VeChain Use Case | 

VeChain Use Case

The Chinese blockchain network VeChain has been making huge headlines recently due to its successes and adoption by mainstream businesses. It has partnered up with major global companies such as Renault and H&M and developed a reputation as a leader in the logistics and supply chain sector.

VeChain is underpinned by two native tokens, VeChain Token and VeChainThor Energy. What is VeChain and what part do these tokens play in the VeChain ecosystem?

What is VeChain?

VeChain is a cryptocurrency blockchain platform with smart contract and dApp capabilities. It was founded in 2015 by Sunny Lu,  as a subsidiary of a large Chinese blockchain company. VeChain is designed with a focus on supply chain logistics and information flow. It uses distributed ledger technology to connect every step of the complex supply chain for a business. Before VeChain, this information was disjointed or unclear coming from different companies involved along the way. 

Manufacturers can place specially designed sensors or tags on their products which record a wide variety of information onto the VeChain blockchain throughout their journey to the customer. This can be used for traceability, quality control, temperature management, authentication, supply chain improvement and more.

VeChain has the software tool VeChain ToolChain that allows businesses of any size to set up on the network easily and manage their supply chain or data. It is designed to be used with little or no knowledge of blockchain technology and coding making it suitable for mainstream adoption. 

VeChain’s Tokens

VeChain has two native tokens, VET and VTHO. VET is the primary financial VeChain Token and is used for transactions between dApps on the network, to store value and for market speculation. VET is also a governance token in the network using a Proof-Of-Authority consensus mechanism. VTHO, which stands for VeChainThor Energy, is used to pay for transactions. So when a business wants to add more data to the blockchain they pay a fee in VTHO.

VeChain is currently working with the Gui’an government in China as a technology partner. It partnered with Renault and Microsoft to develop a distributed car maintenance book tracking a vehicle’s history that cannot be changed or tampered with. VeChain is used by several clothing companies such as H&M, Frank & Oak and Cos to track their sustainability efforts and showcase them to the customer. It also has partnerships with major companies like PricewaterhouseCooper, BMW and Walmart China. Hospitals in Cyprus are using VeChain to manage their health records efficiently where only the owners of that data and authorized users can have access to the data.

VeChain Use Case: Staking VET and Governance

Holders of a large amount of VET coins can take part in governance and verifying transactions within the network to receive a portion of the transaction fees. The VeChain network uses a Proof-Of-Authority consensus mechanism for transactions and governance. This allows scalability as only a select number of VET holders have to reach a consensus so it is less computationally intensive than Proof-Of-Work or Proof-Of-Stake methods.

To be selected to verify transactions as an Authority Node you must disclose your identity and stake at least 25 million VET. There are 101 Authority Nodes and they receive 30% of the transaction fees for verifying a block. The remaining 70% is burned to keep the supply down and prevent inflation.

Governance within VeChain

These Authority Nodes also have 40% of the voting power for governance. Other holders of VET can apply to become Economic Nodes when they have over 1 million VET and if selected they stake VET to have voting power in governance too. So holding and staking large amounts of VET can give you a part in deciding the direction of the VET network and the amount of VTHO generated by token holders and the transaction fees charged on the network.

This means governance is essentially a centralized system within a decentralized blockchain network which has drawbacks for those passionate about decentralization but also makes it more appealing to companies as it provides stability and clear direction.

VeChain Use Case: Smart Money within VeChain

VeChain has designed its network to be efficient and easy to use with a native token that can be used as a type of smart money. VET is used for smart contract transactions on the VeChain network between dApps (Decentralized Applications). Once VET is paid as part of a smart contract, the smart contract is instantly executed which provides security online and can help prevent fraud.

There are also many dApps set up on the VeChain blockchain that users can purchase goods or services through using VET. VeChain is designed for scalability which makes options like micropayments in games within the Plair dApp (a gaming ecosystem) or the purchase of NFTs feasible on VeSea.

Crowdsale – A Marketplace dApp

Crowdsale is a decentralized market place set up on the VeChain network. Users can buy products using VET. Due to the immutability of blockchain technology, all transactions are recorded on the blockchain and can be used to verify the credibility of the seller. Being decentralized, the item can be delivered while retaining the privacy of the purchaser.

Users can buy goods like digital magazines, software keys and online services using VET. It provides security for the sale of online goods as once VET is transferred the digital asset is instantly sent to the purchaser as part of the smart contract.

VeChain Use Case: VET for Online Finance

VET can also be used to transfer money or for online payments. Transaction speeds are extremely fast as they are verified using Proof-Of-Authority. Only a small number of nodes have to verify transactions, this uses much less computational power than in cryptocurrencies like Bitcoin which uses Proof-Of-Work.

Transactions take about 6 minutes in comparison to Bitcoin’s hour. As a result VET tokens can be used to store and transfer value quickly and easily. 

Transferring traditional fiat money online using banking institutions is slow and expensive. Transactions are usually only conducted within banking hours and have high fees.

Transferring Value Globally

So if someone in America wanted to transfer $10,000 to a person in Asia on a Saturday this could take several days and involve multiple transaction fees and some of the value could be lost through conversion. In comparison sending the equivalent in VET would take minutes and have much lower fees.

However it is to be noted that the VET token is primarily used within the VeChain ecosystem rather than for transferring money as it is designed to be focused on business solutions rather than as a decentralized finance provider. VET can be invested in by the general public who wish to take part in the cryptocurrency trading market. As network usage grows and VeChain is adopted by more large businesses the value of VET increases. Investors who took part in the Initial Coin Offering have seen huge financial gains.

VeChain Use Case: VTHO as a Stable Gas Token

VeChain charges users for transactions like many other blockchains (often referred to as gas prices like on the Ethereum network). Most blockchains tend to charge these fees for computational power in their native cryptocurrency which can be susceptible to market fluctuations. VeChain has adopted a different model to combat the instability of charging transaction fees in a volatile cryptocurrency.

As blockchain usage grows in a network the token market valuation usually increases in line. This means the costs of doing business is tied into the market and as a result the price per transaction can vary wildly.

For example, Ethereum charges its gas fee in its sole native cryptocurrency, ETH. In October 2021, the cost of Ethereum transactions was hovering at around $45 and was close to $20 a few months previous. This is a huge barrier for smaller businesses and mainstream adoption as many companies would not conduct business in a setting with such unpredictable costs. 

VTHO Token

VeChain looks to combat this by having a separate token for transaction fees, VTHO. This is generated automatically by holding VET tokens and the value of VTHO is managed by the VeChain Foundation for inflation and cost fairness. This means anyone using the network and holding VET tokens can carry out transactions as long as they have held VET for long enough to generate the amount of VTHO needed. Prices of transactions are managed and kept stable by the VeChain Foundation allowing businesses to plan ahead and budget. 

This essentially incentivizes holding a large amount of VET tokens as the more VET held the more VTHO generated. Companies who use a large portion of the computational power will need a lot of VTHO tokens so will buy and hold VET tokens to be able to conduct business using the VeChain network.

VeChain: A Successful Blockchain-as-a-Service Provider

VeChain has become one of the best established enterprise-oriented blockchain networks out there. It claims that its blockchain technology can be utilized to “solve real world economic problems”. VeChain’s adoption by so many companies worldwide shows that it has provided efficient solutions to many of the issues faced in supply chain management and the tracking of goods and data. 

Its native tokens have clear uses within the VeChain ecosystem. VTHO serves to provide a  stable form of transaction fees unlike the volatile prices of fees in many other blockchains. While VET can be an investment or a way to transfer value, its primary use cases are within the VeChain network, generating VTHO, staking and governance.

VeChain has been designed to focus more on providing business solutions than decentralized finance. In this regard it has proven itself to be at the cutting edge of the Blockchain-as-a-Service industry.