What is VeChain (VET/VTHO)?
in VeChain (VET)
VeChain has a lot going on it seems: VeChain VET, VeChain Thor, VeThor VTHO…let's dive in.
Supply chain tracking is an industry ripe for disruption. Even though the internet has been around for decades, suppliers still track shipments with paper and outdated computer programs. This can create all sorts of problems. For instance, when there is an E.coli breakout, it can take days to track the tainted vegetables back to their source and initiate a recall. There is also a multi-billion dollar counterfeit goods industry, which is partially enabled by all of the ways that supply chain tracking can be exploited.
VeChain hopes to solve these problems. By using blockchain technology, VeChain can create a universal supply chain tracking protocol, which is vastly superior to anything that companies are using today. Already large retailers like Wal-Mart have signed up to use VeChain, and it looks like the project has found a great product-market fit.In this article:
Similar to NEO, the VeChain network has two different tokens. VET is the main token and is used to send value on the network. VTHO (VeChain Thor Energy) is the second token and it’s like gas since it’s used to pay for transactions on the VeChain network.
The more complex the transaction, the more VTHO is required. For example, a regular transaction might cost 50 VTHO while executing a complex smart contract could cost 800 VTHO. When a transaction is sent, 70% of the VTHO is burned and the remaining 30% is given to the Authority Masternode Operators. These are the nodes that validate transactions on the VeChain network.
What’s great about VeChain is that users don’t necessarily have to buy VTHO to pay for transactions. Instead, users can “earn” VTHO just by holding VET. This is somewhat similar to staking, where an investor stakes their crypto to earn a return on it. However, the difference is that VET holders automatically earn VTHO just by holding VET in their wallet. VeChain users can use this calculator to figure out how much VTHO they can earn.
VET is the token that’s used to transact value in the VeChain network. For example, if a distributor wants to pay a supplier using VeChain, they will use the VET token. Of course, one of the benefits of a platform like VeChain is that payments can be automatically triggered, which can radically improve supply chain efficiency.
The shipping company can be paid as soon as they deliver the products to the port. The warehousing company can be paid for their services as soon as the distributor picks up the products and the distributor can be paid as soon as they deliver the products to the retailer.
These payments would benefit everyone in the supply chain since they would clear instantly. Currently, payments through the supply chain can take anywhere from 30 to 90 days to be released, leading to inefficiencies.
VET is also used to secure the VeChain network. Instead of Proof of Work or Proof of Stake, VeChain uses a Proof of Authority (POA) consensus mechanism. The way POA works is that the VeChain foundation only allows certain people and organizations to become block producers. By carefully deciding who can and cannot produce blocks, they can prevent malicious actors from approving illegal transactions (double-spend transactions). The advantage of PoA is that it’s easy to get rid of bad validators. However, the disadvantage is that the system is centralized and can be controlled by a single organization.
To become an Authority Node, a user must be holding at least 25,000,000 VET. The VeChain protocol has a maximum limit of 101 Authority Nodes. There’s also an option to become an “Economic” Node with a minimum VET balance of 1,000,000. Economic Nodes get to vote on transactions, but their votes are not weighed as heavily as an Authority Node’s votes.
VeChain is already working with dozens of large companies like H&M, BMW, PwC and many others. Probably their most famous partnership is with Wal-Mart, where the VeChain blockchain will be used to track produce and other products through the supply chain. A complete list of companies that have partnered with VeChain is available here.
The VeChain official website is a great place to find out news about everything that’s happening with the project. That includes improvements to the protocol, information about new partnerships as well as updates to the roadmap.
The latest version of the whitepaper is available on the VeChain website. It lays out the use case for VeChain, why a Proof of Authority consensus mechanism is beneficial and how the VET token can be used to vote for governance decisions on the network.
For those interested there is also an earlier version of the whitepaper, from 2018, available here.
If you’re going to invest in VeChain, you’ll need a secure wallet to store your tokens. Although the VeChain network is more centralized than Bitcoin or Ethereum, transactions cannot be reversed, and if a hacker steals your coins they’re gone for good.
Exodus is a non-custodial VeChain wallet, which means that nobody else has access to your VET. Keep your seed phrase safe and your coins will always be secure in your wallet. You can also earn VTHO just by holding VET in the Exodus wallet. If you prefer to use a mobile rather than a desktop wallet, Exodus is available for Android or iPhone.
This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.