What is VeChain, and how does it work?

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The fundamental traits of blockchain technology, including decentralization, immutability, transparency and automation, have proven to be capable of several use cases for different businesses. However, due to the costs of creating and maintaining blockchain-powered applications, it can be difficult and expensive for enterprises to fully utilize its benefits.

With the adoption of distributed ledgers, many projects have made efforts to lower the barriers to entry. VeChain is one such blockchain platform built to improve the widespread use of blockchain technology.

One of the most significant issues facing supply chain organizations is a lack of transparency, which blockchain aims to resolve by enabling businesses to conduct transactions directly and without a third party. It also allows data sharing between stakeholders and supports increased integration of financial and logistical services.

This article will discuss what the VeChain public blockchain is, the unique features of VeChain, how VeChain (VET) works, how to buy VeChain and how VeChain staking works.

What is VeChain?

The public blockchain called VeChainThor is intended for widespread use of blockchain technology by companies of all sizes, acting as the building block for a resilient and expandable enterprise blockchain ecosystem.

According to VeChain, Ethereum remains unsuitable for running large-scale commercial decentralized applications (DApps) while being a significant technological milestone. This is because Ethereum does not have a robust governance framework to allow for quick and transparent protocol changes to address emerging issues or breakthroughs.

Also, an appropriate economic model is absent in the Ethereum blockchain, restricting businesses from operating their DApps at a controllable and predictable cost. In addition, given how volatile the price of Ether (ETH) is, companies may not forecast future ETH prices or the expense of maintaining an Ethereum-based decentralized application for a specific time. So, what makes VeChain unique?

The VeChainThor blockchain hopes to address the above issues using meta-transaction features, a proof-of-authority (PoA) consensus method, an on-chain governance mechanism and a unique two-token system.

VeChain meta-transaction features

For enterprise adoption, VeChain’s meta-transaction features, as discussed below, help make the development user-friendly:

  • Multi-party payment: A decentralized application’s freemium model is enabled by flexible transaction fee delegation schemes to onboard users smoothly. With VeChain’s innovative fee delegation protocol, an enterprise can have a smart contract and designated gas account to manage the gas fees necessary to use the network.
  • Controllable transaction lifecycle: Users can set the time when a transaction is executed or expires if it is not included in a block using the Expiration and BlockRef transaction fields.
  • Multi-task transaction: Developers can batch payments, include many calls to various contract functions in a single transaction and control the order of the calls using multi-function atomic transactions.
  • Transaction dependency: Users can set dependencies to stop transactions from being executed until the relevant transaction has been processed, ensuring that the execution order satisfies the business need.

VeChain POA consensus mechanism

VeChain’s PoA consensus mechanism has evolved from PoA 1.0 to PoA 2.0. The original PoA 1.0, implemented at the launch of the VeChainThor blockchain in 2018, relied on Authority Masternodes for block validation, offering efficiency and low energy consumption but facing scalability and financial limitations.

PoA 2.0, introduced in 2022, enhanced the system by improving scalability, security and data finality. It addressed the challenges of PoA 1.0 and aimed to offer a more robust consensus mechanism, reflecting VeChain’s commitment to continuous technological evolution.

VeChain governance

The community-elected Steering Committee, elected by stakeholders, is responsible for strategic decision-making and overseeing VeChain improvement proposals (VIPs). The key benefits of such a system include lower organizational and technical development uncertainty due to role-based voting.

Additionally, VeChain’s model includes community engagement through tokenholder voting, allowing broader participation in key governance decisions.

VeChain dual token economy

The VeChain ecosystem comprises two tokens: VeChain Token (VET) and VeChainThor Energy (VTHO). VET is the primary token for carrying value, or “smart money,” within the ecosystem, enabling investment, transactional activities and stakeholder voting. VTHO, on the other hand, is used as the energy or “gas” to power transactions and smart contracts on the VeChainThor blockchain.

VTHO is generated by holding VET, and it provides a mechanism to decouple the cost of using the blockchain from the market price of VET, thereby stabilizing transaction costs and facilitating efficient resource allocation within the ecosystem.

How does VeChain work?

Let’s understand the workings of VeChain using supply chain management as an example:

Unique identification creation

A unique identification number is given to each product or batch. This might be a near-field communication (NFC) chip, a radio-frequency identification (RFID) tag or a quick response (QR) code. This identifier is essential for monitoring the product’s progress along the supply chain.

Data capture and recording

Relevant data is recorded at every stage of the supply chain, including manufacturing process details, batch numbers, expiration dates, storage circumstances, transit information and other facts. After that, this information is stored on the VeChain blockchain.

Blockchain entry

The captured data is stored on the VeChain blockchain. Every record is time-stamped and connected to the one before it, forming an unchangeable and transparent chain of records.

Smart contracts activation

On the blockchain, smart contracts are pre-written agreements that take effect automatically if specific requirements are met. In the supply chain, this could mean releasing payments, notifying stakeholders when a product reaches a particular location or automatically updating the status of a product.

Real-time tracking and verification

Real-time tracking and verification are possible for all parties involved in the supply chain, including customers, distributors, manufacturers, suppliers and retailers. They can confirm the product’s background and other information by accessing the blockchain.

End-user interaction

To confirm a product’s legitimacy, provenance and other pertinent information, end users can engage with its blockchain record, even by using a smartphone app. This promotes consumer confidence and product authenticity.

Continuous updates and audits

The product’s record on the VeChain blockchain is updated continuously as it progresses through its lifecycle. Due to this ongoing process, the data is updated and auditable for compliance, quality assurance and other uses.

In VeChain’s supply chain management, Know Your Customer (KYC) processes are crucial for verifying the identity of businesses and stakeholders, ensuring that only legitimate entities participate in the network.

Various nodes (such as Authority Masternodes and Economic Nodes) on the blockchain record transactions within this ecosystem. This system maintains the integrity and transparency of the supply chain data, with smart contracts automating key processes like confirming deliveries or payments, ensuring efficient and secure transactions without intermediaries.

But, is the VeChain network secure? VeChain works with a number of security companies, including Hosho, SecureWare, SlowMist and HackenProof, to find potential vulnerabilities and proactively prevent cyber threats.

What is the VeChain ToolChain?

VeChain ToolChain is the key product offered by the VeChainThor blockchain platform. Designed for accessibility, the ToolChain caters to businesses of all sizes, enabling them to implement blockchain technology effortlessly, with applications ranging from product lifecycle management to carbon credit solutions and environmental sustainability reporting.

VeChain ToolChain provides platform-as-a-service (PaaS), software-as-a-service (SaaS) and blockchain-as-a-service (BaaS) to create new strategies for generating value for various stakeholders, promote transparency, and offer insights into product life cycles.

For instance, VeChain’s low-code deployment PaaS allows customers to design process templates and use the built-in tools to avoid creating their own blockchain applications from scratch. In addition, its Food Safety Track & Trace SaaS offers the food and beverage industry a range of easily deployable traceability features, such as quality certificates, to communicate and reliably increase brand recognition.

Through BaaS, VeChain offers a restful API for standardized smart contract services. Two computer systems use the restful API, an application programming interface, to exchange information safely over the internet.

History of VeChain: Who is behind VeChain?

Sunny Lu, former chief information officer of Louis Vuitton China, and Changpeng Zhao, Chinese-Canadian founder and ex-CEO of Binance, founded VeChain in 2015 as a subsidiary of Bitse, an organization that provides blockchain-powered solutions. The VEN token once operated on the Ethereum platform, but in 2018, VeChain switched to its own blockchain and rebranded itself as the VeChainThor blockchain.

VET, the main token, has a fixed max supply, with a portion in circulation and the rest allocated for enterprise investors, the team and ongoing development. VeChain implements a VTHO burning mechanism to maintain equilibrium, where a portion of VTHO used in transactions is destroyed, balancing the supply-and-demand dynamics and ensuring the stability of transaction costs.

VeChainThor is used in various industries, including agriculture, pharmaceuticals and automobiles, to improve supply chains’ effectiveness, transparency and affordability. Utilizing RFID sensors, the blockchain tracks goods along the supply chain to guarantee proper handling and authenticity. This adoption by several Fortune 500 companies, including BMW, Walmart, LVMH, Deloitte, Renault and PricewaterhouseCoopers, reflects its real-world application and effectiveness​.

Related: How blockchain technology is used in supply chain management

How to buy VeChain (VET)

Depending on your jurisdiction, choose a crypto exchange that supports VeChain (VET) cryptocurrency and download a wallet to store your tokens. Alternatively, storing your tokens in the exchange wallet is an option; however, it comes with the risk of “not your keys, not your coins.”

VeChain has also developed the VeChainThor Wallet specifically for its own cryptocurrency, which is compatible with both Android and iOS. However, VeChain tokens are incompatible with wallets like MetaMask since VET and VTHO are not based on the Ethereum blockchain. The final step is to purchase VET tokens for the amount you desire and transfer them to the wallet of your choice for safekeeping.

To buy VeChain (VET) on Coinbase, the key steps include the following:

  • Account creation: The individual should download the Coinbase app and initiate the sign-up process, providing a valid ID and, if required, proof of address. The ID verification process may vary in duration depending on the user’s location.
  • Add a payment method: The user needs to add a payment method by selecting the payment method box in the app. Available options include linking a bank account, using a debit card or initiating a wire transfer.
  • Initiating a trade: On the Coinbase website, the user should select “Buy and Sell.” The mobile app achieves this by tapping the “( + ) Buy” option on the “Home” tab.
  • Selecting VeChain: To choose VET, the user should use the “Buy” panel on the website or the search bar in the app to find and choose VeChain.
  • Entering purchase amount: The individual must input the desired expenditure in their local currency. The app automatically calculates the equivalent amount in VeChain.
  • Finalizing the purchase: The user can review the details by tapping “Preview buy.” They confirm the transaction by clicking “Buy Now” if all is satisfactory.
  • Confirmation: After the order is processed, a confirmation screen appears, indicating the successful purchase of VET.

Apart from buying VET, can you make passive income with VeChain? Typically, users must first buy other cryptocurrencies like Bitcoin (BTC) and then trade their BTC for VET after locating a wallet or exchange that supports VeChain staking. There aren’t any staking pools where one can combine VET investments to earn more VTHO, unlike other cryptocurrencies.

Related: How to earn passive crypto income with Bitcoin

Does VeChain have NFTs

Along with VeChain’s use cases in the supply chain, its nonfungible token (NFT) ecosystem is also thriving. For creating and trading VIP-181 tokens that are kept on the VeChain blockchain, there is a decentralized NFT marketplace called VeSea. The VeChain Foundation introduced the VIP-181 Standard, which enables fundamental functionality for tokens within smart contracts.

NFT marketplaces: VeSea and World of V

VeSea is a decentralized NFT marketplace on the VeChain blockchain where users can buy, sell and discover VeChain NFT collections, including VeKings, Veysarum and others. Users require a VeChain-compatible wallet to interact with NFTs on VeSea. VeChain Sync2 and VeChainThor Wallet are among the compatible wallets.

World of V is another VeChain NFT marketplace that is compatible with the Sync2 wallet. This platform facilitates the creation and collection of NFTs with no gas fees. It supports the minting of new NFT projects and allows NFT owners to stake their NFTs in the creator ecosystem.

NFT collections: VeKings and Paper Project

The VeKings collection initially consisted of 9,999 artworks of vikings and valkyries issued by the creators of the VeSea NFT marketplace. This collection has undergone periodic burn events, reducing the total supply. As per VeChainstats.com, there are 6,866 NFTs in circulation, with 3,133 NFTs burned.

The Paper Project Alpha Collection is an interactive work by Emmet Ahlstrom, an artist residing in Southern California. This collection consists of 11,880 individually generated NFTs.

What is the VeUSD stablecoin?

Stablecoin VeUSD was created on the VeChainThor blockchain with the goal of offering a stable digital currency choice for users within the VeChain network. Announced on Jan. 5, 2022, VeUSD is pegged 1:1 to the United States dollar, ensuring its value remains stable against the fiat currency. This peg is maintained through equivalent reserves of U.S. dollars, which back the stablecoin.

VeUSD was officially launched for public minting on March 14, 2022, marking a significant development in the VeChain platform. It seeks to provide the advantages of cryptocurrencies, such as digital speed, ease of use and security while avoiding their notorious volatility.

VeUSD enhances the utility and scalability of the VeChain network by being utilized for various transactions inside the VeChain ecosystem, such as payments and remittances, and serving as a reliable medium of exchange for decentralized finance (DeFi) apps.

Is VeChain (VET) a good investment?

VeChain aims to accelerate the mass adoption of blockchain technology by addressing issues such as the high cost of maintaining an Ethereum-based DApp. Despite VeChain’s use cases in supply chain management and other industries, investment choice depends upon one’s financial objectives and risk-return profile.

That said, investing in a cryptocurrency in which you feel you need more confidence can be risky, and you may lose your hard-earned money. Therefore, determine your asset-allocation decisions based on your expectations for returns on your investment.

The future of VeChain

VeChain is a layer-1 smart contract platform that allows developers to create unique smart contracts and DApps on top of it. Its applications in logistics, supply chain management and other industries help businesses enhance their operations. However, from an investment perspective, one must always weigh the pros and cons before making portfolio allocations.

As the future is uncertain, the same goes for VeChain; it cannot be predicted if VeChain will become the new Ethereum. Whatever the case, it will be exciting to see how VeChain will compete with its rivals and offer distinct solutions to achieve a competitive edge.