- March 29, 2020
- Posted by: Andreas
- Categories: Altcoins, Crypto Market
We do not usually make posts about price predictions. Technical analysis provides little insights towards long-term prospects. And a historical view is not reliable either.
With Vechain, there is a good reason for some speculation, though. Why? Because we can actually implement some maths to reach a sensible price-point for the future.
Let’s see how it goes.
A Little Bit of Background
First, let’s talk what the Vechain project is about. For a longer analysis, please refer to our overview article of Vechain.
The VechainThor blockchain was established in 2017. It is a blockchain platform that anyone can use to build their dApps on. Basically, it is largely similar to Ethereum in that matter and even the code was based on theirs.
What makes it different is the governance, tokenomics and pretty much everything else. Vechain uses blockchain technology to bring more efficiency to supply chain management. So, the dApps are also largely revolving around this use-case.
The distributed ledger has 101 Authority Nodes that take care of writing the transactions on the blockchain. Every node has a full copy of the ledger, making sure that the information is the same all over the network.
The Vechain ecosystem includes many high-profile companies, including DNV GL and PwC. They sided with the Vechain Foundation in order to cooperate, developing the platform in a manner that would suit their clients’ needs.
As a result, the world’s largest supermarket chain, Walmart, is using Vechain’s blockchain technology to improve the efficiency of supply chain management. And this is only one example of many, albeit the biggest one yet.
VET and VTHO
The transactions on the Vechain blockchain are largely for writing data during an object’s journey over the whole supply chain.
And writing data, or making a transaction costs. They are paid in VTHO, the digital currency for paying for transactions. This is the second token in the Vechain system, with VET being the main token.
The Vechain token, or VET, has one purpose – to generate Thor (VTHO). So a business can simply top up with VET and cover all their transaction costs in the future without buying any extra VTHO from the market. At least in case, they evaluate their future transactions rightly and therefore have enough generation going on.
How much does a transaction cost?
The costs vary quite widely, depending on what you are doing. Sending VET from one wallet to another may cost you about 30 VTHO, while smart contract-related transactions may cost somewhere around 1000 VTHO.
There is also a difference between a transaction and a clause but we’ll skip that part for simplicity’s sake.
We can say, based on stats, that the average transaction costs about 47 VTHO. When the price of VTHO was around $0.001 and the community was speculating if this is too much for a single TX, Sunny Lu gave an answer. A transaction with such a cost still provides more value to the customer compared to the cost.
How much of VTHO is gets burned during a transaction?
Currently, daily transactions are reaching about 100K. This results in about 5.5M VTHO paid. 70% of that gets burned and the remaining 30% is distributed to the Authority Nodes.
How much VTHO is generated daily?
Each VET generates 0.000432 VTHO per day. The total number of VET is around 87 billion. Therefore, every day about 36 million VTHO is generated.
How much VTHO gets burned daily?
At the current rate, about 4 million VTHO gets burned every day. This makes for a large surplus of this digital currency but should the transactions ramp up at one point, the liquidity will be necessary.
How many transactions are needed to burn the daily supply?
About 900,000 transactions will burn all the daily generation of VTHO.
So, a 9x increase in transaction volume, compared to today, will result in a depletion of the daily generation. If we take into account everything that the CEO, Sunny Lu has said, achieving this goal is by no means an impossible task.
Rather, they see it as an inevitability that will still happen before the end of 2020.
Price Forecast for the Near Future
So the market cap and price of both the VET and VTHO tokens are fluctuating based on market whims. Everything is still based on speculation.
But once the VTHO burn rate closes down on the generation rate, the tokenomics will kick in. So we are going to base our Vechain price prediction on that.
For the sake of making this calculation, we can forget the current VET and VTHO prices, as they mean pretty much nothing, moving in correlation with the whole market.
What we need is a price for VTHO. We’ll rely on Sunny’s words that a price of $0.001 per VTHO is still reasonable for customers.
Although emerging startups pretty much never pay dividends, this one has it, in principle, built-in. Of course it’s not exactly the same as a dividend but this is the closest comparison to make here.
What is a reasonable “dividend” then? Companies like Apple and Microsoft pay around 3%. So let’s use this in our calculation.
Lastly, let’s take an amount of VET to hold – 100,000. This amount of VET generates 15,330 VTHO per year.
The intrinsic value of VET
To sum everything up, here are our base points:
- All generated VTHO gets burned daily (needs 9x increase in transactions compared to today)
- A reasonable price for VTHO is $0.001
- A reasonable “dividend” is 3%
- We are holding 100,000 VET
The 100,000 VET gives us 15,330 VTHO every year, as said. Translating it into FIAT, it makes for 15 dollars and 33 cents.
What would be the VET price, if the market says that 3% is a reasonable “dividend”? 511 dollars for the 100,000 VET. The price per a single Vechain token would be $0.0051.
So, deducing the value from the pieces we have gathered (Sunny’s estimation on value) and predicting a larger usage of the network, this is what we get. And it’s actually almost twice as much as the current market value at the time of writing.
Can Vechain (VET) Reach $1?
One of the reasons why so many are asking a Vechain price prediction is probably related to the nodes. The lowest node holds 1,000,000 VET. And a $1 valuation would make them these holders their first million.
Truth be told, there is no way to know for sure.
Getting up to $0.0051 itself requires a 9x increase in transactions (with our set parameters, of course). If we just use the same model to reach $1, we would need a further 306x increase from the whole burn rate. This means a total of 183 million transactions per day!
As many of the Vechain partnerships and customers are still taking their first steps and are barely out of the PoC phase, it’s way too early to say anything about the probability of such a scenario. At the same time, many of the partners include companies owned by the Chinese Government.
Of course, we are absolutely omitting the irrational crypto market here. $1 per VET would give a total market cap of 55 billion dollars. We have seen many a coin achieve that number without anything to show for it.
The Importance of speculation
As soon as the project bursts into life, actual price pressure builds up because of customers looking to buy VTHO on the open market. We can safely assume that should Vechain reach anything near that kind of use, the price will pick up just based on speculation about a possible further increase in use.
Still, we remain skeptical until we are actually seeing numbers a lot larger than the current ones on the mainnet with some regularity.
The Vechain project should reach, according to their roadmap, maturity by 2025. So if we’ll ever see $1, the price in 2025 should already at least reflect this possibility.
This piece is in no way meant to be used as investment advice, as we are not authorized to give any recommendations!
We do hope you liked this speculative piece. As said before, we do not really like such posts comparing cryptos based on historical prices or TA. But Vechain gives an opportunity to look at the future price from a different angle. And Vechain really stands out with ties to the Chinese Government, amongst other important partnerships.
The clear framework for tokenomics enables making some assumptions with pretty mathematical consequences. So the Vechain (VET) price prediction is based on more than market speculation. Still, all this above involves speculative conclusions on Sunny’s comments from the past.
Should this be your last piece of research before plunging in, we also have a throguh tutorial on how to buy Vechain.