As Bitcoin continues its growth vector towards the moon, another formerly unknown altcoin has recently snagged a top 20 cryptocurrency spot on the website known as CoinMarketCap. This coin is called VeChain, and although it may be relatively unknown, it encompasses technology which could have huge implications for society as a whole.
What Is VeChain?
VeChain is a blockchain platform which was built to improve upon business processes, specifically as they apply to supply chain management. Its purpose is to streamline information using the same ledger technology which is employed on other blockchains such as that used by Bitcoin. VeChain can be compared to the systems which are currently used by most businesses to manage supply chains, which are widely inefficient, due to the way in which their information is “siloed” by department and communication is hindered. The network which is naturally created when a blockchain is used helps combine all this supply chain information into one location which all parties involved in the business can access.
How Does VeChain Work?
Similar to Ethereum, VeChain is run on two tokens. VET which is the value layer and can be used to transfer value between two parties on the VeChain network. The second token is VTHO and it functions to run the smart contracts on the blockchain, similar to the purpose of gas on the Ethereum network. VeChain is operated on a proof of authority consensus method, which basically means changes to the software are approved based on the consensus of the shareholders of the company.
The shareholders of the VeChain blockchain are users which hold over 1 million VET tokens. Users with 1 million VET tokens account for 20% of the overall votes in the VeChain system, while users with 1 million VET tokens who also pass KYC regulations account for 30% of the votes. If you’re looking at the above math and thinking that something is missing, you aren’t wrong. The CEO and other board members of the blockchain are responsible for the remaining 50% of the votes.
When a transaction is submitted on the blockchain, the proof of authority applies here too. The transaction is sent to the 101 masternodes on the VeChain blockchain. It is among these masternodes that a consensus must be reached. And if it is, the transaction will be processed. Not all nodes need to vote in order for a transaction to process, and no anonymous nodes are allowed on the VeChain blockchain.
As you can imagine, this creates quite a bit of centralization in the VeChain system, which, while good for a business, is not what is usually desired in the world of cryptocurrency. Thus, the creators of VeChain have tried to increase decentralization by allowing economic masternodes to be held by those individuals who hold over 10,000 VET in their account. Each of these economic master nodes are given a single vote when changes to the system are proposed. These economic nodes are not part of approving transactions or recording them to the ledger.
The History of VeChain
VeChain was created by the former CIO (Chief Information Officer) of Louis Vuitton China, Sunny Lu. He started the company in 2015, originally as part of a larger Chinese blockchain company known as Bitse, so that he would already have an established user base upon the release of his product.
As you can imagine, building a blockchain isn’t easy, and VeChain started out as a smart contract on the Ethereum platform. It was migrated to its own blockchain in 2018. Prior to its change, the VeChain platform was run on the VEN token. When the software was migrated to its own blockchain, the VEN token was replaced by VET. Because of the permanence of blockchains, the VEN token still exists on the Ethereum blockchain today.
VeChain has the goal of becoming a sort of rival to the Ethereum blockchain, and plans to offer ICO’s on their platform in the future. As of the writing of this article, they have partnerships with Renault, PricewaterhouseCoopers, and the Chinese government.
How Can VeChain Be Used
As previously mentioned, VeChain is mostly used as a new digital supply chain management system. What this means, is companies can build smart contracts on the VeChain blockchain which can allow them to track all their products from one location. And they can start the tracking at the manufacturer and follow it all the way up to customer delivery. One of the ways they currently implement this tracking is by attaching RFID chips to their products.
This is a far cry from the current system in place in most countries, where the delivery of products is farmed out to the government mail service or private carriers. And customers rely on the scanning of their package, which could have been torn open or scanned improperly by a carrier. With the RFID chips, package locations can be tracked at any time by shareholders. There are also capabilities to check the quality and temperature of the product remotely. Pretty innovative when you think about it.
So, What’s the Catch?
Well, as with many cool things in this world, in order to achieve convenience, you often must sacrifice decentralization or privacy or both. And VeChain is far from decentralized. Not only is it based on a proof of authority consensus which keeps 50% of votes in the company’s pockets, but it is also in a partnership with the Chinese government—which has long been known for its affinity to spy on its citizens.
Think of it this way, these RFID chips which have all these tracking capabilities, who is turning them off once you receive your product? And do you trust whoever that is to actually turn them off? Exactly. Chances are the Chinese government will happily continue to monitor the location, temperature, and quality of your brand-new wallet through this RFID chip far beyond its delivery. And if you take this wallet everywhere, well, it’s basically the same as having a cell phone, but the government doesn’t have to lie and say it’s not tracking you.
Should I Invest In VeChain?
This is a difficult question to answer, because there is a chance VeChain could be widely used and implemented in the business world in the coming years. Thus, it could possibly be a good long-term investment. But, for those who believe in investing in something they believe in (and oppose spyware) this coin isn’t for you.
Just remember that no matter what you decide, you must do your due diligence before investing in any sort of cryptocurrency. And investing in any sort of cryptocurrency will always carry some sort of risk—regardless of how much you know about the coin.
This article was brought to you by BitRocket one of the best Bitcoin Games of skill online today. Originally posted on the MintDice Cryptocurrency Blog.
I've heard a lot about VeChain in another forum, but I have only read about it at a high level. I didn't realise it is in partnership with the Chinese gov or that it's not quite decentralised. Thanks for the article, I might have to do some more research on this token.