I often see people critiquing the VeChain token, disregarding its value proposition but failing to tie together all the pieces of the puzzle by proxy. Well, today I present a succinct overview of key characteristics of the VeChain model that show value creation is inherent to its two token system.

The VeChain model comprises two tokens, VET and VTHO.

VET is the smart currency, able to freely appreciate at the market’s whim. VET is used to settle smart contracts or as a monetary medium that can be used to invest in ICOs.

VTHO is the unit consumed when writing data to the Blockchain. VTHO is produced by holding VET, directly in to the wallet holding VET, each block (every 10 seconds).

Appreciation comes via a variety of mechanisms:

VTHO must be purchased from holders, by businesses, to fulfill their Blockchain needs. This automatically gives VET intrinsic value as it provides vital functionality. Something no other token can boast. As demand for VTHO increases, so does VET’s ROI. This is one of the market forces that help drive increasing value.

As time goes by, activity on the mainnet will increase as partners continue to deploy their solutions at an ever increasing rate. For example, take the news about China using VeChain for a natural gas facility — on the day of testing (19th Oct, 2018) the testnet clocked over a million transactions without even running all day. On the 7th of November the testnet clocked over 2 million transactions, again, only running for a portion of the day. VeChain’s data throughput capacity is gargantuan. What this means is that, when running at scale, the demand for VTHO is going to be significant. To drive scarcity in to the VTHO stockpile, we need to continuously burn more than we generate each day. In a single day, VeChain was able to almost exceed that value with a total of 1.1Million transactions on mainnet. This is before the majority of major solutions have even been deployed. Needless to say, we will easily be burning far more then we have before in 2020.

Consider the Bright Foods food traceability platform use case (product is called Bright Code). Every step of the supply chain will be tracked to provide carbon data and quality assurance to the end user. Bright Foods plans to incorporate VeChain throughout its entire supply chain, from seed to final product. Each data point along the way requires VTHO. Writing temperature/salinity/soil PH data from the green house? VTHO. Logistics data? VTHO. Carbon emissions relating to the transport used? VTHO

VeChain are working with BYD (an electric car manufacturer) and rewarding EV drivers with carbon credits in DNVGL’s Carbon Ecosystem. Guess how the drivers upload their data? Using VTHO (and VeChain’s patented Multi Party Payment protocol, enabling the user to never have to own crypto yet still use the blockchain — mass adoption 101).

DNVGL’s MyStory? The supply chain uses VTHO throughout.

All these other massive, multi billion dollar partners using VeChain in their supply chains? VTHO VTHO VTHO.

The demand for VTHO which comes by proxy of VeChain’s (already massive) adoption in turn makes VET valuable as a product of its relationship as the chicken that produces the VTHO egg.

When VTHO consumption begins to make the price of VTHO spike, the foundation will reduce the VTHO required to fund a transaction. This allows the fiat cost of the transaction to remain stable for the end user and it only occurs in an environment where VTHO is gaining value. This is good for VET’s value as it now produces an asset that does more ‘work’ for the ecosystem, giving it greater intrinsic value. Once a reduction in Tx/VTHO becomes ineffective, the next step is to increase the base generation rate of VTHO. Holders now generate more total VTHO and thus, their VET does more work for the ecosystem, again making it more valuable. So long as adoption continues upwards, the mathematics of VeChain’s economic model mens VET’s value will continue to climb over time.

In a few years, when things are really up and running, businesses will be buying from the open market. They won’t care about paying $1 or $2 per VET. They’ll need to buy a ton at once to provide the VTHO they require for their activities. For those of us here now buying it for fractions of a penny, well, that will certainly be a great day.

Another appreciation factor are the ICOs. VeChain sponsored ICOs have to raise at least 50% of funds in VET and hold them for a minimum of 2 years. This has the effect of massively reducing circulating supply again. Some recent ICOs have opted for as high as 80% FYI.

There will also be those seeking passive income adding to the demand, sucking up liquid supply. VTHO is free for VET holders after all, and businesses will always need it. VET holders are also likely to buy more VET with their VTHO, creating constant positive pressure on VET’s price and in turn, growing the rate at which holders can produce VTHO, creating a positive feedback loop. Then there’s good old speculation from those hedging their bets on VeChain’s success, which, given its illustrious list of partners, seems inevitable. It is working with 6 state backed companies in China for one, this is a green light from China, a market of 1.3 billion. Then there’s the multitude of other, massive multinationals on board — BYD, BMW, DB Schenker, collaborative work with DHL, Renault, the recent China/France intercontinental trade platform FoodGates.. I mean, the list goes on.

VeChain’s value comes via the staggeringly high volume of transactions that will run through its Blockchain and subsequent demand for VTHO. Both tokens are indispensable and vital for the ecosystem’s functionality. I’ve not come across a project with such a similarly well thought out economic model and consideration of how its token economy will function. It’s one of the only projects where there is clear insight in to value creation outside of pure speculation.

The VET token ultimately appreciates as the proverbial chicken to the VTHO egg. The two are inextricably linked. VET will always be worth more, so it’s safe to say that as demand for VTHO rises, so will the price of VET.

One final important note is the reason for this two token model — VTHO allows transaction cost stability for businesses and is a key factor in its adoption — it enables VeChain to stabilise costs for businesses that wish to use its blockchain. It can not be overstated how important this is in making VeChain the only viable blockchain for commercial application. Usually, when a token like ETH or BTC become more valuable, their blockchains become more expensive to use because of the increased demand for transactions. VeChain solves this. VET can freely appreciate while the underlying usage cost remains the same. It really is genius.

In this coming age, data is the new oil. VeChain be harvesting vast quantities with its impressive list of partners and proposition of building a global, open blockchain backed by the mighty DNVGL. With this data, comes immense value. The future, it seems, is very bright.

I hope that helps you understand.

VeChain is one of the most comprehensive and well constructed Blockchain products I have ever witnessed. Sunny Lu and his team have done an incredible job.

The VeChain whitepaper: (PS, it’s worth the time) — for every piece of technical info you could ever want to know. Whitepaper 2 is coming!

https://cdn.vechain.com/vechainthor_development_plan_and_whitepaper_en_v1.0.pdf