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Use Case
VeChain’s goal is to attain mass adoption in the supply chain, provenance, and traceability industry by providing value to normal business operations. VeChain technology has a wide array of uses across different types of industries but has a very obvious and immediate benefit within business supply chains. Different companies within the supply chain, from producers and distributors to couriers and merchants, can track items through every stage in real-time with the use of VeChain Identity Technology (VIDs), such as QR codes and RFID chips, to scan and identify products onto the blockchain. With asset digitization, VeChain allows manufacturers, supply chain partners, and even consumers to track the movement of products through the supply chain and determine the quality and authenticity of a product.
The VeChainThor blockchain platform is a public blockchain ecosystem intended for “mass business adoption.” VeChain was originally built on the Ethereum protocol but transitioned onto its own blockchain protocol, the VeChainThor, in 2018. At this time, the VEN token became the VET token. Transactions on decentralized applications occurring on VeChain’s blockchain will use VET. A second token, the VTHO, is used to power transactions on VeChain and is equal to the cost of conducting business or ‘gas’ on the Ethereum network.
The VeChain protocol is attempting to replicate the success of the Ethereum ecosystem with some tweaks to perceived “obstacles” around governance and scalability. Currently, there are several dApps on VeChain Thor with the goal of mass business adoption of dApps. They intend to link the entire supply chain from manufacturers, wholesalers, distributors, and storefronts to the consumer, with everyone having the ability to transparently access product data and status. They envision all aspects of the Internet of Things (IoT) riding on the backbone of VeChain Thor, as well as improvements that will take Decentralized Finance (DeFi) out of its current status of merely trading/speculation.
There are very few projects of this magnitude, e.g., entire ecosystems, that are being pushed forward in the crypto/blockchain space. VeChain is similar to the Hyperledger project but with the addition of fungible tokens for transactions as well as gas. VeChain’s disadvantage, when compared to Hyperledger, is that, unlike Hyperledger, there is no private or permissible blockchain making all company data stored on Thor publicly available.
While VeChain sees itself as ensuring the quality of goods and preventing counterfeiting by tagging and following each item throughout the entire supply chain, some businesses may hesitate because of the public aspect of shared data. The history of blockchain has relied on transparency, while companies have relied on privacy.
Governance
VeChain's governance system is well-defined and a bit different from a "traditional" decentralized governance system like with Bitcoin and Ethereum. VeChain’s team describes it as being "decentralized through centralized channels" and is striving to strike a balance "achieving a profound balance between community-based decentralization and enterprise-level execution efficiency."
VeChain’s system of governance is based on transparency and speed but sacrifices some level of decentralization in doing so. They achieve this balance with their own Proof of Authority consensus system, establishing the VeChain Foundation to be "committed to the development, governance, and advancement of the VeChain ecosystem.”
Stakeholders with voting authority select the Steering Committee Board of the VeChain Foundation, which adopts strategies and selects committee chairs overseeing the operational units of the Foundation. "Fundamental" subjects significantly impacting stakeholders require all stakeholders to vote. The fundamental subjects include the election of the Board of Steering Committee, fundamental changes to the consensus mechanism, and modification to the generation velocity of VTHO for VET holders. Stakeholders can be individuals, corporations, government agencies, non-profit organizations, and other institutions with a stake in the VeChain ecosystem as defined by their level of VET holdings. A full description of the governance and voting can be found in the VeChain Governance Charter.
The VET ecosystem’s governance structure includes:
- Stakeholders/voters (Authority Masternodes, and Economic Nodes)
- VeChain Foundation’s Board of the Steering Committee
- Advisory Board
- Five different functional committees:
- Technical, Regulation, Compensation, Operational, and Public relations
The Steering Committee Board is the VeChain Foundation’s top governance body. The board members are elected by stakeholders from a pool of VeChain Foundation members, Authority Masternodes, developers, and established business partners. The board’s primary functions are to:
- Manage the VeChain Foundation’s financial, strategic, and business-related activities.
- Arrange votes on fundamental issues involving VeChain development
- Manage the VeChain Foundation’s annual budget
- Manage and modify the operational costs of the VeChainThor blockchain using VTHO and VET coins.
The Steering Committee is a critical body in the overall project strategy. The main members of the Steering Committee Board are elected to two-year terms where they must be re-elected if they wish to continue to serve. The board meets at least four times per year to discuss the current direction and strategy of the VeChain project. Topics of discussion include proposed changes for funding, project development, business strategy, blockchain construction, and VeChain adoption.
The current Steering Committee (SC) includes Renato Grottola, George Kang, Daniel Kelman, Sunny Lu, Jay Zhang, Peter Zhou, and Margaret Rui Zhu.
Initially, these seven were solely responsible for VET's direction and would assign tasks to appropriate departments at their discretion. However, since the passing of VeVote and voting proposals, the governance model includes more community involvement.
Additionally, an advisory board consisting of the following assists the SC: CY Cheung, Jim Breyer, James Gong, Masanari Koike, Ning Nan Antonio, Senatore Bo Shen, and Roland Sun.
As for who develops the code on Github, most of the commits come from lead devs "qianbin" and "libotony.” The Thor page has had ~3,000 commits between 2018-2021 at fairly routine intervals (every two-to-three months).
One governance feature that developers traditionally control and that helps maintain the integrity of the VeChain ecosystem are VeChain Improvement Proposals (VIPs). VIPs propose network upgrades to the VeChainThor Blockchain and VeChain ecosystem. The different types of VIPs are:
- Core improvements to the blockchain requiring a consensus fork.
- Updates to application-level standards and dApps
- Client API specifications and standards
- Design issues or general guidelines/information to the community
Funding to support continued code development and other VeChain expenses comes primarily from investor and VC funding; VeChain’s focus on enterprise solutions makes VeChain slide decks particularly compelling.
Here are just some of the investors and investment groups who have contributed to VeChain as of Q4 2022:
- Aenigma Capital
- Block VC
- ChainFunder
- ChainPE
- Digichain Capital
- Fenbushi Capital
- Hash Capital
- Myriad Capital Management
- LD Capital
Additional Governance Notes
A concern for any decentralized governance system is distribution: is it really decentralized if just a few whales are voting on all proposals? VeChain mitigates this by requiring a predefined participation rate from all three nodes for any proposal to be considered valid.
However, if one category fails to meet its participation rate, its voting authority is delegated to the higher tiers. And in the case that there are not enough AMs participating in the vote, their Voting Authority is delegated to the Steering Committee. The participation rate and all other rules are described in detail on a proposal-by-proposal basis prior to an "all-stakeholder voting event."
