VeChain

A case for VET

Overview

  1. VeChain (VET) is a cryptocurrency that initially focused on revolutionizing supply chain management worldwide. Currently, guaranteeing product quality and safety is extremely difficult and in many cases financially impossible in today’s world. Fake or counterfeit products, sub-standard replacements, items past expiration, or other cheats are constant challenges for all involved. These challenge consumers, manufacturers, and regulators alike. The supply-chain industry desperately needs a better way to monitor, detect, and address such cheats both for intentional as well as accidental occurrences.
  2. The initial use case of VeChain allows suppliers to record and track the entire history of their products at every stage of production. This is done by issuing a digital tag for each product at the start of the product’s creation. As the product is created/grown/baked/shipped/verified etc, an entry is made on VeChain for each stage of its development. All-in-all, this provides a complete and accurate history for a product - where it was shipped, how it was made, where components came from, guarantees on quality, or anything else that companies choose to record on the blockchain. Finally, this history can be made available to customers as digital evidence towards the authenticity and quality of that product.
  3. Each digital assentation of events following a tag is backed by a financial claim. If any inaccuracy, fraud, or error is later found in a validated chain of events, those responsible will lose a proportionally large amount of money on the VeChain network. This follows a model similar to how other oracles introduce external data into the blockchain. This ensures a high degree of reliability in all information stored. This innovation of counterfeit and fraud-resistant blockchain for enterprise is useful to many additional businesses.
  4. VeChain is now focused on delivering a 2.0. VeChain has used the learnings from its past successes and broadened the scope of its blockchain to support general-purpose enterprise applications, regardless of their domain.
  5. VeChainThor is the upgraded native blockchain that includes an Ethereum Virtual Machine (EVM), allowing it to execute arbitrary smart contracts. This is similar to ETH, BNB, DOT, ADA, and others. However, unlike competitors, VeChain especially focuses on servicing enterprise-level customers. IBM, Amazon, Microsoft, and Google are also working on enterprise-focused blockchains. VeChain has prioritized flexibility, speed and ease of development, a fast-moving governance structure, and simplifying compliance with future government regulations. All of these combined provide a platform that should cover the needs of many businesses.
  6. VeChain’s functional decentralized governance structure innovates decentralized governance to allow for speed of iteration while maintaining decentralized checks on power. It includes a Steering Committee (Board of Directors), Authority Masternodes (daily governing body), Economic X nodes (early token investors), and Economic Nodes (later token investors). Combined, it can efficiently gather input from each stakeholder in the VeChain community but is still able to move quickly due to daily operational power being held by elected representatives rather than individual voters.
  7. VeChain in January 2021 released an early version of its Sync 2 wallet. This was a remarkable innovation that allows users to directly utilize blockchain applications in their internet browser without needing to own or even know about blockchain. Other projects can benefit from this new ease of use both directly and indirectly.
  8. VeChain utilizes a unique two-token model for financial incentives. VET is the main value token of VeChain while VTHO is used exclusively to pay for transactions on VeChain. VTHO tokens are generated automatically for VET holders up to a max limit. For most use cases, enough VTHO should be available for each business just by holding their target amount of VET tokens. By separating usage from speculation interests, VeChain can provide businesses with predictable and stable maintenance costs. This addresses a major roadblock for businesses to using blockchain directly.

Major Bullish Arguments

  1. VeChain has proven itself as a major contributor to the innovation of enterprise blockchain across many major domains. It has existing clients using its technology to solve real problems. Many complex problems facing the cryptocurrency ecosystem now have robust solutions implemented on VeChain. Examples include the sophisticated elected governance model, its two-token economics, and fee-free use due to fee delegation.
  2. VeChain has many existing and new partnerships with companies both within the cryptocurrency area and without. All of these participants are experimenting with and/or committing to trusting VeChain as their platform of choice for handling their business interests on the blockchain.
  3. VeChain made a proactive effort to be compliant with emerging crypto regulations from day 1. They have continued to add more functionality to ensure that their chain is flexible enough to comply with future regulations.
  4. VeChain is in a class almost entirely on its own for servicing enterprise customers. Competition is nearly non-existent. While Amazon, Google, and other large tech companies are looking to expand into enterprise crypto, IBM has closed its blockchain division. Perhaps the closest real competitor would be Cardano (ADA). Though ADA focuses on a general-purpose blockchain, it also makes a special effort to support complex regulatory compliance. ADA would perhaps be able to offer nearly all the features of VeChain at a greater scale with more decentralization. However, VeChain has the advantage of catering exclusively to their single-type intended users. This is a huge advantage that may make up for comparative deficiencies, especially if these deficiencies are mostly technical.

Major Counterarguments

  1. Some of VeChain’s “partnerships” were found to be slightly exaggerated. A few companies have issued statements clarifying the status of their relationship with VeChain as slightly less committed than one can be led to believe by statements posted by VeChain or its community.
    • While this has happened in some cases, it does not seem to have been widespread; most claimed partnerships have appeared to be legitimate. It is very common in startups to have some corporate relationships described as slightly more intimate than maybe reality. Sometimes this is due to misinterpretation on the part of the community and others it can be a conscious exaggeration of the CEO. Some CEOs of even established companies are known to paint their company in the best possible light. Concerns can easily be addressed by those interested as most of the data needed to verify such statements is available publicly if one puts in the effort to find it.
  2. VeChain lacks an official roadmap with concrete delivery dates.
    • This has been true of some other large players in the space. While general goals and vision have been supplied via their updated whitepaper, a detailed map to delivery indeed seems lacking. This may change in the future. If not, this can be monitored by those interested based on the frequency and content of the technical updates.
  3. Proof of Authority (PoA) is less secure and less decentralized than other consensus algorithms, which could make VeChain more susceptible to malicious actors.
    • This is all a question of tradeoffs. One should keep the intended user of VeChain in mind - enterprise over retail use. Indeed, PoA is less directly decentralized than other Proof of Stake options, but this can be offset by frequently changing validators selected at random. This allows VeChain to make decisions with only the votes of representatives of the various types of participants rather than needing to sway a supermajority of voters on every upgrade. Enterprise users also appreciate the availability of a board of directors and known representatives to directly discuss planned use cases.

Price Potential

  1. As a smart-contract platform, this puts VeChain in a similar estimation of value to ETH, ADA, DOT, etc. However, as VeChain’s special focus for its features is on enterprises rather than any smart-contract use this changes its maximum potential audience. At this point, it is difficult to estimate how big the enterprise blockchain market might be. But, by being entirely focused on it VeChin is more likely to be able to secure a strong position for that market, however big it might become.
  2. One useful sub-set of potential users would be its original focus on fighting fraud in the global supply chain. Of course, it is not feasible to produce reliable numbers for the impact of fraud in global supply chains as so much is under-reported, undetected, or not available for public knowledge. However, the total supply chain market size is a large part of the entire world GDP as it includes the import/exports, plus relevant taxes of every country in the world, plus supply chains internal to each country. If a low estimate of only 5% was lost to fraud it represents an enormous opportunity for wealth.

Major Risks

  1. VeChain needs to continue to deliver the functionality outlined in its updated whitepaper. As long as consistent releases continue, VeChain is likely to deliver on the technical features outlined. On the other hand, if they were to repeatably delay releases this may be a signal of technical challenges.
  2. VeChain has built a compelling platform for business blockchains. For it to succeed, more businesses need to accept it and build useful projects on it. Additionally, a large portion of these projects needs to be business-critical applications rather than proof of concepts or fringe uses. Almost no businesses have yet successfully invested in blockchain technology other than as a non-correlated asset class useful for protecting their balance sheet. Even that use only applies to just a handful of companies. We have a long way to go until companies build and rely on blockchain tech themselves. Lack of initial use cases is a major enough concern that it forced IBM to close its blockchain division. However, if VeChain successfully services some initial use cases, more will inevitably follow and a new business model will be born.

Additional Resources

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