sunny Lu graduated from Shanghai Jiao Tong University with a degree in Electronic and Communication Engineering and has over 13 years of senior IT executive experience. He has been dedicated to VeChain since 2015 after his tenure at Louis Vuitton China.

Jay Zhang serves as VeChain’s CFO, leveraging over 14 years of senior management experience at Deloitte and PwC. He joined VeChain in 2015 and has been instrumental in designing VeChain’s blockchain governance framework and establishing digital assets teams.

Kevin Feng, VeChain’s COO, brings over 12 years of consulting and expertise in cybersecurity, assurance, privacy, and emerging technologies. He joined VeChain in January 2018, driving blockchain service delivery and development in China and Hong Kong for PwC.

JianLiang Gu, VeChain’s CTO, holds a Master’s degree in Control Theory from Shanghai University and has over 16 years of experience in software and hardware development and management. He previously served as the Technical Director at TCL.

Source: vechaininsider

Investment Institutions and Strategic Partners

VeChain’s investor list includes 10 institutions, among them are PwC, one of the world’s four major accounting firms, and DNV GL, a globally renowned third-party verification and risk management organization, both of which are strategic partners of VeChain. The deep collaboration between PwC, DNV GL, and VeChain provided a strong foundation from the project’s inception, including initial customer resources, research team integration, and solidifying VeChain’s leadership in blockchain applications for physical business categories.

In addition to PwC and DNV GL, other strategic partners not listed as investors include: the National Research Consulting Center (NRCC) of China, Yida China Holdings Limited (real estate industry), and BitOcean (financial services industry). There are currently 34 known partners, including national-level partners from China (government), direct import goods DIG (wine importer), China Unicom (telecommunications), Kuehne+Nagel (transportation), DB Schenker (transportation, German railway operator), BMW Group (automotive industry), LVMH Moët Hennessy Louis Vuitton (luxury goods), H&M (fashion industry), Walmart China (retail industry), Haier (home appliances), ChainwayTSP (developer and producer of RFID tags), the Republic of Cyprus (government), and BYD (automotive industry).

The following diagram shows the list of investment institutions.

Source: dropstab

VeChain Use Cases

Currently, VeChain’s blockchain technology has been widely applied across various industries. Here are some specific industry use cases for VeChain:

1. Supply chain management

VeChain plays a crucial role in supply chain management, particularly in the traceability of food and pharmaceuticals.

• Case Study - Walmart China
  • Application: VeChain collaborates with Walmart China to use blockchain technology to trace food production and logistics processes, ensuring food safety and quality.
  • Impact: It has increased transparency and credibility in the food supply chain, reducing the risks of food fraud and contamination.

2. Automotive Industry

VeChain’s applications in the automotive industry primarily focus on tracing automotive components and managing maintenance records.

• Case Study- BMW
  • Application: VeChain collaborated with BMW to develop a blockchain-based system for car maintenance records, which records and tracks vehicle maintenance histories.
  • Impact: Increased transparency and reliability of car maintenance records, helping used car buyers understand the true condition of vehicles.

3. Luxury Goods

VeChain’s blockchain technology application in luxury goods helps prevent counterfeit products.

• Case study - Louis Vuitton
  • Application: VeChain collaborated with LVMH Group to develop a blockchain-based traceability system to verify the authenticity of luxury goods.
  • Impact: Enhanced transparency in the luxury goods supply chain and credibility of product authenticity, combating the counterfeit market.

VeChain Highlights

• Economic Mechanism: VeChain’s dual-token model allows businesses or individuals to use the VeChainThor blockchain at very low costs. The transaction fee delegation model enables initiating transactions without requiring cryptocurrency upfront.
• Enterprise Solutions: VeChain offers a variety of enterprise solutions including product lifecycle management, supply chain tracking, anti-counterfeiting, and digital marketing. With a strong research and development team and strategic partnerships, VeChain realizes sustainable development goals.
• Wide-ranging Applications: VeChain has successfully implemented applications across multiple industries, including anti-counterfeiting in luxury goods, food and beverage traceability, and digital automotive passports.
• Sustainable Development & Energy Efficiency: Built on principles of sustainability, VeChainThor is designed from its architecture to its business model to promote sustainable development. Each transaction on VeChainThor consumes only 0.000216 kWh of electricity, making it one of the most energy-efficient blockchains with a carbon footprint estimated at 4.46 tons of CO2 emissions per year by 2022, in collaboration with DNV.

VeThor News

• VeChain 2024 Q1 Financial Report: As of the end of the first quarter of 2024, VeChain Foundation’s financial report shows a value of $550,972,484.57 USD.
• Only five days left until the HiVE Summit and the launch of VeBetterDAO! VeBetterDAO aims to become a new milestone in Web3, primarily building a cross-departmental sustainable dApp ecosystem.
• @vefisummer/vebetterdao-%E7%86%B1%E9%96%80%E9%A0%85%E7%9B%AE%E6%94%BB%E7%95%A5-green-ambassador-challenge-%E5%AD%B8%E7%BF%92%E8%B3%BA%E5%8F%96-b3tr-%E4%BB%A3%E5%B9%A3-b673cedefc18">VeBetterDAO Popular Project Strategy — Green Ambassador Challenge to earn $B3TR tokens
• April 2024 Updates:
  • VeBetterDAO — VeChain’s new sustainable dApp platform and community DAO
  • Market as a Service (MaaS) — White-label NFT platform
  • VeChainThor update v2.1.1, new X-Node reward platform
  • VeChain official website upgrade, including Ledger real-time application, VeWorld wallet
  • VORJ — VeChain’s no-code digital asset platform
  • New Software Development Kit (SDK) Beta release

Conclusion

VeChain is a versatile and energy-efficient blockchain platform designed to meet enterprise needs. Its dual-token model effectively manages transaction costs, allowing users to minimize costs using the VeChainThor blockchain. Additionally, VeChain boasts a strong team and globally recognized strategic partners with practical applications across multiple industries, including supply chain management, automotive, and luxury goods. VeChain is committed to sustainable development and developing new solutions, demonstrating strong growth potential. VeChain is a project with significant room for development. Its token economic design aims to reduce the high costs of market fluctuations for enterprises. Therefore, VET and VTHO are not suitable for short-term, high-risk profits. As of the time of writing, VET is priced at 0.02501, with its historical high in April 2021 at 0.2782.