summary: VeChain is a blockchain-based platform that focuses on providing supply chain solutions for businesses.
content: VeChain is a blockchain-based platform that focuses on providing supply chain solutions for businesses. VeChain utilizes VeChainThor, a public blockchain designed for mass adoption of blockchain technology by enterprise users of all sizes to enhance supply chain management and streamline business processes through the use of distributed ledger technology (DLT). Overview VeChain was founded by Sunny Lu and Changpeng Zhao and was launched on the Ethereum blockchain in 2015 as a subsidiary of Bitse, a chinese, blockchain as a service (BaaS) company. The platform features different governance and economic models, and also aims to improve their protocol to provide efficient and transparent transitions, and controllable and predictable cost. It builds upon the essential building blocks of Ethereum and aims to offer solutions for enterprises as well as developers. VeChain builds their ecosystem in order to provide a robust governance framework and an economic model for businesses to operate decentralized operations. They aim to obtain these goals by implementing meta-transactions, proof-of-authority (PoA) consensus and their two token system. Tokenomics VeChain utilises a two token system, designed to separate the cost of using the blockchain from market speculation consisting of VeChain Token (VET) and VeThor Token (VTHO). The correlation between blockchain resource utilization and the cost of VTHO allows for a more predictable cost through monitoring the supply and demand of VTHO. Additionally, the VeChain Foundation's governance mechanism further stabilizes the cost. VET serves as a value-transfer medium, enabling rapid value circulation within the VeChainThor ecosystem. It represents the smart money of the ecosystem, detached from the direct cost of using the blockchain which is represented by VTHO. The total supply of VET is capped at 86,712,634,466 tokens. The supply of VTHO is derived from payment and smart contract transaction fees on VeChainThor. VTHO is generated from any address holding VET at a predetermined velocity. 70% of VTHO paid in each transaction is burned, while the rest is awarded to the Authority Masternode Operator. Variables such as gas price and velocity can be adjusted to maintain equilibrium between VTHO demand and supply. Governance The VeChain platform utilizes a unique governance model that balances decentralization and centralization to adapt to the different stages of development in the blockchain technology and ecosystem. In their whitepaper they state that “complete decentralization has been proven to have obvious defects in every applied method”. “We believe in the balance of decentralization and centralization on which VeChainThor platform’s governance is designed” The decentralized operating mechanism of the blockchain technology grants VeChain a unique governance structure, with a Board of Steering Committee serving as the governing body, selected by identifiable stakeholders with VET Voting Authority. The Steering Committee lays out critical strategies and selects functional committee chairs to oversee the operational units of the ecosystem. This governance structure is designed for visibility, inclusiveness, transparency, flexibility, and efficiency to facilitate the development, innovation, coordination and advancement of the VeChainThor Blockchain ecosystem. !VET governance structure.PNGStakeholder categories There are three categories of stakeholders who have voting authority: Authority Masternodes, Economic X Nodes, and Economic Nodes. Authority Masternodes are network maintainers who must hold at least 25,000,000 VETs at any given time and go through identity verification and background check by the foundation. They are the only nodes that are authorized to pack blocks on the VeChainThor blockchain and are rewarded by 30% of the transaction fee in each block. Economic X Nodes and Economic Nodes were created as the initiative at the early stage of the ecosystem. Each node holder needs to stake a minimum amount of VET and wait for a maturity period according to the node type and tier. The status of Economic X Node and Economic Node is tokenized according to VIP181 standard and managed by the VeChainThor Node smart contracts. Economic X Node holders are considered as long time supporters of the VeChain ecosystem. There are four tiers of Economic X Nodes: !vet econ nodes.PNG There are three tiers of Economic Nodes. Authority Masternodes have the most voting authority at 40%, Economic X Nodes also have 40% and Economic Nodes have 20% voting authority. Each category and tier has different minimum VET holding and votes per node. !vet 3 econ models.PNG Voting Authority VET holders’ voting authorities are calculated by their voting authority model depending on their specific role and tier. The minimum amount of VET needed per role and tier and the corresponding voting authorities are: !voting authority.PNG Proof-of-Authority (PoA) VeChainThor is maintained by Authority Masternode Operators, who work in alignment with the VeChain Foundation. The Proof-of-Authority (PoA) consensus mechanism used in VeChain is designed to address common enterprise concerns like inefficient upgrades and excessive energy usage. It also requires relatively low computational power to maintain network security and consensus integrity. The network is controlled via built-in smart contracts, which allows for the avoidance of hard forks in the event that Authority Masternodes fails to upgrade. To become an Authority Masternode, individuals or entities must voluntarily disclose their identities and reputations to the VeChain Foundation, and go through a strict know-your-customer (KYC) procedure. This ensures that all Authority Masternodes have additional incentives to behave and keep the network secure. In VeChainThor, a new block is scheduled to be generated every 10 seconds, based on the usage of VeChainThor. The block is generated by the Authority Masternodes and the "trunk" is chosen from two legitimate blockchain branches by the Authority Masternodes. PoA2.0 On November 17th 2022, the VeChain Foundation upgraded its blockchain, VeChainThor, to a new protocol known as Proof of Authority 2.0 (PoA2.0). This upgrade aimed to make the project more robust, scalable, and secure by bringing new security mechanisms and finality to the blockchain. PoA implements the Finality with One Bit (FOB) feature and the Verifiable Random Function (VRF) based random beacon generator scheme, a method for generating random numbers in a decentralized manner using a VRF. Additionally, PoA2.0 includes a 'committee' function which adds an extra layer of verification, making the blockchain more secure and less susceptible to interference. Finality with One Bit (FOB) Finality with One Bit allows VeChainThor to run the Nakamoto and Byzantine Fault Tolerance (BFT) consensus simultaneously combining the strengths of the two models while eliminating their individual weaknesses. Nakamoto Consensus Nakamoto consensus is a consensus algorithm that was first introduced in the Bitcoin whitepaper. It is based on the idea of "one CPU one vote," where each node in the network has an equal say in the consensus process. It uses a proof-of-work mechanism, where nodes compete to solve a difficult mathematical problem in order to create a new block. The first node to solve the problem gets to create the block and add it to the blockchain. Byzantine Fault Tolerance Consensus BFT consensus, short for Byzantine Fault Tolerance, is a consensus algorithm that is designed to be resistant to certain types of failures. It is based on the idea that the network is made up of nodes, some of which may be faulty or malicious. The goal of BFT is to ensure that the network can reach consensus even in the presence of these faulty or malicious nodes. This is typically achieved by having nodes communicate with each other and come to an agreement on the state of the network, rather than relying on a single node to solve a difficult mathematical problem like in Nakamoto consensus. Verifiable Random Function (VRF) A VRF is a cryptographic function that takes in a secret key and an input, and outputs a random value that can be verified with a corresponding public key. In a VRF-based random beacon generator scheme, a group of nodes, called validators, are each assigned a secret key. They take a certain input, such as the current time, and use their secret key to generate a random value using the VRF. The output of the VRF, called the VRF output, along with the input and the public key of the validator, are then broadcast to the network. The validators then vote on the output and the input that generated it, and if a supermajority (more than 2/3) of validators agree on the output, it is considered a valid random value and is added to the blockchain. VeChain ToolChain VeChain ToolChain is a blockchain-as-a-service (BaaS) platform that aims to make it easy for small and medium-sized enterprises (SMEs) and individuals to integrate blockchain technology into their businesses. It was officially launched on April 18th 2019, at the 2019 VeChain Summit, the first global developer conference of VeChain. One of the key features of VeChain ToolChain is a variety of general interfaces to essentially eliminate the high technical threshold and substantially lower the costs for SMEs or even individuals in blockchain integration. ToolChain also includes a vertical blockchain application focusing on produc