Focus Fire: VeChain (part 1)
In the Focus Fire series, we take time to really get to know a project and focus on different elements of what makes the project great. We hope it provides a better understanding of the technology and its vision to the larger cryptocurrency and blockchain community. Today, we begin our examination of the VeChain platform, looking into the technologies and tools that the company plans to deliver.
The VeChain project is a complex beast with many moving parts — there is simply a ton of information to digest when it comes to learning about this ambitious project. Yet, the top priority for the VeChain team always comes back to one recurring theme:
How will this technology be useful for businesses around the world?
Whereas many blockchain projects of the past couple years have dwelled on advancing technology for technology’s sake with little in the way of real-world application, VeChain constantly and consistently returns to the key purpose; making VeChain a broadly useful and practical tool for enterprise. VeChain has been designed from the start, CMO Noah Huo, explains, as “a bridge between business and technology.” An imperceptible yet complete integration of VeChain’s many tools into an enterprise’s ecosystem would be a key marker of success for the VeChain team.
One of VeChain’s earliest blockchain implementations is designed to track high-quality wine products, proving the authenticity of wine produced in France and eventually shipped to China. Luxury goods also point to a clear use-case for VeChain technology, such as expensive handbags and purses, which are often counterfeited, losing massive sums of rightfully deserved income to cheap knock-offs designed to fool consumers. By embedding NFC chips into luxury goods, each product has a unique digital ID, stored on the blockchain, and is capable of being scanned for verification of authenticity and uniqueness.
VeChain is also developing decentralized applications, or DApps, to develop a comprehensive token system that can be integrated with businesses, providing practical solutions and genuine real-world business use for the blockchain technology. In addition to DApps, a key element of the VeChain system rests in hardware that can be physically installed into products for the purposes of tracking and ensuring conditions are maintained throughout the manufacturing and shipping process. In addition to NFC/RFID chips, IoT sensors can track and record conditions such as temperature and humidity to ensure optimal conditions for food or medical goods as they move throughout the process from manufacturing to shipping and on to eventual local distribution.
VeChain technology is capable of providing solutions in the auto industry, as well. CMO Noah Huo explains, “A ‘vehicle passport’ uniquely associated with each manufactured vehicle can be used to track data generated by the vehicle, including mileage, preventing odometer records from being altered and allowing potential buyers to verify mileage that can not be faked.” Even maintenance and insurance records, repair history, and driving behaviour can be recorded using the technology so that buyers can know that the used vehicle they purchase has been driven safely and maintained satisfactorily.
VeChain has sought to take advantage of blockchain technology for its inherently useful attributes — harnessing the public blockchain’s ability to prevent fraudulent activity and counterfeiting through the incorruptible, immutable, and openly transparent nature of public blockchain ledgers.
Sunny Lu, the CEO of VeChain, witnessed the daunting problem of counterfeiting in his years of experience as the CIO of Louis Vuitton China. VeChain’s technology was conceived as a business solution from the beginning, protecting the brand power of luxury goods and assuring customers of the authenticity of their purchased products. Since then, it has expanded to many broader applications and partnerships, as we will learn about in more detail in the second part of this Focus Fire series.
For now though, let’s take some time to look into the system involved in making VeChain work as a blockchain solution for enterprise.
VeChain is a two-token economy, using both VeChain Token (VET) and VeThor (VTHO). While VET is used for the transfer and storage of value throughout the broader economy and for the recording of data, with fluctuations in value based on market demands, VTHO acts as a sort of gas for any verification processes or smart contract applications required by partnering businesses.
Normally, blockchain transaction costs can be highly volatile and unpredictable, which is a big problem for any business wishing to use blockchain technology to improve their current business processes. VeChain’s solution is for businesses to rely on using the VTHO currency for blockchain transaction costs. VTHO is designed to remain relatively stable, lacking scarcity due to its capacity to be injected into the economy in larger quantities as needed. As a holder of a significant sum of VET and VTHO, VeChain can act as a sort of reserve for VTHO, adding more to the ecosystem to ensure price stability. VET itself generates VTHO somewhat like a dividend would do in traditional markets, allowing for this circulation of “gas” and incentivizing the accumulation and holding of VET. Thus, businesses can either hold VET to generate their own VTHO and thereby cover transactional costs, or can instead purchase VTHO at a stable price for such purposes.
The innovative implementation of VTHO as a second token allows for some ingenious opportunities to solve problems that, up until now, have discouraged cryptocurrency adoption among businesses. In general, most traditional businesses are not going to be too eager to deal with all the complexities and inconveniences of handling cryptocurrency transactions, storage, exchanging, and so forth. This stands as a significant barrier to getting businesses to adopt the technology for everyday use. VeChain has developed unique protocols — MTT and MPP — that allow blockchain transactions which behave like a regular transaction, from the perspective of the enterprise client. MTT, or Multi-Task Transactions Protocol, allows any users to send several transactions, called clauses, together as one single larger transaction. This significantly reduces transaction costs and is potentially much more convenient in certain situations that involve a high volume of required transactions to be sent or received.
The second innovative solution availed via VTHO technology will prove even more important in attracting business users. MPP, or Multi-Party Payment Protocol, allows multiple parties to handle transactions. By creating this solution, the business client does not need to deal with the hassle of paying network fees, as all network fees can be handled by a sponsoring agent instead via smart contracts. In essence, a third party can foot the bill for transactions, allowing the business to simply enjoy the benefits of Vechain’s blockchain technology without having to deal with the complicated process itself. In fact, the business might not even be aware that it is using blockchain technology, since the entire transaction would be seamless from their perspective, while transactions are quietly handled in the background by the sponsoring agents and, of course, the VeChain network.
This two-token system seems to have an ever-expanding range of use-cases in the business world, as we will observe in the next part of our examination of the VeChain platform.
In part 2 of our Focus Fire Series about VeChain, we will delve into the many partnerships and implementations that VeChain is pursuing in an effort to encourage mass adoption of the technology, examining specific examples of VeChain utility.