What is VeChain (VET)? The Blockchain for Supply Chains Explained
What is VeChain? VeChain is a blockchain company, whose network, the VeChainThor, is designed for enterprises. Within its ecosystem, dozens of real business solutions could.
What is VeChain?
VeChain is a blockchain company, whose network, the VeChainThor, is designed for enterprises. Within its ecosystem, dozens of real business solutions could be found, such as supply chain management, logistics, manufacturing, and customer protection.
Since the company’s establishment in 2015, VeChain has secured an impressive list of companies and brands that have been benefiting from the blockchain network. Many of these companies are part of the Fortune 500 list, making VeChainThor and its two tokens, VET and VTHO, undervalued in the eyes of many crypto investors.
What is VeChainThor?
VeChainThor is a public blockchain that is based on Ethereum. This means companies can run decentralised applications (or DApps) on VeChainThor in similar ways as many DApps can run on Ethereum.
However, VeChainThor is significantly different from Ethereum in many ways. Ethereum has been the prime ecosystem for many decentralised and anonymous financial services, such as P2P lending, liquidity pools, and ‘yield farming’.
VeChainThor as a network is neither too decentralised or too centralised, and neither anonymous nor too revealing. It has successfully inherited the robust security features of legacy blockchains, but has remained grounded within regulatory frameworks to provide solutions that all enterprises can easily attain.
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How does VeChain work?
While decentralised financial applications have been the best-known use case for blockchain technology due to the widespread adoption of cryptocurrencies, blockchain itself is more than just for minting tokens and exchanging value through them.
Blockchain technology offers immutability to digital records.
Once any type of data is recorded inside of a blockchain, it is forever tamper-proof and extremely difficult to corrupt. This makes blockchain technology ideal for use cases where tamper-proof records are necessary.
If you think about it, almost all business operations around the world require some form of secure and immutable historical records.
This is where VeChainThor comes in to fulfill the needs of various companies for industrial and commercial use cases.
Below are just some of the many use cases of VeChainThor:
Many auditing firms like DNV have spent years building trust to deliver high-standard auditing, accreditation, and classification services for businesses worldwide. Blockchain technology practically reduces or even eliminates the need for trust.
For customers and businesses, audits are backed up by the indisputable and tamper-proof evidence that is recorded on the VeChainThor blockchain. For DNV, the blockchain gives more power and authority to their services.
In supply chain management, companies need to keep track of raw materials and finished goods as they exchange hands through various processors and distributors.
For example, food traceability is crucial for public health, and VeChain has partnered with Walmart China to provide immutable records of origin, handling, processing, and even sourcing of many food products.
German car manufacturer BMW has also partnered with VeChain to fight against mileage fraud of used cars. The blockchain-powered VerifyCar app was developed so that car owners can prove that they have not tampered with the odometer, the indicator most often correlated with the overall health and quality of the car.
VeChain has worked together with China, Cyprus, and San Marino on a national level, to improve the authority of government agencies concerning tax and certifications, the transparency of banking services, and the effectiveness of public health and sustainability programmes.
Latest rates: Click here to view the latest prices for (VET).
What is the difference between VET and VTHO tokens?
Another unique feature of the VeChainThor blockchain is the use of two distinct crypto tokens — the VeChain token (VET) and the VeThor token (VTHO). The whitepaper states that the relationship between the two tokens offers stability to the token economy of VeChainThor. Here is how they both work.
VeChain token (VET) is a governance token
VeChain tokens give shareholders equity to the blockchain. In other words, a holder of VET is part owner of the blockchain. However, one requires a certain amount of VET in order to have significant voting rights over the development of the blockchain.
VET is used as collateral for VeChainThor’s Proof of Authority consensus protocol. At the time of writing, VeChain allows up to 101 Authority Nodes, which are nodes that have the authority to validate transactions and finalises the state of the next block in the blockchain.
Authority Nodes need to stake 25 million VETs and have to go through a rigorous vetting process because Authority Nodes cannot be anonymous. In some regard, Authority Nodes also stake their name and reputation. To find out more about how companies become Authority Nodes, head over to their official guide.
VeChain token (VET) is an ideal store of value
The VET token has a limited supply of 86.7 billion tokens.
Just like Bitcoin and many other cryptocurrencies out there, VET has a limited supply cap. This makes VET an ideal store of value, whereby the bigger the VeChain network, the more VET will be in great demand.
Another interesting feature of VET is that it generates VTHO tokens, meaning that a VET holder will be given a ‘dividend’ of 0.000432 VTHO per VET per day. In some regard, this is similar to having a share of stock of a company.
VET is also used as payment within a smart contract agreement (e.g. a business purchasing goods or services from another business will use VET).
VeThor (VTHO) is an operating token
VTHO is used to operate on the blockchain. In order to run smart contracts, companies must pay a transaction fee (or ‘gas’ fee) in VTHO. Running a smart contract on VeChainThor will result in the destruction (or ‘burning’) of 70% of the VTHO fees paid. The other 30% is given to Authority Nodes as payment for processing transactions or data input.
VeThor (VTHO) is an ideal medium of exchange
As you may expect, VTHO is an inflationary cryptocurrency that has no supply cap. It does however have a consistent inflation rate, given that each of the 87 billion VET tokens will produce the same amount of VTHO per day.
Although VTHO is minted from VET, the two crypto tokens were designed to be independent of each other’s prices. The VTHO tokens are created and burned on a daily basis, regulating its supply and thus the price of the token. This frees up VTHO from the regular volatility of the crypto market due to speculative pricing, making the VTHO more appropriate as a medium of exchange.
Why does VeChain need to have two tokens?
Operating cost stability and predictability are crucial factors for enterprise adoption of the VeChainThor blockchain. However, it’s important to note that VTHO is not a stablecoin, unlike the USD Tether. VTHO’s price will fluctuate due to network activity, however such fluctuations are much more manageable than that of the VET tokens.
The busier the network, the faster the rate at which VTHO will be burned, making VTHO scarce. In this situation, if businesses run out of VTHO to operate on the blockchain, they will need to acquire VTHO from exchanges, with a higher price due to scarcity.
However, some businesses will have a stock of VET to produce a portion of the VTHO each day, giving them some ‘free’ rights to use the VeChain network. The more VET is accumulated, the more VTHO will be produced by the business.
Without a supply cap, however, a stock of VTHO that sits idly will lose value over time, giving VTHO holders an economic incentive to release them into circulation. If there is little network activity, VTHO will accumulate, driving its price down, encouraging users to use the network.
Thus, the cost of VTHO is proportional to the network bandwidth, and has nothing to do with the price of VET. The price of VET may appreciate over time, however, the inflationary nature of the VTHO tokens will lower the cost of entry to use the network.
It seems like a good thing that VTHO is inflationary, as it encourages more users to use the network, increasing the value of the VeChainThor blockchain as a whole.
Should you buy VET or VTHO?
It depends on how you want to interact with VeChainThor. If you are a business that will operate on the blockchain frequently, it is best to purchase VTHO directly at the open market.
However, if you want to invest in the long-term implication of the VeChainThor blockchain on the world’s industry, it seems that VET is more attractive as an investor. You may find some people holding on to VTHO. In which case, it is possible that they believe in the short-term increase in the price of VTHO.
It’s important to note, however, that all VET holders can vote to increase or decrease the VTHO supply rate and transaction fee in VTHO through decentralised governance. The price of VTHO may not significantly increase as much as the price of VET in the long run.
How to buy VeChain?
As always, it’s advisable to do your own research. VeChain Insider provides more insights into this promising cryptocurrency and blockchain network. For a more technical dive, you can always go back to the blockchain documentation.
With all things considered, it’s safe to say that VeChain has one of the most utilitarian functions in the crypto space, and will only get better as the technology continues to mature.
This makes VET an excellent crypto to add to your portfolio. Buy VET easily and securely with the competitive rates at Easy Crypto.
In addition to competitive rates, we also offer portfolio tracking, auto-buy templates to automate your purchases, and the flexibility to swap between your crypto assets directly for better liquidity.
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