VeChain is an innovative platform that seeks to create real-world business solutions using blockchain technology to increase the efficiency of supply chain management and business operations. Essentially, by using Internet of Things (IoT) connectivity and distributed ledger transparency, the VeChain ecosystem is designed to provide businesses with a more transparent flow of data and information.
When investors ask, What is Vechain?, the simple answer is that VeChain’s goal is to make businesses more efficient, traceable, and transparent while minimizing costs.
Of course, with VET coin as the 38th largest form of crypto as of March 3, 2022, VeChain continues to evolve its approach to offering more sophisticated business solutions via the blockchain. Keep reading to learn more about VeChain and its two tokens, VET crypto and VTHO, which power transactions on the VeChain platform.
How Does VeChain (VET) Work?
What is VeChain, VET crypto, the VTHO coin, and how do they all work together? The founding white paper describes VeChain as a “public blockchain designed for mass adoption of blockchain technology by business users of all sizes.”
VeChain also offers a software protocol designed to help businesses discover new efficiencies in their supply chains — and leverage the separate VeChain Thor blockchain to build decentralized applications (dApps). VeChain solutions can enable businesses to connect their real-world operations with blockchain-based services and apply them to an impressive range of use cases (from NFTs to consumer goods, gaming, and more).
How VeChain Evolved
VeChain, which originally launched on the Ethereum blockchain, has evolved its own blockchain largely in reaction to challenges endemic to the Ethereum platform, stating in its white paper: “Ethereum has proven to be unsuitable for hosting large-scale commercial decentralized applications (dApps). …. Secondly, Ethereum lacks a suitable economic model to allow enterprises to run their dApps with a controllable and predictable cost.”
VeChain created the VeChain Thor blockchain to support greater enterprise-scale use of blockchain technology. And it evolved as a two-token platform to address the second point about the need for predictable business costs.
A Two-Token System
VeChain has created a two-token system that aims to mitigate the speculation that is rampant in crypto markets, and separate VET coin, which is a store of value, from the operating costs of the platform, which are paid using VTHO, similar to the use of gas on Ethereum.
The goal of this system in using two different types of crypto is to keep VTHO relatively stable, and allow businesses to better predict the costs of their transactions instead of being subject to the volatility brought on by token speculators.
The VeChain Business Tool Kit
The main product of VeChain is called the VeChain ToolChain. This is a blockchain platform featuring blockchain-as-a-service (BaaS), platform-as-a-service (PaaS), and software-as-a-service (SaaS) solutions to help businesses utilize blockchain-powered solutions.
The PaaS part of VeChain ToolChain gives developers tools to program dApps without requiring a lot of coding. There are also services such as:
• a digital carbon footprint solution
• a food traceability platform
• a risk self-assessment application called VeTrust
So, what is VeChain used for? Basically, VeChain ToolChain aids businesses in using blockchain tech without having to build things from scratch.
A Unique Consensus Mechanism
To regulate the process in which transactions between users are verified and added to VeChain’s public ledger, VeChain Thor uses a consensus mechanism known as proof of authority (PoA). With the PoA protocol, votes are allotted based on VET holdings, as well as user disclosures. VET holders without know-your-customer (KYC) credentials, and with 1 million tokens, are given 20% of all votes. VET holders with KYC and the same amount in their accounts are responsible for 30% of all votes.
Unlike the Bitcoin system, which requires all nodes to vote on a transaction before reaching consensus, VeChain operates using a network of master nodes responsible for reaching consensus on transactions in VeChain’s blockchain.
While using a PoA mechanism helps process large transaction volumes rapidly, the disadvantage of its approach is that it relies on a central authority to check and authorize users who can take part in processing transactions. Consensus mechanisms are one way that different crypto platforms distinguish themselves.
Advantages and Disadvantages of VeChain (VET)
With its focus on scalable, enterprise blockchain solutions, VeChain comes with some pros and cons.
Advantages
First, per their mission statement, VeChain has successfully forged partnerships with global and/or multi-national corporations, offering real-world services and solutions.
To accomplish this, the platform has managed to flex its blockchain capabilities and combine them with IoT functionality to provide greater transparency for monitoring and managing supply chains in response to modern high-tech business challenges.
The use of a two-token system has helped to keep transaction costs more predictable.
Disadvantages
Although the proof-of-authority consensus system is an interesting middle ground between proof-of-work and proof-of-stake, some users question the mix of having a more centralized form of authority on a decentralized platform.
Also, the cost of setting up a master node and being able to stake VET and vote on issues of governance requires a pretty big deposit.
VeChain faces stiff competition in the world of supply-chain management (blockchain based or not), and its focus on allowing businesses to create their own dApps is no longer an advantage in today’s crowded market.
Advantages | Disadvantages |
• VeChain has attained successful partnerships with global firms. | • Vechain’s PoA system may not be as efficient as it sounds. |
• The two-token system keeps transaction costs more predictable. | • Higher costs to set up/run a node. |
• Its focus on scalable, transparent business solutions may give it an edge. | • Faces stiff competition for its services. |
Who Created VeChain (VET)?
VeChain was created by an entrepreneur named Sunny Lu. His stated goal with the project was to “build a leading enterprise-focused dApp/blockchain application platform for products, services, and data.”
Lu later worked at an information, technology, and services company called Netstar. At Netstar, he learned the importance of data tracking, which gave him the inspiration to start VeChain. He then took positions at large companies like 3M China and Louis Vuitton China, where he was CIO.
In 2013, Su learned about blockchain technology and founded a company called BitSE, which eventually led to the creation of VeChain. VeChain’s initial VEN token launched on the Ethereum blockchain. VeChain transitioned onto its own blockchain and rebranded itself in 2018, becoming the VeChainThor (VET) blockchain.
Why Does VeChain (VET) Have Value?
VET is the main cryptocurrency powering VeChain and can be used for holding (or “hodling” in crypto-slang), spending, or staking. That said, users who build dApps on VeChain will need VTHO to pay for transactions. And if those applications prove popular, the demand for VET could rise.
Additionally, users who hold and stake VET tokens have the ability to vote on changes to the VeChain network, including increasing or decreasing the VTHO supply.
VeChain has partnerships with an array of companies, from a luxury goods manufacturer to a multinational retailer to a global consulting firm. These relationships may signal that businesses may be taking advantage of VeChain’s real-world capabilities and solutions.
Price of VeChain (VET)
VET is worth about $0.054 as of March 3, 2022, with a market cap of $3.4 billion and a circulating supply of about 64.3 billion VET.
Like many other cryptocurrencies, the supply of VET tokens is limited, meaning that there will only ever be 86.7 billion VET.
Why Use VeChain (VET)?
Businesses might be interested in using the various tools offered by the VeChain ecosystem to assist with things like supply chain management and the deployment of smart contracts.
Users may also find VeChain appealing because of its ability to support anti-counterfeit and quality-control measures for various products.
Last, the dual-token system helps keep transaction costs relatively stable, which may appeal to companies seeking to move more of their operations onto the blockchain.
How Can I Buy VeChain (VET)?
You may have to do a little research to find platforms that enable VET trades. Also, be sure to review how crypto exchanges work, as well as any fees that may apply.
Step 1: Choose an exchange and fund your account.
Set up a crypto trading account and then fund your account with a secure wire transfer from your bank, or even with a credit or debit card transfer (but check with your bank in the case of restrictions). Fees may apply.
Step 2: Set up a wallet to store your assets.
Just as you might keep money in a physical wallet, cryptocurrencies are held in digital “wallets.” Be sure to select a crypto wallet that supports VET.
Note that some crypto exchange accounts come with a custodial wallet, and there may be restrictions about moving your crypto off-platform.
Step 3. Trade VET!
Once you’ve executed the trade, you can transfer your holdings to your wallet. You may want to leave your holdings there if you plan to keep trading.
Sharing Personal Data
Depending on where you choose to trade your crypto, different platforms may require different forms of identification. Some exchanges adhere to Know Your Customer (KYC) rules, a common set of standards that require investors to disclose certain information. Others may allow anonymous or P2P transactions.
Associated Costs
Similar to trading securities, there are fees to consider when trading crypto. Be sure to understand the associated costs that may come with trading crypto on one platform versus another, or using one form of payment versus another.
How to Sell VeChain (VET)
Once you’ve decided to sell your VET, the next step is deciding whether you plan to cash out for a fiat currency like U.S. dollars (USD) or trade another type of crypto.
Step 1. Decide what to trade.
If you’re exchanging VET for USD, the steps may be different than if you’re buying another form of crypto — or you may have to complete a more extensive KYC identification.
Step 2. Find the best price.
Crypto prices fluctuate by the minute, so do your research beforehand so you know a good offer when you see one.
Step 3. Sell VET.
Complete the trade and move your crypto (or cash) to your wallet, unless you plan to keep trading on the exchange.
Step 4. Keep taxes in mind.
Remember that crypto gains are subject to taxes. Be sure to consider the tax implications of selling VET coin, and consult a professional as needed.
Does VeChain (VET) Have Staking?
Yes. Even though VeChain doesn’t follow a proof-of-stake consensus model, the platform does allow users to stake their crypto. Users can buy VET and stake them to earn VTHO. Unlike with other cryptos, however, there aren’t any “pools” where you can combine VET stakes to earn more VTHO.
To stake VeChain, users will need a VeChain wallet that allows for staking.
The Takeaway
The VeChain project seeks to use blockchain technology and IoT integrations to give businesses real-world solutions to supply chain issues and other modern business operational challenges.
VeChain, which originally launched on Ethereum, created the VeChain Thor blockchain to support greater enterprise-scale use of blockchain technology largely in response to certain challenges the VeChain founders perceived on Ethereum.
In addition, its unusual Proof of Authority (PoA) consensus protocol combines some aspects of decentralization, with some of the oversight from centralization.
VeChain offers a software package known as VeChain ToolChain. This features blockchain-as-a-service (BaaS), platform-as-a-service (PaaS), and software-as-a-service (SaaS) solutions to help businesses leverage blockchain-powered business strategies.
