VeChain: What It Is, How It Works, Examples, and History

Vechain ( photo: )

VeChain is a blockchain platform that aims to improve supply chain management and business processes. It intends to simplify these processes and the flow of information in complicated supply chains by utilizing distributed ledger technology (DLT).

The VeChain platform consists of two separate tokens: VeChain Token (VET) and VeChainThor Energy (VTHO). The VeChain Token is utilized to transfer value within the VeChain network, while the VeChainThor Energy serves as the fuel or "gas" that powers smart contract transactions.

VeChain is a blockchain platform for enterprises that aims to eliminate the silos of information by creating a complete view of an organization. It also aspires to be a dominant platform for initial coin offerings (ICOs) and transactions between Internet of Things (IoT) devices.

The VeChain platform utilizes two tokens: the VeChain Token (VET), which serves as a value layer, and the VeChainThor Energy (VTHO), which functions as the smart contract layer.

VeChain Explained 


VeChain aims to create a trustless and decentralized business ecosystem platform that facilitates the flow of transparent information, efficient collaboration, and fast value transfers.

In the current scenario, supply chain data related to business processes are separated into silos among various stakeholders, resulting in fragmented information flow.

The VeChain white paper states that blockchain technology can solve the issue of asymmetric information and restore control of data to its rightful owner. The VeChain platform aims to give authorized stakeholders a complete view of all relevant information related to a product and its business operations, such as storage, transportation, and supply, thereby increasing market transparency.

Applications of VeChain 


VeChain can be utilized to monitor various aspects of a product's journey, such as its quality, authenticity, storage conditions, mode of transportation, and final delivery to the customer. For instance, this could be applied to track a medicine package or an alcohol bottle from the manufacturing plant to the end customer. To achieve this, VeChain employs smart chips or Radio Frequency Identification (RFID) tags and sensors that transmit important information onto the blockchain network, which can be accessed in real-time by authorized parties.

Utilizing Sensors for Improved Monitoring By using sensors, VeChain can continuously monitor all relevant parameters of a product and promptly alert relevant parties of any issues that may arise. This allows manufacturers and customers to be notified if a drug packet is stored at a temperature outside the recommended range, leading to improved service and quality control.

VeChain Empowers Automobile Owners Additionally, the VeChain platform enables car owners to claim ownership of their data and leverage it to secure more favorable terms and policies with their insurance providers.

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The History of VeChain 


VeChain was established in 2015 by Sunny Lu, formerly the Chief Information Officer (CIO) of Louis Vuitton China. It was originally a subsidiary of Bitse, one of China's largest blockchain companies, and is one of the few blockchain companies with a significant number of established corporate clients.

Initially, the VEN token was based on the Ethereum blockchain. However, in 2018, VeChain underwent a rebranding effort and transitioned onto its own blockchain, transforming the VEN blockchain into the VeChainThor (VET) blockchain.

The goals of the VeChain blockchain platform are detailed in its white paper. The original aim was to revolutionize the supply chain industry by making data accessible and transparent. Additionally, VeChain aims to become a leader in decentralized applications (dApps) and initial coin offerings (ICOs) built on its platform, as well as serving as an intermediary for the Internet of Things (IoT).

Over the years, VeChain has entered into several strategic partnerships to further its goals. One of these partnerships is with PricewaterhouseCoopers (PwC), where VeChain's blockchain solutions will be utilized by PwC's clientele to enhance product verification and traceability.

VeChain has also joined forces with Renault, and with the support of Microsoft and Viseo, has developed a tamper-proof digital car maintenance book. Additionally, VeChain is the official technology partner for Gui'an, a Central Chinese Government economic development zone.

The VeChainThor Blockchain Platform

The VeChainThor blockchain platform is a public blockchain designed for widespread business adoption. It features two tokens: VET and VTHO. VET is the token used to transfer value or "smart money" from smart contracts on VeChain's blockchain. Essentially, transactions on decentralized applications hosted on VeChain's blockchain will utilize VET, and it is open to investment by the general public.

The VTHO token, also known as VeThor Energy, is used to fuel transactions on the VeChain blockchain. It represents the cost of executing transactions on the VeChainThor blockchain.

The concept of VeChain's two-token system is similar to Ethereum's ether and NEO's "gas," where developers need to allocate a certain amount of underlying tokens (which are not visible to the public) to perform transactions for their decentralized applications. According to VeChain's white paper, this two-token system was established for effective governance and to provide a predictable economic model for developers of decentralized applications.

In its current state, Ethereum lacks a predictable economic model due to the volatility of its native gas token, ether. This means that developers have to guess the amount of ether needed for a transaction and the transaction will fail if the estimate is incorrect. To overcome this problem, VeChain's platform has made several technical improvements, as outlined in its white paper.

For instance, the VET blockchain enables Proof of Work (PoW) for every transaction, allowing individuals conducting a transaction to mine additional VTHO if their initial estimate was off. This ensures a more predictable economic model for decentralized applications on the VeChainThor blockchain.

Governance Protocol


The VeChainThor blockchain operates using the Proof of Authority consensus protocol. Under this protocol, voting power is distributed based on the quantity of VET held and the level of transparency provided. Individuals with 1 million VET in their account and without know-your-customer (KYC) credentials are allocated 20% of all votes, while those with the same amount of VET and KYC credentials are given 30% of the voting power.

In VeChain's blockchain, there are 101 authority master nodes that reach consensus on transactions. Unlike Bitcoin, which requires a vote from all nodes to reach consensus, VeChain only requires its authority master nodes.

To become an authority master node, it is mandatory to disclose one's identity. Anonymous nodes are not permitted. This system, as outlined in VeChain's white paper, uses less energy and does not require a minimum number of validators for reaching consensus.

The VeChainThor blockchain also includes economic master nodes, which serve as a balancing mechanism for the network. Unlike authority master nodes, economic master nodes do not participate in block production or ledger maintenance. Instead, their voting power is determined by their VET holdings, with each 10,000 VET providing one vote. This system helps to ensure that the network remains decentralized and prevents any single entity from gaining too much control.

The establishment of master nodes in VeChain's blockchain creates a centralized system for voting rights. However, the creators of VeChain aim to strike a balance between centralization and decentralization by implementing this protocol.

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