What is VeChain (VET)?
VeChain is a software that seeks to incentivize a network of computers to operate a platform allowing businesses to build and run decentralized applications (dapps).
In this way, VeChain’s goal is to enable better digital collaboration between businesses by giving them new tools for efficient data transfer and supply-chain management.
Originally a solution for supply chain management alone, the VeChain protocol rebranded to VeChain Thor with the launch of the protocol’s mainnet in 2018, increasing the scope of dapps to include more general data solutions.
Corporations that have started using the VeChain blockchain include:
- BMW, which uses VeChain to prevent odometer fraud in automobile sales
- LVMH, which uses VeChain to track luxury leather goods
- Walmart, which uses VeChain to track food provenance.
- Central to running the operations on its blockchain, VeChain boasts two native cryptocurrencies, VET coin, for voting on changes to the protocol, and VTHOR, for executing transactions.
Users seeking to stay connected on the current development status of VeChain, along with the companies that are integrating its blockchain, can follow its official blog for up-to-date details.
Who Created VeChain?
VeChain was co-founded in 2015 by Sunny Lu, former chief information officer of Louis Vuitton China, and Jay Zhang.
The VeChain team initially distributed its cryptocurrency, VEN, on the Ethereum blockchain in 2017 as part of a crowdsale that sold 1 billion tokens and raised $20 million.
These tokens were later replaced by VET tokens (sometimes referred to as VET coins) when the VeChainThor blockchain was launched. VEN tokens were swapped for VET tokens at a 1:100 ratio.
How Does VeChain Work?
VeChain aims to give any company the ability to launch new kinds of dapps.
In order to facilitate the creation of dapps, the VeChain team built a component called the VeChain ToolChain, a software development kit.
Proof of Authority
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).
Users who verify and add transactions to the blockchain are known as Authority Masternodes, and, to become one, users must stake a minimum of 25 million VET and submit identifying information to the VeChain Foundation.
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.
Of note, VeChain is working to improve its PoA to ensure a more randomized and distributed block creating mechanism.
Two Token Design
In order for it’s software to work, VeChain uses two native tokens, VET, used to store and transfer value, and VTHO, used for transactions on its blockchain.
This design is intended to isolate the price volatility of VET coin from the cost of computations on the network, allowing applications on VeChain to charge stable fees (since the VTHOR supply can be adjusted to maintain a stable price for transactions).
Similar to how the Ethereum blockchain uses ETH and gas, miners earn VTHO fees for computations processed by the network. The more complex the computation, the more VTHO a given program will require.
Lastly, nodes staking VET coins gain the ability to vote on network upgrades, and are rewarded with VTHO every block.
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Cryptocurrency