Why I am Bullish on Vechain

30 min readAug 28, 2022

Please note that I have a position(s) in the VET token.

To arrive at this conclusion, I find it helpful to acknowledge following topics:

Substantial positions

Vechain with the help of DNV have proven themselves to be reliable, cheap, accessible and easy to onboard. They are showing companies as well as government institutions that they bring an innovation to this market and are ready to bring in a new digital revolution into supply chain management, certification and data verification.

Business model (SaaS / BaaS)

Vechain’s offering of SaaS coupled with advantages of blockchain create a product that will help its clients digitize and improve supply chain management and certification all the while saving money and improving the supply chain in all its aspects.

Potential

These unique technical aspects of Vechain give it certain advantages over its competitors, whether those offer solutions based on public or private blockchains. Its simplicity and ease of use, combined with it being battle-tested and working without interruptions since 2018, proves that blockchains are the future of digital supply chains.

Following topic points out the negatives and outlines the critique which has a bearish outlook if not addressed in the near future:

Concerns

All of these concerns do not overwhelm the things that Vechain has already achieved and all of the potential its vision has. It could however delay its expansion and have the potential to loose clients due to lack of recognition. The lack of transparency with the community would also thwart progress and innovation on the “retail side of things” such as DeFi and even potential investors.

The first three topics lead me to a long-term bullish conclusion while the concerns leave a short-term bearish outlook with potential for change.

An Introduction to Vechain (VeChainThor Blockchain)

Vechain was originally created as a dApp on the ethereum public blockchain in 2015. Later it transitioned into its own layer 1 blockchain in 2018. (see my Post on Cryptocurrency Types to know what a “layer 1 blockchain” is) Its initial idea was to disrupt the supply chain industry by making data actionable, transparent and simplify supply chain management.

The Vechain blockchain, contrary to others, is a hybrid permissioned/public chain. Public meaning that the ledger is open for anyone to see and for anyone to deploy their dApp on it and permissioned meaning that only select members can validate transactions on the network.

From Design of a Block Chain and Machine-Learning Based Blood Donation Supply Chain Management + added last entry

The ecosystem consists of 101 authority nodes who validate and process transactions on the chain and “token nodes” (the VET token holders) who have governance power and can participate in all sorts of decisions proposed by Vechain Foundation.

Anybody can apply to become an authority node, however they must fulfill certain criteria and be allowed by the Vechain Foundation (potentially also token nodes in the future).

All AM holders must do the following: a) be vetted to ensure that they have a legitimate identity, b) hold 25M VETs as collateral, and c) run and manage a server with a certain guaranteed level of performance and availability. More importantly, in addition to those minimum qualifications, AM holders are responsible for actively contributing to the VeChain ecosystem in their own fields. VeChain AM holders are subject to strict KYC, and their identity and reputation are part of the stake, in addition to the financial collateral. The VeChain Foundation will conduct strict identity verification and hold AMs accountable for their activities and obligations to the ecosystem.

The Vechain blockchain uses a unique consensus algorithm called “proof of authority” that differentiates it from others.

From The Dynamics of Governing Enterprise Blockchain Ecosystems

It also has a unique two token system that powers the whole blockchain.

VeChainThor designed a bi-token system that includes VeChain Token (VET) and VeThor Token (VTHO). The function of VET is to serve as a value-transfer medium to enable rapid value circulation within the VeChainThor network. VTHO represents the underlying cost of using VeChainThor and is consumed, or in other words, burned by performing on-chain operations. Furthermore, VTHO is generated from holding VET, which is established to allow any user with VET to make transactions at no extra cost if the user holds the VET tokens for long enough.

The VET token has a maximum supply of 86.712.634.466 while the VTHO token which is used to pay for transactions has no supply cap.

VET is also used to power token nodes. These nodes do not require the holder to have any hardware and they do not participate in the consensus algorithm. Anybody can become one if they purchase enough VET tokens. Being a token node holder you are have the following perks:

Generate additional VTHO
Ability to participate in governance
Potential for special rewards from either Vechain Foundation or projects launching on the chain (airdrops)

There are two types of token nodes, economic nodes and X-nodes.

Info from https://manager.vechainstats.com/vnt-guide/

The takeaway is that economic nodes can be created (after having enough VET in the wallet you can make an economic node based on the amount of VET after a certain “maturity” period). X-nodes (which are in form of NFT tokens) however are non-fungible, limited and can only be purchased from other holders on the official on-chain marketplace.

Here are the requirements to be able to power certain token nodes: (you have to have that amount of VET in the wallet, otherwise the node’s token will be automatically burned after a certain time)

Governance consists of the following voting rights:

Authority nodes: 40%
X-nodes: 40%
Economics nodes: 20%

Note that the Vechain Foundation very likely held a majority of authority nodes at inception and may potentially still be in control of its majority, however that is speculation.

Since the blockchain is open for anybody to deploy their dApps, Vechain is home to some decentralized exchanges, NFT marketplaces and even has its own collateralized stablecoin called “VeUSD”. DeFi on Vechain is still very unpolished and underwhelming due to lack of support from the Foundation and incentives. Since DeFi is not the focus, it lacks the appropriate funding and has less interest from developers in comparison to other blockchains such as ethereum.

VeChainThor has already been applied across a diverse array of use cases, aiding the daily operations of corporations and creating new value and efficiencies. Alongside key strategic partners PwC and DNV(formerly DNV GL), VeChain has collaborated with world-leading enterprises including DB Schenker, Walmart China, Bayer China, BMW Group, Groupe Renault, LVMH, BYD Auto, PICC, Shanghai Gas, D.I.G, ASI Group and more. National level partnerships include the Republic of Cyprus, Gui’an New Area (China) and others. See more here (list may be outdated)

Following patents are filed by Vechain Global Technology Sarl in Luxembourg:

Other patents related to Vechain:

Dimitris Neocleous, UK and EU Ecosystem Manager of VeChain, co-authored a recent patent application detailing a process for storing sensitive data like medical records on the blockchain without breaching GDPR.

Main contributors to the development of the public blockchain is the non-profit Vechain Foundation which has offices in Singapore, China, Luxembourg, Japan, USA and is headquartered in the Republic of San Marino.

Vechain Tech is a for-profit private company that specializes in on-boarding of clients to use the blockchain to improve, simplify and digitize supply chain information, certificates and other types of data.

Substantial positions

Achievements

Government level adoption

This impressive list not only gives this project legitimacy and assurance but also shows just how much Vechain’s influence has spread over the years. Being a member of so many associations / alliances and coalitions gives Vechain an important opportunity where they can promote innovation, lobby for additional advantageous positions and push their products into bigger markets.

Vechain initially had a big focus in Asia where blockchain technology is set to become widely adopted in the near future and is already being used to build the new digital world.

Later it has expanded into Europe where it had setup a headquarters in San Marino. It collaborated and partnered with some European government institutions and companies to create various case-specific products that would utilize its public blockchain to certify and verify certain data.

Vechain’s strategic partner DNV which is an international accredited registrar and classification society headquartered in Norway has launched multiple products in collaboration with Vechain (utilizing its Toolchain SaaS) that use its public blockchain for various purposes. Notable products launched by DNV include:

Norway in a Box

To assist superior Norwegian products, such as seafood, supplements, water, or home furnishings enter into the Chinese market, VeChain, DNV GL and Norway In a Box are working together to build a trust platform enabling consumers from China to enjoy high-quality products produced in Norway, as well as other Northern Europe countries.

My Story

My Story is a solution build by DNV GL in cooperation with VeChain that gives brands the opportunity to share with consumers the authentic product story.
Verifiable facts about the product, registered throughout the product’s history will be stored on VeChain’s immutable blockchain, for consumers to check before and after purchase.

MyBaby

In partnership with VeChain and DNV, Renji Hospital, a top-ranking hospital in China affiliated with the Shanghai Jiaotong University School of Medicine has announced the launch of smart medical care project — MyBaby, the world’s first blockchain-based In-Vitro fertilization (IVF) Service Application.

VeTrust

In the face of the long-term impact of the COVID-19 on the global economy, VeChain, together with DNV GL, have jointly introduced a blockchain-based risk self-assessment application named VeTrust. It provides hotels with an effective risk self-assessment toolkit to enhance safety and risk management during and after the pandemic.

Tag.Trace.Trust

Hydro and DNV GL have announced a partnership to leverage the VeChain based solution “Tag. Trace. Trust”. This service, developed by DNV GL, will be implemented by Hydro to enable its customers to verify the validity, reliability, and authenticity of product data with an “environmental profile”.
Hydro is one of the largest aluminum companies worldwide. Headquartered in Oslo, the Norwegian company is operating in more than 50 countries. The Norwegian state controls 34.3% of the company, together with the Norwegian pension fund with a 6.5% stake. Hydro’s yearly revenues are estimated to be around $12.6 billion.

My Care (used by De Cecco)

With the COVID-19 pandemic threatening individuals and businesses worldwide, infection risk management has been a tough challenge. To help companies better handle this problem, DNV GL, one of the world’s largest assurance companies with over 15,000 professionals globally and over 110,000 customers, has designed, developed and released a blockchain-enabled infection risk management solution called My Care, which aims to assess, manage and mitigate infection risk in management processes, business dealings and operations for enterprise users.

DNV GL’s reclaimed plastic traceability standard

ReSea Project is a Danish company cleaning rivers and oceans in Indonesia. It is the second organization in the world to be certified to DNV GL’s Chain of Custody standard built to assure the traceability and integrity of plastic recovered from the hydrosphere.

Other strategic partners such as PWC also created products that are powered by Vechain such as Air Trace.

Lately it eyed an expansion into USA where they already acquired a modest integration partnership with OrionOne and a marketing partnership with UFC.

Other recent partnerships include UCO Network and Electi.

However it still has very valuable clients in Asia, namely in China. Which is interested in “seizing the opportunity” and adopt blockchain technology.

The official’s remarks come after Chinese President Xi Jinping said China must make “greater effort” to develop and apply blockchain technologies and gain an “edge over other major countries.”

Vechain having a very strong presence there from the very beginning, little competition and very favorable regulations allowed it to acquire very favorable positions and enough legitimacy to gain trust of government institutions.

Europe is starting to invest heavily into blockchain and has realized that it has tremendous potential. Keep in mind that blockchain not always means cryptocurrency. government institutions and companies will very likely be more comfortable with implementing private blockchain solutions before utilizing the public ones as they are not mature enough and are yet to prove themselves.

Having strategic partners like DNV is very crucial for Vechain.

DNV is the world’s largest classification society, providing services for 13,175 vessels and mobile offshore units (MOUs) amounting to 265.4 million gross tonnes, which represents a global market share of 21%.[4] It is also the largest technical consultancy and supervisory to the global renewable energy (particularly wind, wave, tidal and solar) and oil and gas industry — 65% of the world’s offshore pipelines are designed and installed to DNV’s technical standards.
Prior to the merger, both DNV and GL had independently acquired several companies in different sectors, such as Hélimax Energy (Canada), Garrad Hassan (UK), Windtest (Germany) and KEMA (Netherlands), which now contribute to DNV’s expertise across several industries. In addition to providing services such as technical assessment, certification, risk management and software development, DNV also invests heavily in research.

Being the world’s largest classification society, DNV has an enormous outreach where they promote the use of blockchain and of Vechain’s products to many clients. This is undoubtedly one of the most crucial strategic partnerships in the whole of the cryptocurrency industry.

Vechain with the help of DNV have proven themselves to be reliable, cheap, accessible and easy to onboard. They are showing companies as well as government institutions that they bring an innovation to this market and are ready to bring in a new digital revolution into supply chain management, certification and data verification.

Certain concerns such as strict regulations and a cryptocurrency ban might be brought up when talking about Vechain. Its unique approach and a carefully designed business model means that they are not affected by any dangerous decisions to thwart innovation.

Business model

Vechain’s business model focuses mainly on offering Software-as-a-Service (SaaS) platforms and other types of software to help onboard clients to use the public blockchain without the need to hire specialists. The most popular SaaS platform is Toolchain.

ToolChain is a kit containing all the necessary hardware, software and service protocols to onboard a business onto the VeChainThor blockchain.
There are 3 Versions of the ToolChain kit: Standard, Developer and Channel Partner. This is so that businesses with any levels of technical capability can use VeChain’s technology.
Standard Version
The Standard Version provides standarized application modules, tools and Internet of Things (IoT) devices. It was designed for MSMEs without the capability to develop their own blockchain-based lifecycle management solution. Businesses can be onboarded onto the VeChainThor blockchain within 30 minutes.
Developer Version
The Developer Version is designed for enterprise customers with stronger technical capabilities. It will allow enterprises to develop various applications based on the VeChainThor blockchain tailored to their needs.
Channel Partner Version
Channel Partners will be able to have independent deployment and multi-dimensional customisation of ToolChain.

Here is an overview of the Platform’s Architecture.

Screenshot from https://www.veworld.com/home

Notable products

Carbon Footprint SaaS platform

VeChain’s brand new Digital Carbon Footprint SaaS Service is a powerful, rapidly deployable tool, enabling enterprises of all sizes to re-engineer their carbon footprint data management practices. This new offering is also the first of its kind to benefit from the combination of decentralized ledger technology and an SaaS business model.
This platform provides a practical solution to the challenge of unverifiable data that often comes with environmental reporting. Whether it’s reporting one’s carbon emissions, the amount of bycatch in their fishing operations, or whether produce meets organic certification standards, it can be hard to independently verify data, especially with so many moving parts in complex supply chains.

Food Safety Track & Trace SaaS

A blockchain-enabled food traceability platform that provides the food and beverage industry with various traceability functions that are readily deployable, including product provenance and quality certificates etc. It creates a brand-new consumer interaction that allows food and beverage companies to communicate and build brand awareness in a trustworthy manner.

Sustainability Track & Trace SaaS

A lightweight and rapidly deployable sustainable traceability application that allows brands to record all their sustainable footprints throughout their supply chain, including but not limited to the usage of recycling raw materials, green production processing, green packaging and logistics, product carbon footprint etc. The blockchain technology provides a solution to make sustainability transparent and trustable.

General Supply Chain Track & Trace SaaS

With 300+ enterprise cases, General Supply Chain Track & Trace Software-as-a-Service (“SaaS”) covers the traceability needs of various business scenarios and industries, giving the fastest path to a consumer-facing blockchain solution. The standardized templates for various industries are available out of the box, improving production, marketing and brand building.

Low-code Deployment PaaS

Low-Code Deployment Platform-as-a-Service (“PaaS”) provides clients with flexibility to create process templates and use provided powerful tools to easily build their own blockchain applications within specific scenarios.

Blockchain as a Service platform

BaaS is an expressway to connect with the underlying blockchain and is used as a gateway service to access on-chain smart contracts with a traditional restful API. It is available for independent deployment to build out a functioning application with multidimensional customization to meet diverse business demands and provide a more immediate end-user experience.

Offered solutions

Sustainability and Carbon Management

In order to help companies to address climate change, we offer a complete, one-stop solution based on blockchain technology and scientific methodology, covering scenarios like sustainability track and trace service, carbon emission inventory mechanism, product carbon footprint, etc. Third party assurance services are also available within the solution provided by close partners like DNV.

Transparent Supply Chain

The solution utilizes blockchain and IoT technologies to capture and store the key data from participants in the supply chain. Sharing the information captured across the supply chain communicates transparency and security, allowing companies to better trace back the source of their goods across the globe and ensuring that their goods have been sourced lawfully and responsibly.

Blockchain Storage

By utilizing blockchain technology, we can eradicate the malicious intent of paper-based counterfeited certificates, bills, and contacts, and provide authentic data for government agencies and financial service providers.

Smart Agriculture

The solution supports building agricultural big data management platforms based on the blockchain technology. The platform could integrate all types of key data related to different processes of the agricultural sector to achieve agricultural resource monitoring, quality and safety traceability. Governments can gain oversight of details from across the supply chain, enterprises can manage their entirety of their product ranges, and consumers can gain an overview of product and company profiles. With this solution, it will help to realize smart agriculture and rural brand revitalization.

Food Safety Traceability

With the blockchain based Food Safety Traceability Solution, food enterprises can achieve full lifecycle traceability for their supply chains, including food origins, processing, packaging, logistics, retail etc., exploit value via on-chain data generated by their own business. The immutable traceability data on the blockchain enables companies to increase the efficiency of food compliance review, quality control, government supervision, supplier evaluation, customer trust engagement and more.

Sustainable Fashion

The solution allows fashion companies to credibly record the sustainable practices throughout the supply chains and create a visible sustainability picture. By storing the key product traceability data on blockchain, sustainable footprints can be clearly seen. Fashion brands can manage the suppliers based on their sustainability performances, and meanwhile demonstrate the green stories to their clients or regulators with trustworthy data, building strong sustainable brand image to gain competitive advantages in long term.

Anti-counterfeiting and Digitization for Luxuries

The solution allows brands to digitize products on the blockchain by establishing the linkage between the physical product and unique blockchain identity using IoT technology (NFC/RFID/QR Code) and implementing the traceability of luxury products’ entire lifecycle management. Each product has its own landing page created by the brand with the product description and marketing and traceability information. The solution can also contribute to effective channel management, after-sales services, and convenient financial services such as insurance for high value goods.

Digital Vehicle Passport

VeChain assigns each vehicle a unique ID and a digital passport that covers the entire lifecycle of the car. By using the authentic data stored on the blockchain, the brand can assess the quality and authenticity of auto parts. Additionally, vehicle owners can share data access rights to third-party service providers such as car insurance companies, and used cars trading platforms etc. In the end, the blockchain stored data with clear accountability of each user and party will generate the new value of “data on blockchain” for automobile sales, financial support, and trading in second hand markets.

Cold-chain and Smart Medical

The solution combining blockchain technology and IoT sensors helps to real-time check the temperature or humidity data during storage and in-transit stages of temperature sensitive products like foods, reagents, medicines etc., and visualize the results to monitor and manage the cold-chain logistic status. Moreover, for medical or healthcare companies, they are allowed to track drugs across supply chain including patients side and giving transparency during treatment between doctors and patients as well, establishing smart medical system.

The way ToolChain, Vechain’s main offering, fit within the whole ecosystem is quite unique and offers many advantages. It utilizes something called ToolChain Credits (TCC) which is what the client is going to interact with while the blockchain is used in the background without the user even needing to know how it all works:

ToolChain Credits (TCC) are not a cryptocurrency, nor do they interact with the blockchain. They are a traditional method of payment that businesses can use to create digital identities to new products (known as a VID), upload data, manage users, and other administrative needs. Since this unit of accounting doesn’t involve cryptocurrency, ToolChain is completely compliant in difficult and conservative regulatory regions that are less friendly towards digital assets. They are priced to reflect the cost of using the blockchain (in VTHO) and other development costs associated with the ToolChain platform. So what happens when a business purchases VIDs with ToolChain Credits?
The foundation is able to complete the transaction on the blockchain mainnet by supplying the VTHO themselves. Note: Every transaction on VeChain requires VTHO, it’s just a matter of who sponsors the payment. For ordinary transactions, users pay directly. However, using fee delegation, it’s possible for businesses or dApp users to pay in regular currency, and have a secondary party (in this case, VeChain themselves, pay the VTHO). The advantages of this method are plentiful:
- Simplicity — Businesses don’t need to manage VTHO or worry about price fluctuations
- Faster onboarding — Steps to deployment are significantly reduced
- Regulator-friendly — Major regions such as China don’t allow for cryptocurrency to be used as a form of payment
- Generates revenue — VeChain have a consistent revenue stream to fund future development, staff salaries, research & develop new technology, and put towards marketing, PR, and client outreach
All these advantages should lead to one thing: Faster adoption for businesses.

One of the most important factors here is regulator-friendly. This allows the platform to function under many circumstances and require far less compliance with additional cryptocurrency specific regulation. Currently regulation is a great barrier to adoption of such technologies, whether companies are being deterred from adoption due to unfavorable regulations or are afraid that such regulations will be introduced in the future. This is how Vechain gained such a strong presence in an environment that is quite hostile towards cryptocurrencies such as China. And China being the world’s second biggest economy, Vechain is positioned to have tremendous potential considering the positions it already has.

According to a recent McKinsey & Company report, technology industry analysts predict further growth in the Software-as-a-Service market, and expect to see the market for SaaS products near $200 billion by 2024.

SaaS has become the default software-delivery model — and at breakneck speed. In 2010, SaaS offerings commanded just 6 percent of enterprise-software revenues. By 2018, that share had grown to 29 percent, or $150 billion globally. Yet that figure understates the true size of the market. When revenues from companies still transitioning to SaaS are counted, the total as-a-service share rises to 75 percent of all enterprise-software revenues, or more than $380 billion. Those numbers mean that companies with no SaaS offerings now represent only one-quarter of total industry revenues.

SaaS has many advantages according to IBM:

Reduced time to benefit
Lower costs
Scalability and integration
New releases (upgrades)
Easy to use and perform proof-of-concepts

The cost of using ToolChain and its underlying blockchain and the simplicity to onboard means that companies and institutions start to see the benefits right away such as:

Improved quality assurance
Improved payments and pricing processes
Improved data authenticity
Improved theft prevention
Improved transaction flow
Improved integral traceability
Improved regulatory compliance
Improved auditability of the supply chain and other processes

Vechain’s offering of SaaS coupled with advantages of blockchain create a product that will help its clients digitize and improve supply chain management and certification all the while saving money and improving the supply chain in all its aspects.

Having the most partnerships in the cryptocurrency industry and a strong business model coupled with many products is not the only bullish thing about Vechain. Even if it does not compete with other layer 1 blockchains it still has some very unique aspects that are quite valuable in terms potential and contain certain advantages over other well established projects.

Potential

Following aspects help Vechain compete as a layer 1 chain:

Cost of use

The study “Containerized immutable maritime data sharing utilizing Distributed Ledger Technologies” argues that:

VeChain has a lower transaction cost compared to Ethereum and a less complex structure as compared to directed acyclic graph ledgers such as IOTA. Pilot projects conducted with stakeholders have shown its suitability for a wide variety of use cases in supply chain management, food safety and digital assurance

Its two token system plays a crucial part in it:

Such a two token system is an essential building block for VeChain, a public blockchain purpose built for enterprise solutions. The VeChain Token (VET), acts as a store and transfer of value, while the VeThor (VTHO) is used to pay for transactions on the VeChain. For comparison, the average transaction cost on VeChain was 1.10 VTHO which converts to $0.0065 while the average Ethereum transaction of the same size was 0.00012 ETH which is around $0.27. This difference in price is further put into context by considering use cases beyond BL ownership records. Consider the case of regular hashing of sensor data as highlighted in section 2. If we assume that a transaction is sent from a vessel every 10 minutes that would be 6 transactions per hour. For a system implemented in Ethereum, the cost would be around $15061 per year, a much higher cost compared to approximately $358 per year in case of a VeChain based system.

And this is not accounting the fact that there were times where ethereum’s gas fees skyrocketed for long periods of times. Such cost instability can be very detrimental to a functioning system of supply chain management or any other important system for that matter, even financial.

Ethereum focuses on completely different things and does not even compete with Vechain. But it is still an important aspect to take into consideration.

Adaptability

The cost of use is a very crucial component of a flourishing product, that is why Vechain Foundation reacted and proposed a vote as soon as it noticed a rise in costs.

In “VeVote Opinion Poll On Adjusting Base Gas Price Of VeChainThor” they stated:

Reflecting on our business foundations, we recognise the potential effects that increased costs can bring and acknowledge the need to keep costs affordable to use the network. For example, on January 1, 2021, it cost $0.291 to initiate an NFT auction on the VeChainThor blockchain. Today, at the time of writing, that same transaction costs around $7.009. Aside from startups, increased transaction costs would also affect current and future business, enterprise and government users. Such increases in transaction costs can slow down the large-scale adoption of products and services.

Subsequently an on chain governance vote was submitted where all the token node holders voted which was then followed by a vote from the Steering Committee which eventually led to a decrease of 99% of cost for transacting on the blockchain.

This not only shows that it is cheap to use the blockchain, it also shows Vechain’s adaptability to certain problems that may occur in the future.

Consensus algorithm (Proof of Authority)

At the time of writing (08.2022) the identities of the authority nodes are unknown except for a few exceptions. But all that is know is that the transactions are processed and verified by entities who have a financial stake in the system and are incentivized to ensure its functionality.

This means that there is a greater engagement between the Vechain Foundation and the authority nodes to ensure that the blockchain always functions properly and avoids forks, which is a very important factor for enterprise clients (which Vechain targets as its costumers). Forks can be detrimental to security, data availability, privacy and even falsification of data. This is why traditional databases are used everywhere, besides being fast and reliable they are also centralized. This ensures that threat actors are able to do less damage than in a completely decentralized environment. This level of protection allows clients to be more confident about Vechain and be sure that it works all the time without issues.

Another big concern that always comes up is that decentralized blockchains can be attacked if enough resources are available (whether in form of hash power for PoW based blockchains or stake for PoS based blockchains). Vechain’s PoA consensus algorithm has neither hash power nor staking / delegating (where the token holder is free to delegate their stake to different entities). This makes it more resilient to attacks thus making it more reliable to the costumers.

VeChain reduces the attack surfaces by preventatively sacrificing some degree of decentralization for increased security.

Governance

As already outlined above, Vechain’s model allows any token holder (with a certain amount of tokens) to participate in the on chain governance and vote on certain changes to the blockchain or decisions that Vechain Foundation proposes. This coupled with the passive generation of the VTHO token incentivizes people to acquire VET. That way people who are interested in the future of Vechain can have a say in which direction it will go and which decisions will be done along the way.

Another crucial part of governance of the Vechain ecosystem is the Steering Committee, which at the time of writing (08.2022) consists of 5 members. Members of the Steering Committee can be viewed on the official website.

It also has had elections in the past, one of which was in 2021. In it anybody who met certain criteria could apply to be part of the Committee and steer the Vechain Foundation in the right direction.

Unified leadership

Decentralization can in some cases bring fragmentation of power because of disagreements. Everybody has their own vision and ideas and sometimes conflicts could be the end of good projects. Vechain has a clear vision which is being realized by people who invented it and supported by those who believe it to be a great project. Its mix of centralization and decentralization gives it the stability it requires to service critical clients such as government institutions and the ability to vote on propositions appeases the decentralized nature and vision of cryptocurrencies. Vechain Foundation is the key enabler of the ecosystem as it focuses on building the underlying technology, infrastructure, utilities and services but it also gives an opportunity for others to contribute like their grant program which at the moment is minuscule compared to grant programs of other layer 1 blockchains but might grow bigger in the future.

These unique technical aspects of Vechain give it certain advantages over its competitors, whether those offer solutions based on public or private blockchains. Its simplicity and ease of use, combined with it being battle-tested and working without interruptions since 2018, proves that blockchains can be the future of digital supply chains.

Nothing is perfect, nor does it need to be. Vechain has problems just like any project or company in the world. I would like to point out some concerns that I have found so that you can compare them and decide for yourself whether Vechain is a good investment or not.

Concerns

Some of the following things are apparent when doing due diligence and learning about Vechain. These are in my opinion things that should be addressed and solved.

Insufficient support for developers and contributors

DeFi and NFTs are, like previously mentioned, still very underwhelming. Vechain’s grant program does not contain many recipients nor a big amount in the program itself to attract developers, contributors and researchers. The lack of DeFi dApps and activity on them is the product of this. There are decent decentralized exchanges for example but they lack features and functionality to attract investors.

A very underwhelming bug bounty program is also present with cash prizes that are not very attractive.

A recent hackathon was also underwhelming which resulted in few participants and small prizes.

Foundation’s “One Million USD Grant Program for the Vechain eNFT Ecosystem” back in 2021 garnered some attention in the media and seemingly fizzled out.

Insufficient variety of software (and browser) wallets could also be a deterrent for potential retail investors. This however is not in a very bad shape, there are official wallets and they are decent. Its just that there is no variety which is evident by the lack of interest from developers.

Suggestion: Expand the grant program, organize hackathons and announce bug bounties. It should be clear by now that open-source succeeded and is superior to closed-source software because of open engagement. If this engagement is incentivized the product will become better and thus more attractive to developers who are interested in deploying dApps on Vechain or potentially even contribute or work for it leading to more #ValuableTXs.

Insufficient growth and devaluation

With so many partnerships and so many clients one would think that the chain would be full of activity. This is sadly not the case.

Mainnet Activity from https://vechainstats.com/

The amount of transactions (in this case clauses) has not been growing for quite some time and the biggest client doing the most transactions on the chain is Walmart China accounting for around $100 burn of VTHO daily.

Daily amount of VTHO burned in USD from https://seevechain.com/burn-usd

Currently the average daily generation of VTHO sits at around 37,10 million units a day while the daily burn sits at around 45,97 thousands. (VTHO is burned when a transaction is sent)

If there is more and more VTHO entering circulation it leads to inflation and devalues the token. The less valuable VTHO is the less attractive it is to hold VET. The only way the system would become healthy and grow is if there are enough transactions to burn more VTHO then the protocol produces. The lack of a growing amount of transactions means that VET becomes less attractive as an investment and also hurts its credibility.

Potential solution for the inflation: The Vechain Foundation is in control of a big amount of VET that constantly produces VTHO. It sometimes gives that VTHO for free to clients and also uses it to pay for ToolChain transaction fees etc. In my opinion it should burn the majority of the VTHO they currently have and start buying VTHO from the open market in order to incentivize people holding VET, since every VET produces VTHO on a daily basis. This is a drastic measure and there could be better solutions, but if nothing will be done the value of both VET and VTHO will continue to devalue drastically.

Suggestion: Bring more transparency, if possible, about the phases of implementation of current clients. If on-chain activity won’t grow then at least there could be some clarity about why it isn’t growing. Usually it simply takes a long time for these things to materialize, but without transparency it feels like all the partnerships are not even real.

Lack of engagement with community and transparency

Sometimes very little is answered and the concerns keep growing. The Vechain Foundation, apart from the occasional partnership announcement or an AMA does not say very much. There is little community engagement from the side of the Foundation and the transparency has also declined. Vechain’s last Financial Executive Report (vol. 15) was in 08–2021. Before these were coming often but now they have seemingly disappeared.

The last AMA that I am aware of was in 2021.

The last episode of Bootcamp (which is Vechain’s interactive learning and communication series) was in June 8, 2021.

Suggestion: Bring back the Financial Executive Reports. Transparency is a key factor for legitimacy. Organize more community engagement events, continue with Bootcamp. Sponsor or incentivize social media presence like Podcasts or Youtube channels that are focused on Vechain. But please do not do giveaways or some weird contests. Provide funds to those who will continue to produce content about Vechain, not those who will come for the contest or the giveaway and forget about it. Incentive those who focus on growth of their content like Podcasts.

Lack of events / conferences(UPDATED)

According to the website coindar.org Vechain had 54 events occur during its existence and out of those only 5 are of significant value such as a brand event, a general event and conference. Its most known event was the “Vechain Summit 2019” with the motto “#CreatingVluableTxs”.

Vechain’s Sunny Lu (CEO) attends conferences and is a speaker in them, but those conferences are not Vechain specific. There needs to be more like the Vechain Summit of 2019 where people can gather to discuss and meet others in order to promote the brand and its products.

EDIT(2023): Vechain announced the HiVe (https://thehivesummit.org/) A big event with good speakers with teased announcements.

Suggestion: Start more events that would promote brand recognition and product among companies and institutions, but ones that would allow retail people to attend and even participate in such as conferences organized by Vechain.

Lack of a clear roadmap(UPDATED)

Believe me this is hard to find if you look for it, but the only thing there is for a roadmap is this:

From a tweet by https://.twitter.com/realsezgikocak

This extremely vague and unexciting chart is the only thing there is and its nowhere to even be found on the official website.

There is a technical roadmap that is a little bit more recent:

But this only a technical roadmap for the new consensus algorithm which was announced back in 2020 and still is yet to be finished.

EDIT(2023): A new roadmap was released

This is a big improvement in terms of clarity and transparency. I will keep the rest of this post and suggestion intact so people could have an idea on how things developed over time.

Suggestion: Create a clear roadmap which will explain and show what is being done and what will be done in the future. The community and investors needs to know what to expect and to know if the fundamentals are changing. A chart with extremely vague points is very unprofessional for such a basic yet important document that shows the progress and the vision of a project.

Lack of transparency around authority nodes

This one has been a constant concern raised by the community over the many years of existence. The fact that nobody besides Vechain knows the entities behind the authority nodes is rather concerning. It also constantly fuels speculation and uncertainty within the community and its investors which moves to those who are outside of Vechain’s ecosystem and are interesting in learning about it.

Suggestion: Disclose a list of entities who are holders of authority nodes who agree to be public about it. If not many will agree to publicly disclose it, show the ones that do and show just how many authority nodes are under the control of the Vechain Foundation.

Lack of marketing(UPDATED)

According to the latest “The VeChain Foundation Financial Report — 2021 Overview” the Foundation had assets valued at $1,373,691,155 as of the time of the release of the report at January 26, 2022. (Visit my website https://www.devfunds.info/vechain to stay up to date on this information)

In that report it is stated that the spending for the year of 2021 amounts to $18,579,463.

Such a huge treasury is a big potential but only if used correctly. The key term here is used. Money that is not being spent on investments, expansion, marketing and even acquisitions is something that leads to lost potential.

Vechain did start 2022 strong with a big marketing partnership that costed them $100 million. But it still lacks a clear marketing strategy. Some argue that UFC is not the best fit for this, saying that UFC’s audience will not capture the vision and idea of Vechain. Others were delighted that at least something happened in terms of marketing.

Relying on clients alone to do the marketing could mean that the brand will take much longer to expand and not be noticed by potential strategic partners or big clients.

EDIT(2023): In late 2022 there was a big redesign of the logo, Website and many other things. The whole brand got a new improved and clean identity. This will boost the marketability of the brand and it is a big step in the right direction. The marketing strategy is however still not transparent.

Suggestion: Invest in a clear marketing strategy with some respectable company that would promote the brand and be clear and transparent about this strategy to the public.

All of these concerns do not overwhelm the things that Vechain has already achieved and all of the potential its vision has. It could however delay its expansion and have the potential to loose clients due to lack of recognition. The lack of transparency with the community would also thwart progress and innovation on the “retail side of things” such as DeFi and even potential investors.

Please note that the above points are concerns in my opinion. Some may be backed up by the Vechain community, some may not or not entirely.

Conclusion

Vechain, alongside strategic partners like DNV and its collaborations on national levels with government institutions, has big potential to revolutionize the supply chain. Having a great product offering, easy onboarding processes for clients and a huge outreach means it could become the de facto blockchain for digital supply chain management, certification and data verification.

The cryptocurrency and blockchain industries are evolving and are slowly showing the world what they are capable of. Vechain is not your usual hype coin with big DeFi APY/APRs because its focus is on working with corporate clients. They are expanding, growing and working towards the status of being recognized by entire industries as reliable. Just some of their positions and achievements overwhelm the concerns that I brought up because of the size of the scale of those positions / achievements. Working directly with government institutions puts my mind at ease about the success and direction of this project. But that doesn’t mean that the concerns should be ignored. Maybe the Vechain Foundation could take a little bit of their busy time to at least address these concerns to the community or even explain them. Maybe there is a misunderstanding or maybe just a lack of available information.

Either way the vision this project had from the beginning has not changed and that is why I am bullish on Vechain.

This content is for Information and educational purposes only and should not be considered investment advice or an investment recommendation.

Visit my website for financial information of various non-profit foundations that are developing cryptocurrency projects: https://www.devfunds.info/

Visit Vechain Foundation’s official twitter: https://twitter.com/vechainofficial

Follow this twitter account to stay up to date with news related to Vechain: https://twitter.com/eisenreich