Project Spotlight: VeChain, the supply chain solution
An overview, key facts, development, and more.
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Did you know that 20% of global wine sales are suspected to be counterfeited?
Did you know that $375 million worth of italian cheese in the US are intentionally mislabeled by producers?
Based on a report by Cointelegraph, these seem to be just some examples of many more issues in the food industry. Take a look below at the major food safety incidents around the world in the last 10+ year. Insane, right?
You may wonder… Why is she talking about food in a crypto newsletter?
That is because blockchain as a technology can have very diverse applications, and as the crypto space expands, there are many real solid use cases that go beyond the eye-catching DeFI and NFTs.
So in order to expand the topics covered in this forum, I want to introduce you all to a project that focuses on an industry we have not covered yet in this forum (Not that I didn’t already give it away with the title…)
VeChain provides supply chain management solution.
It essentially authenticates and tracks goods across the whole supply chain journey before ending in the hands of the consumers.
This is important because it helps companies track their products, ensuring quality and helping pinpoint issues or discrepancies.
So let me first introduce an overview about VeChain, before moving on to the problem it solves, and how.
Introducing VeChain
Key Facts
VeChain was founded in 2015 by Sunny Lu, former CIO of Louis Vuitton China.
It is created under VeChain Tech, a software development founded in China.
The development of VeChain is coordinated by the VeChain foundation, a non profit based in Singapore.
It raised $20M in a 2017 ICO, and its mainnet went live in 2018.
It was originally launched using the Ethereum blockchain, under the token VEN.
However, to avoid some of the scalability issues, in June 2018 VeChain transitioned to its own blockchain, VeChainThor.
Tokenomics - a dual token system
VeChain runs on 2 tokens:
VET, which is the actual cryptocurrency and store of value. It has a maximum supply of 86.7B (yes, billions), and
VTHO, which is what is used to pay for transactions (think of it like the Ethereum’s gas fee) or executing smart contracts. It doesn’t have a maximum supply but it’s adjusted periodically by the foundation.
Why not just use one?
Well, the idea is to use VTHO to avoid the extreme volatility cryptocurrencies can suffer, and given that VeChain’s solution is targeted to enterprises, being able to maintain a stable currency and transaction fee is key to its partnerships.
Therefore, the VeChain Foundation adjusts the supply amount of VTHO to achieve this purpose.
Consensus Mechanism - PoA
Normally, I talk about this in the Key Facts section.
But today, I’m splitting it out because it’s a model we have not talked about before.
Even though you can stake VET, VeChain Thor blockchain actually uses Proof of Authority* (PoA) as consensus mechanism.
*Fun fact: the creation of poa is credited to ethereum and polkadot cofounder gavin wood.
So instead of computing power (PoW model) or amount staked (PoS) in PoA the VeChain Foundation chooses the nodes that are certified authorities to create blocks based on reputation
(interesting how cultural characteristics come into place huh?).
There are in total 101 authority nodes that process all transactions on its blockchain. These authorized nodes are still required to stake a minimum of 25 million VET, which is a lot, so in a way they are still using staking to sure real interest is in the line.
They are also required to do KYC process, which is quite centralized for a blockchain solution, but given that it is a B2B solution, most companies are ok with it as they prioritize other aspects of the solution such as speed and price.
As a reward, they earn VTHO in exchange.
Now that we know a fair amount abot VeChain, what problem does it solve again?
Besides the food incidents examples I kicked start this article with, the issues in supply chain is really quite industry agnostic, from fashion, to cards, medicine, art, and the list goes on...
Any issues in even one of the any steps across the entire chain can cause a massive issue for the company.
Counterfeits, fakes, substandard qualities. All these end up impacting us as end consumers as well.
In a nutshell, there is a clear issue of transparency, and therefore trust issues in the supply chain.
How does VeChain solution works?
It uses existing supply chain solutions, such as RFID, QR codes, NFC, and it combines it with IoT infrastructure and blockchain technology.
In simple terms, it essentially means that goods will have electronic tags such as QR code throughout the entire process, and they will be scanned and tracked at every step of the way.
This tracked data, you guessed it, is transferred and stored in the VeChain Thor blockchain, and as blockchain, it means that the data is immutable, aka cannot be changed.
So as an enterprise solution, VeChain provides a tracking and data storage system that prevents data manipulation, erasing and tampering with.
This emphasis in integrity of data is highly relevant to companies across the world, particularly luxury brands that suffer millions of counterfeit.
No wonder the founder and CEO of VeChain is former CIO of Louis Vuitton. Safe to assume he suffered his fair amount during his foremr job.
Last Considerations
Ecosystem
Let’s not forget that VeChain Thor is a standalone blockchain, so there is a vibrant ecosystem built on top of it.
Currently there are around 70 dapps (decentralized applications). To ensure the blockchain doesn’t get too bloated, all dapps are approved by the foundation and VET holders.
This is because as a B2B solution, it needs to be reliable and ensure consistent performance.
Partnerships
VeChain has managed to secure some very strong partnerships.
These are mostly with Chinese subsidiaries of multinational corporations. Some of the most well known names are retail giant Walmart, pharmaceutical giant Bayer, accounting firm PwC, and of course the Chinese government.
Chinese crypto crackdown
Considering the Chinese crackdown of the crypto industry, the future of VeChain does has this constant latent concern.
Here is my Articles Pipeline for the next few weeks:
What is Technical Analysis
Crypto News - August Edition
Project Spotlight: XRP (and what is happening with the SEC)
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