Similar to TCP / IP and other protocols in Internet technology, VeChain positions the blockchain as an “invisible service”: ubiquitous and undetected by users. Like most SaaS services, although it does not directly interact with the end users, the enterprise-level data communicated on the blockchain will greatly improve the efficiency of business information feedback, and ultimately create more value for users at the upper level.

Since the boom of Ethereum-based ICOs, a prevailing statement lingered in the blockchain industry, that “there is only one type of blockchain, that is, public blockchain”. But today, after the decline of many huge names and projects that advertise themselves as a public blockchain, people gradually discovered that deliberately pursuing a state of full openness and permissionlessness is not a rational design logic. Projects focused on the real adoptions of the blockchain technology, such as VeChain, have returned to the center of the stage. Some classical concepts have once again been paid attention to: the purpose of the blockchain technology should be to reduce costs and increase efficiency, rather than pursuing an agenda of pure decentralization formalism.

“We don’t intend to distinguish the superiority and inferiority between a public blockchain and a consortium blockchain. What we do focuses on the business application of blockchain technology. A technical form that is conducive to business implementation is a good technical form.” VeChain CEO Sunny Lu explained.

A blockchain is at its core a semi-trust shared database balanced by multiple parties, which has the advantages of simplifying the database’s permission management model through cryptography. A business scenario is established when one’s own data has value to others and other data also has value to him. No matter how open the database is, it is just a solution that enables efficient flow of high-value information.

In recent years, the B2B sector has been in a state of battle at the frontlines of the Chinese Internet industry. In the era of an increasingly saturated mobile Internet market and trend, due to the huge traffic dividend, B2B is the difficult hard bone that has not been the best choice for capital investment and attention. However, it is foreseeable that any story that exists in a developed market will repeat itself in other developing sectors. When the growth of the mobile Internet comes to an end, the shift of a trend to the B2B sector in the Chinese Internet industry is inevitable.

In the U.S, enterprise-level service providers such as Salesforce, SAP, Oracle, and GE account for trillions of dollars in terms of market value, yet enterprise-level SaaS only accounts for less than 10% of the Chinese Internet market. We have already seen that e-commerce giants such as Alibaba and Pinduoduo have been trying to carry out reformation on the supply side for business use, and the popular concept of middle desk also attracts a lot of investments.

Native blockchain projects, represented by VeChain and traditional Internet companies such as Ant Financial and Facebook (Libra) are trying to break through the limitation of traditional B2B business models that only provides standardization services within the enterprise by using the blockchain technology to build a universal cross-agency information platform. Among them, as Libra brought the idea of permitted-authority-nodes-only blockchain design into everyone’s vision, people found that VeChain, a veteran native team, has actually been on this path for quite a long time.

Can such a “permissioned mechanism” open up a new pattern of consensus design for blockchain designs in the future? It will take us time to see the answer.

Consensus Beyond Technology

Since the birth of Bitcoin, the development of the blockchain industry has been around the construction of underlying technology. Consensus algorithms and economic models are the most heated topics. Since 2019, a large number of public blockchains with self-proclaimed fancy high transaction per seconds (TPS) appeared on the market, yet almost zero valuable transactions were processed by those new blockchains. This phenomenon has alarmed industry stakeholders that the emphasis and development efforts on blockchain’s underlying technical performance was being overemphasized.

In reality, the bottleneck of blockchain application and adoption is not at the protocol layer, but at the real use scenarios and related supporting technical facilities.

At the Shanghai International Blockchain Week 2019, VeChain CEO Sunny Lu outlined three major stages for blockchain’s development and adoption publicly, which are, technical consensus, business consensus and governance consensus. These three stages are non-exclusive which is progressive while intersecting with each other. In the speech, Sunny mentioned that we are currently at the middle of the technical consensus and the starting point of the business consensus. The existing underlying technical design is qualified to support some upper-level applications. While the underlying technology continues to improve, a more urgent call to promote more applications should be pinned as top priority.

Some people may question: The concept of enterprise-level blockchain application is not a new idea. Why is it being mentioned again?

“We have talked with dozens of large companies. Although the situation is much better now than a few years ago, blockchain technology as a whole is still in its early stage. Current technical facilities cannot support large-scale applications perfectly.” Sunny mentioned that “Taobao, for example, is managing logistics, customer service, and payment through processes within e-commerce applications, but these corresponding areas are still blank for the use of blockchain.”

“Basically, there is a lack of a standardization. Enterprises are very rational. They will be interested in blockchain technology, but whether they will actually use it depends on the ROI of this technology.”

At the cornerstone of profitability, standardization is an inevitable topic in every business sector. However, due to the complexity within real application scenarios, blockchain is often considered by many to lack standardization.

“It depends on how much effort you are willing to make. The need for valuable data exchange is destined to exist, but only by continuously deep diving into each business scenario and understanding the enterprises’ needs can make it possible for blockchain technology providers to accumulate real experience. This is a long-term process that needs to be done carefully.” Sunny said when talking about VeChain’s business logic.

From the very beginning of projects implementing blockchain-based traceability solutions for luxury goods, VeChain has since completed many use case applications in a number of industries, such as energy, automotive, agriculture, and wine. There are also food safety traceability platform projects, for instance, the “Walmart China Blockchain Traceability Platform” launched by VeChain, PwC and Walmart China, as well as new energy vehicle emission reduction certification projects combined with IoT technology. These experiences are significant and resulted in VeChain developing a standardized blockchain data BaaS platform, named “VeChain ToolChainTM”, which greatly reduces the cost of enterprise-level deployment while eliminating the need for building solutions from scratch for each client or use case.

“Blockchain will one day become a universal technology infrastructure similar to Windows and Oracle.” In VeChain’s opinion, blockchain technology will be the essential part of the next generation of technology stacks in the future.

On the path towards business consensus, the fundamental difference between blockchain and traditional enterprise services is that the adoption of blockchain often involves the coordination between multiple business entities, and the coordination between the entities is naturally much more difficult than the internal coordination of various departments within a single enterprise. Therefore, higher requirements are imposed on blockchain service providers in terms of information integration.

On the path towards enterprise-level blockchain applications and adoption, competition between traditional Internet players and native blockchain companies is inevitable.

“The traditional and established Internet companies (that also provide blockchain-related services) do have their advantages, but blockchain at its core is not just another type of technology, but a set of services which ties itself to the implementation of technology. In other words, blockchain is a type of solution to be applied to specific scenarios and problems. The experience accumulated in the process of solving actual problems using blockchain through years’ of efforts is the biggest advantage of VeChain: we have better understanding of the needs of different enterprises. “ Indeed, VeChain has the experience to back-up their claims of knowing what is most important for the deployment of this technology.

Traditional large companies have more government and business resources, which is undoubtedly conducive to business development. However, the Internet giants are accustomed to leading, and they may not adapt to this semi-trusted cooperation framework that blockchain requires. On the other hand, dedicated blockchain solution providers have a first-mover advantage on this aspect, with their long-term experience being an unignorable advantage.

Sunny believes that the key to achieving business consensus for adopting blockchain lies in the fact that the enterprises that are required to maintain a common infrastructural network would lead themselves to compete more effectively, as they would be subject to the rules of fairness and transparency in exchange for mutual benefits. In itself, it is essentially a “Coopetition (Cooperate and Compete) game.”

By observing the history of enterprise software providers in Europe and the U.S, we can find that these B2B businesses do not necessarily have an absolute network effect like those with a B2C business model. As B2B companies belong to the “low cost and high efficiency” industry with low dividends, these enterprise software giants will not have an overwhelming comparative advantage in the vertical areas. Thus, such a scenario creates room for further specialized solutions in each vertical and segment, which leads to the emergence of more B2B service providers. There can be giants within the industry like Oracle and IBM, or there can be a lot of “small and beautiful” competitors such as Slack.

Moving Towards Governance

With increasing Internet participation across the world, spam and low quality information is also increasing day by day. These “invalid” information hinders people from obtaining accurate or valuable information from the Internet. Whether on WeChat or Twitter, it is apparent that the trend of inflammatory and subjective content is on the rise. When people do not have the means to discern from the truth, or only able to obtain a partial source of facts, unnecessary speculation and rumors will be rife.

The recent coronavirus outbreak has raised public concern in all sectors of society on the transparency and efficiency of the operation of public facilities, and blockchain has been placed in high hopes to solve such problems. A distributed technology to function across institutions is considered to be a technology that can achieve full-process transparency and reduce the consequences of information asymmetry. With blockchain, any processes that are related to public facilities can be unified using the technology. For example, a series of single-point data sources can be processed into a high-quality data source with no possibility of collusion while allowing for mutual supervision and monitoring.

This scenario of complete intercommunication between business and different entities such as the government fits exactly the “governance consensus” in the three-phase consensus theory proposed by VeChain. The framework of governance consensus sets higher requirements for service providers. They must learn the best way to coordinate between different needs and interests of all parties to the greatest extent, while simultaneously reducing costs and increasing efficiency for the entire society.

The cliche of achieving business success is to do things that seem simple and do it 10,000 times. After the fact and looking back, you will certainly find that you have traveled far beyond the imagination of others.

“The valuable application of blockchain technology is our goal, and all our work will be carried out around this.” Sunny summarized VeChain’s strategy with this sentence.

To date, the exploration of enterprise-level blockchain applications has only been four or five years, and there will still be a lot of time in the future spent doing down-to-earth work, rather than holding celebratory parties of success. Considering the scarcity of blockchain infrastructure and its short industry history, this seemingly uninteresting situation is certainly considered normal.

The commitment to performing down-to-earth work in this industry isn’t referring to wishful thinking of the best case scenario, but rather is the acceptance of reality and common sense of doing what is right, especially after understanding what the implication of such a technology is. When we try to look at the entire blockchain industry from the perspective of an outsider, we will find that seemingly tough and complex goals will become clear, and are just repeats of established business history and processes.

It is wise to believe in the long-term value and do something beneficial to the users, which is the only way to earn a place in the second half of the growth of the Internet.

Today’s blockchain industry is still very young. But one day, blockchain will have its time to shine.