What Is Vechain?

Sep 24, 2021

Defining VeChain

VeChain is an interesting company that uses blockchain technology to enhance supply chain solutions. The company was founded in 2015 in China, and has since grown in scope and size. Via blockchain, corporations in various industries can track the movement of their inventories around the world, and end-users like you can use VeChain to verify the authenticity of the goods you buy. 

The exploding demand for luxury goods in China has opened up the floodgates for counterfeit goods. VeChain was initially conceived to help luxury brands prevent counterfeiting and help buyers avoid it. The scope of its supply chain includes enhancement application and value proposition.

Chief among the enhancements are improved transparency in the supply chain for better quality control and supplier management, reduced cost to acquire third party verification services for the product, and the ability to collaborate with insurance companies to provide microinsurance on products.

The value proposition perfectly addresses food supply chain problems, specifically the difficulty of really knowing where your food has come from and in what conditions it was shipped. VeChain attempts to tackle this problem with an Internet of Things (IoT) application that utilizes physical sensors with an irrevocable connection to the blockchain.

VET, the namesake cryptocurrency for VeChain, has gained a huge following, helping the crypto regularly rank among the top 30 cryptos by market cap. VET was the payment token within the VeChain ecosystem before VTHO. The more VET you or your enterprise holds on the VeChain platform, the more resource priority you receive from the network.

VeChain is one of a few blockchain projects that has successfully integrated cryptocurrency into a real-world high-end solution. Let’s dive into this project and see how and why VeChain is so popular today.

 

Supply Chain Meets Blockchain

The main solution VeChain offers the industry is relatively straightforward, unlike many of the finance-related platforms in the blockchain and crypto world. Basically,

VeChain prevents counterfeiting by assigning a unique ID to every unit that a company transports from its factory to the store. If that Gucci bag doesn’t have a scannable ID, how can you be sure it isn’t counterfeit?

Despite the apparent simplicity of its solution, there are many working parts that make it possible. First of all, the company has physical sensors that help companies track their goods. Secondly, VeChain has its own blockchain platform that has not been on Ethereum since 2018. The third, and technically fourth, parts are the two cryptocurrencies on the platform - VET and VTHO.

VeChain Sensors

You already know that VeChain is a blockchain that allows you to track the movement of goods in a supply chain and prevent counterfeiting of luxury goods. But how can a blockchain, which is just code deployed over the internet, help track goods in the physical world? In the case of VeChain, the answer is physical sensors. 

VeChain sensors, according to docs on VeChain’s website, are “devices for monitoring and recording of temperature, humidity and accelerator. With their embedded NFC interface plus direct connection of internal temperature, humidity, accelerator sensors, and batteries, they can be easily used in the cold chain industry,” like pharmaceuticals and food.

The sensors make up the IoT aspect of VeChain. Physical sensors store data on items in transit. That data can be accessed by users of the blockchain.

VeChain sensors can be configured to store additional information such as GPS positioning, account number, and time; they include an authentication key function and can also check battery capacity. This functionality means that the sensors can be used for a wide array of tracking applications. 

The whitepaper outlines how VeChain may best be used for food supply chains and pharmaceuticals. Keeping food and drugs at the right temperature is imperative in keeping people healthy. Unfortunately, many people get sick from eating food that was stored improperly in transit. VeChain sensors can detect abnormalities before food or drugs hit the shelves.

The Platform - VeChainThor

The second major working part in VeChain is the VeChainThor mainnet platform. Although the entire VeChain ecosystem is not as deeply steeped in Norse mythology as Thorchain, VeChainThor is a powerful, versatile platform. 

VeChainThor is a public blockchain where users can deploy their own dApps. Since the platform has been designed specifically with scalability in mind, greater activity on the network should not slow down transactions, as is currently the case with many networks, including Ethereum. 

The blockchain is one of a few that utilizes a Proof of Authority (PoA) consensus algorithm. The VeChain whitepaper explains that the developers went with PoA because it demands nodes to be authorized in order to participate in the blockchain consensus.

As a result, there is no need for nodes to spend vast amounts of resources to compete with each other. In addition, richer nodes do not have more advantages than other nodes in the system. This arrangement increases efficiency and equality across the network.

Some limitations of PoA make it possible, however, for a single node to manipulate the network when it has the authority to create a new block. 

You can check all transaction data on the network through VeChain Explorer, which works similarly to Etherscan or BSCscan. VeChain also has a dedicated wallet app called VeChain Sync for users to move their tokens on-chain with ease.

Hundreds of businesses have deployed dApps on VeChainThor already and use it in their day-to-day operations. This is a simple testament to the utility VeChain provides real-life businesses via blockchain. Since so much business relating to internal supply chains and international trade is done via the internet, it only makes sense for savvy business owners to seamlessly upgrade their existing systems to increase efficiency and raise the bottom line.

VET And VTHO Cryptocurrencies

The VeChain ecosystem now features a two-token model. When it launched, there was only the ERC-20 VET token, which is the namesake of the company - VeChain. VTHO is the native token to the VeChainThor blockchain, and is used to pay transaction fees on the network. 

VET is essentially a store-of-value token. You can buy VET, the ERC-20 token, and bank on its speculative value increasing over time. You may even catch a pump if you can read the market properly. But aside from that, there is not much utility in VET, especially since VeChain has launched its own mainnet. 

VTHO has a notably greater amount of inherent utility than its sister token. VTHO is the native coin on the VeChainThor blockchain. You can use it to pay gas fees on the network in the same way that ETH is used to pay gas on Ethereum, or BNB is used to pay gas on BSC. Anytime you make a transaction on VeChainThor, you need to pay for the computational power required to write the data on a block. The cost varies based on the amount of data being written.

VTHO has an elastic supply, which at any time is determined by current velocity of the token - token velocity refers to the amount and proportion of the total in which a currency changes hands. This can be affected by volume of transactions and gas fees. Such a design leaves the field open for VeChain to increase its scalability since the foundation can increase supply to reduce fees, which would stimulate adoption.

 

Takeaways

VeChain has become one of the most widely-adopted blockchain projects in the world in regard to real-world solutions. Growing demand among major transnational industrial players is evidenced by the inclusion of Price Waterhouse Cooper, Kuehne & Nagel, and Groupe Renault, among many other billion-dollar corporations that use VeChain’s solutions.

As a result, you can surely expect to see VeChain deploy more solutions that other industries will find great utility in. 

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