Although development began on the VeChain platform as long ago as 2007, it was not officially launched until 2015. Founded by Sunny Lu, who was a former Louis Vuitton CIO in China, VeChain started its life as a Bitse subsidiary, using the Ethereum blockchain. In 2018, it moved over to its own blockchain, called the VeChainThor blockchain, which features two digital tokens. The VET coin is the publicly traded VeChain token and the VTHO token, which can be earned by holding VET, is a separate token that is used to pay transaction costs on the platform.
VeChain’s dual token architecture enables businesses to base their supply chain management processes on the platform’s tamper-proof blockchain without being directly exposed to the volatility of the VET cryptocurrency, thereby making it easier for them to predict and control administration/transaction costs over time. The cost of VTHO coins does go up and down, reflecting the cost of the VET coins from which they are generated, but this volatility can be managed in one of two ways by VeChain’s stakeholders:
- Number of VTHO Coins Generated Can Be Altered – Each VET coin held will generate a certain fraction of a VTHO token for every block that is added to the VeChainThor blockchain and this fraction can be increased (but not decreased) in response to changes in the cost of VET on open exchanges.
- Cost of Transactions in Terms of VTHO Can be Altered – The amount of VTHO that is needed to complete transactions can be altered to mitigate substantial changes in the price of the VET coin.
The two above measures have helped to make VeChain a popular choice for supply chain management purposes among a number of large, established companies across the globe. In contrast to a platform such as Ethereum, where transaction costs have been known to fluctuate by a factor of 10 over a relatively short period of time, the VeChain platform is seen as a more stable base for supply chain and product life-cycle management by many industry professionals, which has certainly helped to broaden its appeal among manufacturers, wholesalers and retail organizations.
How VeChain Supports Supply Chain Management
RFID tags and smart chips can be used to send and receive information to and from the blockchain: information that can be accessed by authorized stakeholders. This functionality allows commercial organizations to track stock movements from factories and warehouses to retail customers, as well as to keep an eye on the conditions in which individual items of stock are kept, by examining storage temperatures and other parameters that are recorded on the blockchain as the items are transported from one location to another.
The VeChain platform features VeChain Identity technology, which uses a hash function to generate unique identifiers, known as VIDs, which can be written to the RFIDs and smart chips attached to individual products or pallets of products in company’s supply chains, thereby providing each unit with its own unique identifier in the system and making it easy for authorized stakeholders to identify their assets.
In addition to allowing manufacturers and wholesalers to track the location and condition of their stock, consumers can be given access to the same tracking functionality, to assure them that they are indeed purchasing genuine articles when they buy products made by companies that utilize VeChain’s supply chain management capabilities. Furthermore, ownership of the assets tracked by the blockchain can be linked to specific account holders through the smart contracts that VeChain offers. This helps to avoid any disputes between manufacturers, wholesalers, retailers and consumers as to who actually owns an asset at any given moment in time.
The VeChain blockchain (VeChainThor blockchain as it is officially known) has a proof of authority consensus protocol, which relies on the 101 masternodes in the network reaching a consensus on each transaction in the blockchain. Votes are distributed among all nodes according to their VET holdings and identity disclosure but no anonymous nodes are allowed to become masternodes in the network.
In addition to the authority masternodes that come to a consensus on the validity of new transactions in the blockchain, VeChain’s network also features economic masternodes, which are allocated a certain number of votes based on their VET coin holdings. Whilst economic masternodes do not participate in the production and verification of new blocks and transactions on the blockchain, they do have a say in future changes to the network, helping to ensure that the centralized authority masternode structure does not allow a small number of stakeholders to have a disproportionate say in the governance of the VeChain platform.
The VeChain Foundation
Responsible for the design, development and ongoing evolution of the network is the VeChain Foundation. In addition to fostering partnerships with many commercial organizations that are interested in utilizing the supply chain management capabilities of VeChain’s blockchain, the foundation also occasionally offers grants to individuals and companies that propose to develop blockchain applications, tools for other developers and other types of projects that may eventually be of benefit to the VeChain ecosystem. Grants are allocated to accepted projects after an application/interview process: details of the criteria on which proposed projects are evaluated can be found on VeChain’s official website.
Potential Advantages of VeChain (VET)
One of the advantages of VeChain’s architecture that industry insiders have pointed out, as far as the proof of authority protocol used on the VeChain blockchain is concerned, is scalability: because only 101 masternodes participate in the validation of new transactions and blocks on the chain, the number of simultaneous transactions that can be processed on the VeChain platform should be significantly higher than it is on competing cryptocurrency platforms that require every node in their networks to participate in validation exercises and form a consensus on each new block/set of transactions.
Another advantage, which we covered earlier, is the ability to control transaction costs with the dual token system employed by VeChain, making it easier for organizations to predict future costs if they decide to use the blockchain for supply chain management and product life-cycle management purposes.
Perhaps the biggest advantage that the VeChain network has to offer prospective investors is its supply chain functionality. Whilst many digital coins are purely speculative cryptocurrencies that have no underlying value, VET and VTHO coins serve a practical purpose too. Whether this has a noticeable effect on the future value of VET coins remains to be seen but it does at least make the VeChain platform slightly more interesting to a certain type of investor.
How to Store VET Coins
As an ERC20 token, the older VEN token that was based on the ETH blockchain could be stored in any wallet that supported Ethereum but since the platform moved over to its own blockchain, with VET coins, this is no longer the case. A dedicated mobile wallet was released when the changeover was made – the VeChain Thor Wallet – which offers smartphone users a convenient and secure place to store their VET coins and is available in both iOS and Android flavors. If you are not keen on browser-based wallets or mobile wallets and prefer the security offered by hardware solutions, the Ledger Nano S is the obvious choice as far as many crypto experts are concerned. This malware-proof hardware wallet supports a wide variety of different cryptocurrencies in addition to VET coins, making it the ideal solution for security-conscious investors with diverse cryptocurrency portfolios.
Whether you choose to store your VET coins in a mobile, desktop or hardware wallet is up to you but hardware wallets are undoubtedly the most secure option currently available, along with so-called paper wallets, mainly due to the fact that once you disconnect a USB hardware wallet from a PC, it is no longer on any network and therefore not vulnerable to any hacking attempts. Some investors choose to keep a smaller balance of VET coins in a software wallet, allowing them to trade the coins quickly and easily at any time, whilst storing their long-term holdings in a hardware wallet.
It is not possible to make future price predictions for VET coins or other cryptocurrencies with any degree of accuracy so when you are looking at the future of VeChain, you should focus on the practical application of its supply chain management technology and the partnerships it is building with large commercial organizations across the globe. Nobody can predict how well this strategy will play out in the future either but with names as big as Microsoft linked to the VeChain platform, it would be unwise to dismiss it as a flash in the pan.
Whatever happens to the price of VET coins in the coming years, the long-term sustainability of the platform lies in its ability to attract commercial organizations to base their supply chain and product life cycle management systems on the VeChainThor blockchain. With this in mind, VeChain’s future probably rests on its ability to maintain industry-leading security standards and on its ability to encourage the development of blockchain applications that facilitate the use of its supply chain management functionality.