- March 22, 2020
- Posted by: admin
- Categories: Altcoins
Today we are going to take a closer look at an altcoin we have been following since the end of 2017. And we are sure there’s plenty of reasons to continue keeping an eye on this particular cryptocurrency.
Yes, it’s Vechain, a project that is constantly in the TOP 5 in weekly transactions (tick the “remove spam” box to see real transactions) but far from the same place in terms of market cap.
Vechain (VET) is a coin that utilizes the VechainThor blockchain, using a two-token system. The main focus of this project is verifying products by having the whole supply chain on the blockchain.
It works similarly to Ethereum, as anyone can build dApps on the VechainThor blockchain platform. And it is one of the few projects that actually has customers already taking advantage of this option.
For example, it is possible to monitor the whole journey of a single product from the farm to the shop. At every stop, a new record is written onto the chain. Also, tracking the conditions is possible.
That means installing sensors that can alarm the system if the temperature has risen above a recommended predetermined level. And this can be very valuable for temperature-sensitive products like vaccines or food.
Writing data onto the chain requires payment in the form of their own cryptocurrency. And this is where the 2-token system comes into play. All the transactions are paid in Thor. 70% of it gets burned, while the remaining 30% goes towards Authority Nodes. We’ll get into the tokenomics later, though.
Sunny Lu – CEO
The CEO of Vechain is Sunny Lu. An entrepreneur with a background that includes a position as the CIO of Louis Vuitton China and IT Manager at Bacardi China. So he is someone who really knows the effect of counterfeit goods on a brand. Which is one of the reasons that drove him to provide a tracking solution to prove the authenticity of items.
He saw a gap in the market and instantly became a fan of Ethereum. However, he identified some shortcomings in the project that make it unusable for enterprise use. These include:
- Fluctuating transaction costs
- A governance model that slows down development
- Transactions per second (TPS) becoming a bottleneck
So this became the driver for him to create a new blockchain based on the Ethereum model in 2017. The initial scope included supply chain management but grew far wider than this.
Jay Zhang – CFO
The chief finance officer at Vechain is Jay Zhang. He has more than 14 years of experience combined with working for Deloitte and PwC in senior roles. He has been responsible for creating the governance model and leading the digital assets establishment teams at Vechain.
Kevin Feng – COO
Another experienced member of the team, Kevin Feng is the chief operations officer at Vechain. He has over 12 years of experience in cybersecurity, assurance, emerging tech, etc.
Jianliang Gu – CTO
A very experienced developer, having worked in the IT sector for over 18 years by now. Previous positions include the technical director job at TCL. Gu has a Master’s degree in cybernetics from Shanghai University.
This is where Vechain really stands among blockchain companies. There have been many announcements over the years, which requires a whole separate post about Vechain partnerships and customers. Most of them use blockchain based applications to improve their supply chain management.
These include companies that deal with luxury goods, the automotive industry, food & drinks, etc.
Here, though, we are covering the 2 most important partnerships that can have a significant effect on the success of this project.
DNV GL is a global enterprise providing auditing and certification (ISO standards) services. This means they are the ones who determine if a company meets the requirements and issue a certificate to prove it.
They are active in many industries, including the maritime, food & beverage, healthcare and renewable energy industry.
DNV GL is one of the most outspoken partners, presenting the possibilities this paradigm shift in technology brings to the table. Together, DNV GL with Vechain as their technology partner developed a dApp that runs on the VechainThor blockchain platform – My Story.
It is a digital assurance solution to prove the authenticity of foods and beverages on the blockchain through a continuous gathering of the data over the whole supply chain and audits. The more expensive wines can all carry a separate smart chip to include unique data.
And here lies one of the key points – blockchain is just an immutable ledger. If you insert false data, it will just assure that the data cannot be changed afterward. By having DNV GL on board, Vechain has a partner to audit these data sources to assure that the initial input is correct.
Lately, they also transferred all their certificates onto the blockchain, which was seen by many as a strong statement towards the future of collaboration between the two companies.
Another well-known name that has a partnership with Vechain. PwC belongs to the “Big Four” auditing firms in the world and has more than 400 of the Fortune 500 companies as their clients.
The partnership of the two means that PwC introduces Vechain as a solution to their customers looking to improve their supply chain management through the use of blockchain technology.
The Vechain guys have never been a bashful bunch. This section here is why we have even chosen to write about the project. While many say that making great tech will bring in customers, Vechain has made it clear that the key lies with 2 aspects – a solution for enterprises and good communication.
The whole governance model was set up as it is to support this notion. So whenever an obstacle arises regarding usability, they can act quickly and implement changes. This is a pretty unique feature for blockchain companies.
Two of the most significant updates to the chain to accommodate enterprise clients are the MPP and VIP-191.
So let’s start with the first revolutionary idea – the Multi-Party Payment Protocol.
The idea was brought to life after rigorous market research. Vechain has shown it can do more than 160 TPS, which is more than 11x the capacity of the Ethereum blockchain. Many projects are chasing similar results, seeing this as the obstacle between tech and business adoption.
Vechain’s market study showed that while this is definitely a bottleneck, another problem lies with the difficulty of the technology itself. Or actually using it.
Traditionally, the one who wants to write a transaction, has to pay for it. This means that whoever utilizes the blockchain, has to also know about cryptocurrencies. Seems logical but there are better ways. Enter MPP.
The Multi-Party Payment Protocol allows 3 different sources to pay for a transaction:
- The transaction sender (like all blockchains)
- The smart contract account
- The smart contract’s owner
What does it mean and how does it affect usability?
Now let’s say that an item, a handbag, for example, has a smart chip in it. The manufacturer inserted it, using it to write data about the bag’s origins, thus confirming its authenticity.
Now, a public blockchain actually enables to keep on writing data to, for example, give this bag a unique story through a journey of ownership.
But every owner has to pay VTHO to write her name on the blockchain as an owner. Until now. The MPP allows them to write the name, and either the smart contract, or its owner, can do the payment for her. This means that a person who has no knowledge about blockchain can still utilize it through a dedicated dApp and have the transaction be paid for by a third party.
The same system can be applied to various steps throughout the supply chain, for example, where different checkpoints write data with only one source paying for all the transactions.
This has had a great impact on the VechainThor Blockchain. VIP-191, or fee delegation, is utilized in more than 90% of the daily transactions!
It is another way of allowing a 3rd party to pay for a transaction. Here, both the sender and receiver of a TX (transaction) have to be online and sign the transaction. This way, the receiver can pay the Gas (VTHO in Vechain’s case).
So both the sender and receiver have to be online and confirm the transaction. Meanwhile, with MPP, the contract can do so automatically.
The MPP system, however, includes more overhead costs.
Vechain has an off-the-shelf product for enterprise use. It’s called the ToolChain.
Since its inception, it has had a great effect on the adoption of the VechainThor Blockchain. Why? Because it makes adoption easy.
Companies, regardless of size, can sign up to the program and start utilizing the blockchain from the go.
The kit comes with everything necessary, from documentation, APIs, IoT chips, etc. All this makes it the perfect starter-kit, so even small fashion retailers, for example, can benefit from Vechain’s blockchain without extensive work on figuring out how to set it up.
Firstly, Vechain has announced a plethora of customers. Although we are still waiting to see the full effect they are going to have on the chain’s usability in the form of constantly large numbers of transactions, Sunny Lu has confirmed that they are all still in the works.
Similarly to partnerships, we have to make a separate article on Vechain projects. But we will highlight some of the most interesting and prominent ones here in the overview.
Back in June 2019, Walmart announced they will start using the VechainThor Blockchain to track their goods. After that, quite a few images of products with Vechain QR code markers have appeared on the web.
The plans are grandiose with a variety of products, ranging from meat to vegetables and seafood, planned to hit the shelves with a verification code on them.
Time will tell if the China branch of Walmart will become the PoC for using Vechain at Walmart worldwide, or will this project be limited to the Asian branch alone.
While the Walmart partnership came through PwC, this one utilized the partnership with DNV GL.
FoodGates is an intercontinental solution for tracking food and proving its authenticity and origin. The announcement came at the China International Import Expo (CIIE) in 2019. France’s President Emmanuel Macron and China’s respective equivalent in Xi Jinping were also present.
The image of the two eating blockchain-verified meat instantly became a hit with the followers of the Vechain project.
In the Summer of 2018, Vechain announced another national-level partnership in China to track vaccines. Problems with vaccine recalls became the foundation of this deal.
Here, the aforementioned possibility to track temperature sensor activity, for example, can come into play. Verifying the source of the vaccine, along with meeting the requirements during transportation, can significantly reduce the risks in the industry.
The news about Vechain working with different automotive industry leaders has been a known fact for quite some time. BMW is one of them.
The VerifyCar app will create a digital passport for each car that will then show all the relevant vehicle information. This includes mileage, service history, accidents, etc.
An industry with a lot of problems with document falsification can benefit greatly from this kind of a solution.
The list of partnerships really seems like neverending in the context of cryptocurrency projects, but we will limit the examples with the ones above to better conform the article to the concept of “an overview”.
There are, however, many interesting country-level initiatives in the works. And these include others besides China.
Governance Model – PoA
The VechainThor Blockchain platform uses proof of authority as its governance model. This is one of the answers to the aforementioned scalability problem that Ethereum users encounter. But is also one of the main reasons for criticism for Vechain.
So let’s dive deeper to see how it works and why is it seen in both the good and bad light.
Neither total centralization nor total decentralization would be the correct answer, but a comprise and balance of both would.
This is what the Vechain Foundation had to say about the model themselves. The proof of authority system means that a number of assigned organizations and influential individuals are holding nodes. In Vechain’s case, the number is 101.
The Authority Nodes have to comply with the Foundation’s requirements. When not doing so, their power of writing on the blockchain will be revoked and a new node will replace a bad actor.
They, the authority node holders, are responsible for verifying the transactions on the blockchain. The criticism here comes from the fact that only a few of the authority node holders are publicly known. And this results in speculation about the possibility of collusion.
The foundation has said that they are not pushing anyone to reveal their identity but they have the right to come forward. While many have hinted at being a node holder, the community only knows about a few holders for sure – DNV GL, PwC and BMW.
For many, having these three on board is enough, as they definitely know more and are still willing to participate.
Another section of the crypto community thinks that this means nothing until all the nodes are publicly known and some even say that 101 nodes altogether are too little for a proper decentralized model, undermining the whole point of a trustless blockchain.
The VechainThor Blockchain is governed by the Vechain Foundation, a non-profit organization. They, in turn, are governed by the Board of Steering Committee.
Thus, the Steering Committee is responsible for all the updates to the blockchain itself and determining its future. Such a structure helps to keep the organization dynamic and implement changes and updates whenever necessary. Hence, it solves the problem of voting, rendering hard forks and the like unnecessary.
The Steering Committee was also responsible for choosing the 101 nodes from a list of applicants.
While the first Steering Committee was an internal choice, they have now made the membership voting available to all node holders. And there are actually more than the 101 nodes we just talked about. We will get to that in a minute.
The Vechain cryptocurrency only has one purpose – to generate VTHO. VTHO, in turn, is the gas in the VechainThor ecosystem.
The principle is that most of the Thor gets burned during transactions. And every transaction has a certain value which is for the market to decide. This, in turn, determines the price of Thor.
From there, we can say, for instance, that 1,000,000 VET generates nearly 13k VTHO per month. And it is worth a certain amount of $.
The community agrees on viewing VTHO as a dividend. So what is a fair % of dividends per year? Let’s say you generate $200 in VTHO per year and the market agrees that 5% is good.
We can then deduce a value of $4000 for the VET stack generating this amount of VTHO.
While the numbers here are just made up for the example, we can see that this is one of the few projects where you can reasonably arrive at a certain token value.
The Steering Committee has said that they are aiming to hold the price of VTHO at a certain level, once it hits that. In order to do that, they have 2 levers to pull – decrease the cost of a transaction (amount of VTHO required) or raise the VTHO generation rate per VET.
And that is how the value of VET can increase over time, along with speculation of course.
Now the question remains – what is a fair value for a single transaction? We do not know yet as the tokenomics will only start working in the future, with more TXs on the chain.
What we know, however, that some people were, at one point, fearing the cost per transaction had risen too high when VTHO was at it peak price. Sunny Lu’s answer? The customers are getting much more business value compared to the cost of a transaction.
Every Vechain holder generates VTHO, regardless of how much VET he holds. But the node holders are generating a little more and have some other rights to go along with the status.
So, there are many layers to the node system. Here’s the overview.
The highest tier – Thrudheim Nodes, all hold at least 25,000,000 VET.
The 101 Authority Nodes were selected from this bunch. They are responsible for writing the transactions on the blockchain.
All Authority Nodes have completed a full KYC process, so the identity is known to the Foundation. Each is in possession of certain hardware that makes processing transactions possible.
As said, every transaction is paid for in VTHO that gets burned. Still, 30% of the payment goes to the pockets of the Authority Node holders.
When it comes to voting on the VeVote platform (from Steering Committee members to other changes to the blockchain), 30% of the votes are in the hands of these 101 node holders.
You can qualify for a Masternode by just having a certain amount of Vechain in your account. You then need to apply for a node status in the wallet. It takes 10 days for the node to become active.
There are 4 levels to the Masternodes:
- Strength Node – over 1,000,000 VET
- Thunder Node – over 5,000,000 VET
- Mjolnir Node – over 15,000,000 VET
- Thrudheim Node – over 25,000,000 VET
The reward for holding one is an increased production rate for VTHO and voting rights.
X Nodes were handed out to early adopters who, at the time of the inception of the program, had a certain amount of VET in their wallets.
The X Nodes grant a higher VTHO production than regular or Economic Nodes. Also, they come with other privileges like early participation in ICOs and discounts.
Vechain held a rebranding event in 2018 and introduced their roadmap for the coming years:
- 2016 – Exploration & PoC
- 2017-2018 – Assessment of Economic Potential of Blockchain
- 2019-2021 – Regulatory Developments
- 2022-2024 – Growth
- 2025 & beyond – Maturity
While most of the Vechain investors are painstakingly waiting for an explosion of transactions on the blockchain, we can see the project is actually still not in that phase.
The team is working hard to make sure that they align with all the necessary rules to offer their services around the globe. At the same time, onboarding new clients is, of course, an ongoing process.
During the last long Ask Me Anything session, Sunny Lu, the CEO of Vechain said that in 2018, the blockchain had around 500,000 TXs. The number grew to 36 million in 2019.
The forecast for 2020? 5…10x from that. We have some reservations about this forecast, especially in the light of the Coronavirus impact. But still, we should keep the numbers in mind when assessing the strides the project is taking towards achieving its long-term goals.
As you probably know, it’s never a good idea to hold your cryptocurrency on an exchange, although it may be enticing with its simplicity. Also, remember to hold your private keys safe.
Hacks are not that uncommon, so not moving your funds to an external wallet is just a needless risk.
VechainThor Wallet for iOS & Android
Both operation systems have wallets available for download. The VechainThor wallets were developed by the Foundation and passed rigorous testing, providing a safe solution for VET holders.
So although holding your funds on a hardware wallet is usually the best recommendation, these mobile wallets are also safe and the community has been very pleased with the reliability.
Hardware Wallet – Nano Ledger S
The most secure way to hold onto your VET, the Nano Ledger S, is compatible with Vechain tokens. A favorite among VET holders for a safe way to store the tokens, it is still important to remember that keeping the private key to yourself is crucial.
Hardware wallets are pretty much like small USB sticks that make accessing your cryptocurrencies easy and safe. One of the main perks is having the support of many different coins through one device.
Is Vechain a Good Investment?
Firstly, we are not in a position to give any investment advice.
This overview is for people just learning about this project in order to give a better insight into what and how the project is doing.
So DYODD (do your own due diligence) and only then can you decide, if the project is worth an investment.
However, if the prognosis about increasing transactions will come to fruition, soon the whole daily generation of VTHO will be depleted on the go. And this is where it will get interesting, as real-life transactions will start to interfere with market speculation. You can read more here, from our speculative piece on Vechain price prediction.
The ambitions of the project are definitely bold. Various statements about becoming the world leader in the blockchain industry mean nothing without actions. But we can already see the first glimpses of an international organization making waves in various industries, while Vechain’s market cap is lagging behind that status.
So in the cyrptocurrency sphere, which is filled with failed promises, false partnerships and little utilization, Vechain definitely stands out as one of the few projects to keep an eye on.
Again, this should not be taken as investment advice. But once you have done your research and decided to invest nevertheless, we have written a guide for buying Vehcain. It help to pinpoint the best exchanges and give a step-by-step tutorial on how to acquire some VET.