VeChain is one of the foremost supply chain focused blockchain projects currently out there. They are getting quite a bit of attention since their main-net launch.
This was the mainnet launch that saw them release their native VET tokens that have seen increasing volume across a number of exchanges. However, VeChain is not alone in its supply chain focus and there are a number of companies and projects that have launched recently.
So, with so much competition, is VeChain still worth considering?
In this VeChain review I will attempt to answer that. I will also analyse the use cases for the VET token and its potential for eventual mass adoption.
What is VeChain?
VeChain is an interesting spin on the uses of blockchain technology. Started in 2015, it is focused on business applications, primarily in the logistics field through supply chain management that provides tracking, quality control, inventory management, and much more.
The mainnet for VeChain was launched back in June 2018, and the project has pushed forward strongly since, bringing many partners into the VeChain ecosystem.
VeChain Entire Technology Stack. Image via VeChain
It has become a part of the Price Waterhouse Cooper incubation program, is working on a proof of concept with BMW and Renault, and has recently partnered with Australian winemaker Penfolds to provide proof of authenticity for their wines being delivered to China.
Unfortunately for investors all of these strong partnerships have had little impact on the price of the VET token, which has continued to drift lower in the midst of the ongoing bear market for cryptocurrency altcoins.
The VeChain project has continued to forge ahead nonetheless, bringing new partnerships onboard, starting new pilot programs, and growing in the business space. This hasn’t been reflected in the token price yet, but it does point to increased adoption, which should eventually be reflected in the token price.
While the threats from blockchain projects are currently minimal, there are players in the traditional technology sector that do pose a real threat already.
One of these is IBM, who have partnered with the shipping giant Maersk to create a global shipping management blockchain platform. This platform has attracted great interest already and has nearly 100 companies on-board, including ocean transport companies, logistics companies, ports, and others.
IBM has also begun work with Walmart and Unilever to uncover new areas of the supply chain that can benefit from blockchain technology. With its technological dominance and global reach, IBM is a threat that can’t be overlooked.
SAP is also entering the blockchain logistics space and is working with shipping and pharmaceutical companies to create a blockchain-based supply chain tracking system. SAP is another huge global player with massive resource and an extensive customer base to draw upon.
VeChain recognizes the importance of having an established business and client base, and with that in mind has been very active in creating partnerships. Through the end of the second quarter of 2019, there are no less than 31 partners which VeChain is working on pilots with, any of which could lead to a breakthrough and wider adoption of the blockchain. And they continue adding new partnerships.
A few of these partners are Price Waterhouse Cooper, BMW, Walmart China, LVMH Group, NTT Docomo, and most recently Australia’s leading wine producer Penfold’s.
Onboarding of new partners and clients is handled quite smoothly by VeChain since they operate on a Blockchain-as-a-Service model, and set up all the infrastructure for clients, including any necessary customization. It’s this model that has allowed VeChain to partner with such a broad and diverse group of industries.
The partnership with PwC has given VeChain access to many companies across China and Southeast Asia and has been valuable in spreading the word about VeChain.
Only a small selection of some of the VeChain Partners
With LVMH, VeChain is developing a system that tracks limited edition luxury goods. Pirating of these types of products is widespread, especially in China and Southeast Asia. With LVHM’s broad offerings of luxury goods, this is a perfect partnership.
VeChain has also been working with DNV GL to increase the transparency of products from the factory or farm to the consumer. In this partnership, VeChain has developed a blockchain-powered digital assurance solution they’ve called MyStory.
Using this dApp consumers are able to learn about the story behind a bottle of wine from the vineyard, to the bottler, through distribution, and to their store’s shelves. All this is accomplished by simply scanning a QR code on the wine bottle.
Another valuable partnership is the one with Chinese automaker BYD, where VeChain has been working on a proof of concept for handling carbon emission imbalances. This partnership is working on building a dApp that will track and record the emissions data of millions of cars, buses, trains, and other vehicles onto the public VeChain blockchain.
Not surprisingly these partnerships are helping VeChain grow, although it does remain smaller than major players such as Ethereum and EOS, who have more highly developed dApp ecosystems, with greater offerings of games and other applications.
The VeChain Team
The primary driving force behind the adoption of VeChain and the VET token is the VeChain Foundation, an organization founded in Singapore which governs and maintains the project, its development, and promotion. The Foundation is governed by the Steering Committee, which is elected every two years and is currently represented by the project founders.
Sunny Lu is the CEO of VeChain and one of the founding members of VeChain. Prior to founding VeChain, he was CIO at Louis Vuitton China. He has over a decade of experience working for Fortune 500 companies in executive IT positions.
From Left: Sunny Lu, Jay Zhang, Kevin Feng & Jianliang Gu
Jay (Jie) Zhang is the CFO at VeChain and is also a co-founder of the project. Prior to working at VeChain, he was employed at Deloitte and prior to that he spent more than a dozen years with PwC. He was responsible for the design of the VeChain governance framework.
Kevin Feng is a partner at VeChain and acts as the COO of the project. He came to VeChain with over 12 years of experience working at PwC. His expertise is in risk assurance and cybersecurity, and he was a driving force behind the development of PwC’s blockchain services.
Jianliang Gu is the CTO at VeChain, coming from TCL & Alcatel’s R&D center he has more than 16 years of experience developing mobile hardware and software. He has amassed over 100 patents in the mobile communication field.
VET and VTHO Token Economics
VeChain is the type of blockchain which uses a dual token economic model in order to avoid the cost of transactions increasing when the value of the token rises. In the case of VeChain, there is a VET token used for speculation on exchanges and governance of the blockchain. The VET token is also used for staking and the generation of VTHO tokens.
The VTHO tokens are used to pay for network transactions, with the default transaction fee equal to 21 VTHO ($0.010437 as of 9/24/2019). Users can increase the number of VTHO paid for a transaction in order to increase its priority on the network. VTHO tokens can be purchased from exchanges, or they can be generated by holding VET in a wallet.
Token Economics powering the VeChain Thor Blockchain. Image via Vechain Whitepaper
Both tokens are drastically different in terms of the function they serve, total supply, and inflation.
By using a dual token model such as this the network fees are kept separate from the potential volatility in the price of the VET token, which in turn makes the blockchain more suitable for business and enterprise uses.
Users who choose to hold VET in a wallet will generate VTHO over time, which enables them to make transactions for free in essence. One side effect of this is that it should increase demand for VET as the network usage grows.
Besides generating small amounts of VTHO it is possible to generate much larger amounts by running nodes to help support the network. There are three types of nodes in use, and each requires a substantial amount of VET.
These nodes participate directly in consensus and require a minimum of 25 million VET. In addition, the owners of authority nodes must be able to prove they are able to make a significant contribution to the VeChain ecosystem as well as passing stringent KYC measures.
Benefits of Authority Nodes on the Network
Authority masternodes are awarded 30% of the daily VTHO usage.
There are three different types, and while they don’t participate in consensus, they do provide network stability. Economic nodes receive a portion of VTHO generated by a pool of 15 billion VET set aside for this purpose.
The economic nodes also receive VTHO based on their VET stakes. The three types of economic nodes and staking requirements are the Mjolnir Masternode (15 million VET required), the Thunder Masternode (5 million VET required), and the Strength Masternode (1 million VET required).
These are nodes that supported VeChain in its early stages of development. They receive the VTHO generated by a pool of 5 billion VET set aside for this purpose.
The VET Token
VeChain conducted their ICO on August 17, 2017, raising 200,000 ETH with tokens priced at $0.0008 each or 1 ETH = 3,500 VEN. Note that I said VEN and not VET.
The original tokens were ERC-20 tokens, but these were swapped for the native VET tokens at the ratio of 1:100 after the VeChain mainnet went live on June 30, 2018. At the time the VEN token was worth $1.62, making VET tokens worth $0.0162 each.
The all-time high also occurred while the VEN token existed and was $8.28 on January 23, 2018. That would be equivalent to $0.0828 for VET.
VET Price Performance. Image via CoinMarketCap
Price dropped following the swap to VET and dipped under $0.010 in August 2018, but recovered to trade between $0.010 and $0.015 until dropping again in November 2018. The all-time high for VET occurred during this period and was $0.019775.
Price has remained below $0.01 since then, although it nearly recovered that level in June 2019. Since then the token has slid steadily lower and as of the date of this writing (September 24, 2019) VET is at an all-time low of $0.003397.
Buying & Storing VET
There are a number of markets for the VET token as it is listed on quite a large range of exchanges. These include the likes of LAToken, OceanEx, Binance, Huobi and MXC. There is strong volume on these exchanges which is more than I have seen for other coins of a similar market cap.
However, the bulk of this volume appears to be concentrated on the likes of LATOKEN and OceanEx. This means that liquidity could be quite concentrated and hence is dependent on these two exchanges.
Taking a closer look at the individual order books it appears as if they are pretty robust. For example, below are the Binance BTC / VET order books. They are quite deep and there is a reasonable amount of daily turnover.
Once you have bought your VET tokens you are going to want to take them offline and store them in a wallet. We all know the risks that come from keeping tokens on large centralised exchanges.
Given that these are the native VET tokens, you don’t have too much choice for storage. We actually have a post on the best VeChain wallets. Perhaps your best bet for storage ought to be a secure hardware wallet.
VeChain Opportunities and Threats
While VeChain is targeting several different markets, its core focus remains on the supply chain and logistics industries. It has also been developing its smart contract functionality and has its eyes on delivering Internet of Things solutions.
The focus on the supply chain industry makes sense, as this is a massive, multi-billion industry that can benefit immensely from the addition of blockchain technology.
VeChain has already forged several partnerships with luxury brands to develop blockchain tracking systems that will serve to maintain the authenticity of products, whether that be luxury handbags, premium wines, or the service history of automobiles.
One key to these tracking systems is the VeChain NFC chip. This tiny chip can be embedded in any product, and consumers are then able to scan products with their smartphone to confirm their authenticity. Counterfeiting of luxury goods is a huge problem globally, with some estimates claiming global counterfeiting affects some $1.2 trillion in goods annually.
Oddly, the biggest threat competitively for VeChain is not other blockchain projects, although there is some competition from that direction, but rather from traditional companies.
In the crypto-space VeChain is up against competition from IOTA in the Internet of Things space, and from Waltonchain in supply chain management. But the adoption of these two projects remains low, and until we have a blockchain project that can scale a working case it isn’t likely there will be a leader in the blockchain space.
VeChain Development & Roadmap
There is no doubt that the VeChain team has been active making partnerships and rolling out updates, but how much of these work is actually reflected in the code?
Given that VeChain is an open source project it may make sense to go into their public code repositories. This can give you a good idea of just how much work is being done on the protocol.
Hence, I decided to dive into the VeChain GitHub and take a look at the coding activity in their repos. Below is the commit activity on the top three most active repos over the past year.
Commits over past 12 months for Select Repos
As you can see there has been a reasonable level of activity. This is about in line with other projects that are at a similar level of development. Of course it is worth mentioning that there are a further 35 other repositories with varying levels of commits.
Looking forward, there are quite a few things that one can look forward to. While there is no official roadmap that has been laid out, you can glean some information from this blog post.
For example, the developers are actively working on cross chain interoperability of VeChain. They are currently still working on “technical preparations” for this technology. This interoperability could no doubt increase the adoption of VeChain.
Then, there is further studies that are being done on the eventual implementation of anonymous transactions. This will be through the use of Bulletproof technology that has alreay being popularized on the likes of Monero (XMR).
There’s no doubt that VeChain has been one of the most successful blockchain projects in terms of generating partnerships. With pilot projects ongoing for nearly 3 dozen companies VeChain is beginning to see some successes. If it can build on those it could see increased adoption.
The project is well-thought-out, with good governance, and a unique economic model that works very well when taking into account the needs of large organizations and enterprise customers. It also hasn’t faced the scalability issues common at many blockchain projects, although that could be due to lack of adoption.
With all the successes VeChain has had, one thing is eluding the project, and that’s positive growth in the value of its token. While the overall bear market in cryptocurrencies certainly has a good deal to do with that, another factor is the competition faced from large traditional technology companies such as IBM and SAP. Investors are understandably worried that VeChain will be buried by these mammoth companies.
The coming year will be a crucial one for VeChain. If it can get some of its pilot programs into production it will make itself more attractive as a long-term player in the supply chain industry. That could shoot it to the top of blockchain projects. If it can’t achieve this then it’s likely IBM and SAP will keep it from becoming a major force.
Featured Image via Fotolia