How VeChain works

Currently we can find a large number of cryptocurrencies, which come to “solve” a problem. Bitcoin would come to solve the use of money privately, Ethereum would become a decentralized computer and the list would be very long. We are going to see in this article what is the proposal of VeChain , the blockchain (and cryptocurrency) focused on the traceability of the supply chain .

Index of contents

  • What is VeChain
  • VeChain development
    • VeChain milestones
  • How VeChain works
    • Real world technology
    • Cryptocurrency
    • Platform
  • How blocks are generated in VeChain
  • How governance works
    • GoVote
    • Types of nodes and voting rights
      • Masternodes of Authority
      • Economic Nodes X
      • Economic Nodes
    • What VeChain can be used for
      • Food safety
      • Fight against counterfeiting
      • Health
      • Control of carbon emissions
    • Which companies collaborate with VeChain
    • VeChain Roadmap
    • Final words on VeChain

What is VeChain

(PRNewsfoto / VeChain)

It is a blockchain developed to help simplify the supply chain management process. VeChain was initially developed to verify whether a physical product was true or false, thus solving the problem of fraud and counterfeits. Little by little, the number of uses of this blockchain has been expanding, even helping in traceability from wine production to car manufacturing.

VeChain blockchain is called VeChainThor

We are talking about a fairly simple process. Each product in the supply chain receives a unique identifier. Through a series of sensors we can know everything that happened in each part of the supply chain . It allows companies to have proof that the products have been handled correctly. The consumers in turn have the certainty that they are buying a genuine and legitimate product.

VeChain was born under the philosophy of Blockchain-as-a-Service (BaaS) that seeks to take advantage of the great capabilities of this technology to solve different problems.

Its design for recording the movements of goods in the supply chain makes its VET cryptocurrency a utility token . What’s more, VeChain has two different tokens, one destined to finance projects and the other to be used on the blockchain.

Additionally VeChain has achieved two strategic partnerships. The first with the Government of China to develop smart cities. The second with PricewaterhouseCoopers (PwC) to promote the use of the VeChain blockchain among PwC clients.

VeChain development

The VeChain blockchain idea was dreamed up in 2015 by Sunny Lu, a former CIO of Louis Vuitton China . The problem with Louis Vuitton and other luxury brands is that there are a lot of counterfeits, some really good ones. Lu combined his knowledge and experience with luxury goods and blockchain technology to develop IoT applications for supply chain management. He is currently the CEO of VeChain through the non-profit VeChain Foundation.

VeChain milestones

  • 2015: VeChain is founded by Sunny Lu
  • June 2016: VeChain 0.1v released
  • May 2017 – PwC partners with VeChan through an incubation program
  • Summer 2017: The VeChain Foundation is created
  • February 2018: VEN cryptocurrency renamed VET
  • Spring 2018: VeChain mainnet launched
  • Summer 2018: Launch of the smartphone wallet

How VeChain works

This blockchain is built on three pillars: real world technology, a cryptocurrency, and a platform.

Real world technology

To begin with, each of the physical products of a certain producer receives a unique identity. Currently RFID systems, QR codes or NFC are used. A series of sensors are added to the products or their packaging, which store information from each stage of the supply chain and are linked to the identity of the product. These sensors are designed by VeChain and produced by the companies Bosch and Qualcomm.

The veracity of the data is guaranteed by blockchain technology. Once the data is stored in a block, it is impossible to alter. This allows a reliable record of everything that happened throughout the supply chain. If there is a problem, such as sending the merchandise to the wrong place, the information stored in the blockchain will allow the origin of the error to be detected.

The recipient of the merchandise can verify that there have been no problems during the process and that the products are authentic. Something that can help combat fraud within the luxury goods sector, such as high-end handbags or watches.


VeChain initially deployed a token called VEN within the Ethereum blockchain. VeChain deployed its own blockchain called VeChainThor that has its own cryptocurrency, the VET , although it is more of a utility token. The VET token is used for payments within the network. The higher the amount of VET you have, the higher the priority will be in the use of blockchain resources.

VET can also be used to create a second token called VeThor or Thor Power (VTHO) that allows access to supply chain technology. The VTHO token is used to add information to the blockchain about the product during the transportation process.


The operation of this blockchain has a certain similarity to Ethereum. The VeChain network has the ability to support other projects. Something that has allowed VeChain to stop being a blockchain exclusively for the supply chain to be a platform that supports DApps.

How blocks are generated in VeChain

The great particularity of this blockchain is that several validators are required to accept a block to be added to the blockchain. VeChain is based on the Proof-of-Autority (PoA) consensus.

The PoA consensus does not require great computing power, since a complex mathematical problem must not be solved. PoA eliminates mining and happens to have a group of validators that have been approved.

A validator must run the VeChain software on a computer for the validation of the new blocks to be added to the blockchain. This mechanism simplifies the validation of transactions and supports a greater number of transactions validated per second with respect to the PoW and PoS consensuses.

Its negative part, the PoA consensus, is that not everyone can be a validator. This generates a problem of centralization of the transaction validation and block generation processes. In order to become a validator, we must meet a series of hardware requirements and a certain availability.

How governance works

The big difference between VeChain and other cryptocurrencies lies in the governance. It tries to offer a balance between centralization and decentralization. The decentralization mechanism of its technology has a very particular governance structure.

It has a Board of the Steering Committee that is the governing body of the VeChain Foundation. This is selected by all interested parties who have the right to vote. The Steering Committee is in charge of critical strategies and selecting the chairs of the functional committees, who will oversee the operational units of the Foundation.

For critical issues that will have a significant impact on members, a vote of all members is required.

In November 2019, VeChain made changes to its governance mechanism to meet the needs of the companies, regulators and governments with which it collaborates. The changes made were:

  • Selection mechanism for the new Board of the Steering Committee
  • VeChainThor consensus mechanism changes
  • Modification of the VTHO generation rate by retaining VET
  • The Board of the Steering Committee can make the appropriate changes for voting


It is a mechanism to improve transparency in the governance of the blockchain. VeVote is a decentralized voting mechanism that was unanimously adopted by the Steering Committee.

It offers a mechanism for the platform to be immutable, transparent and decentralized. It allows stakeholders to cast votes on important decisions that are based on voting authority. The voting is done by the smart contracts of VeVote and the result becomes registered in VeChainThor blockchain.

Types of nodes and voting rights

VeChain offers three levels of voting authority, such as:

  • Masternodes of Authority:Offer a voting authority of 40%
  • Economic Nodes X:They offer a voting authority of 40%
  • Economic Nodes:They offer a voting authority of 20%

The different categories depend directly on the amount of VET that we have in holding. Depending on the amount of VET leveraged, we will have a number of votes and a voting authority. Any user, company, government body, non-profit organization and other institutions collaborate in the governance of the network.

Masternodes of Authority

They are the ones tasked with maintaining the VeChain blockchain. To become an Authority Masternode, a total of 25 million VET in holding is required. Currently, the blockchain has 101 active Masternodes of Authority whose identities have been verified by the VeChain Foundation. It should be noted that in addition to a specific hardware and the 25 million VET, a KYC process must be passed.

The Authority Masternodes are the only ones that have permission to create blocks and add them to the VeChainThor chain. These receive in exchange 30% of the commissions of all the transactions stored in a block.

Economic Nodes X

They are one of the types of nodes created by the VeChain Foundation during the initial phase of the ecosystem. These types of nodes are based on betting a minimum of 600,000 VET, which gives them a certain number of votes. Once we have the VETs in holding, we must wait for their maturity, which varies according to the type and level of the node.

Currently , more X Economic Nodes can no longer be generated , only allowing to improve the level of the node by adding more coins to go up in category and thus obtain more votes. This assumes that the number of Economic Nodes X will only decline over time.

Economic Nodes

The number of Economic Nodes X can no longer increase, but it is possible to request to be an Economic Node today. Any public address on the network that contains at least 1 million VETs can apply to be an Economic Node.

What VeChain can be used for

Food safety

It allows the traceability of the products, knowing where they have passed and the controls they have passed. VeChain has developed IoT devices that can be integrated throughout the supply chain, entering products, transport vehicles and storage areas.

The information offered by the different sensors and location systems verify, upload and store the information on the blockchain. It allows wholesalers and intermediaries to have products controlled at all times . The end customer can also know the entire layout of the product and the conditions it has endured.

Fight against counterfeiting

Currently, the counterfeiting of reputable brand products generates millions and millions of euros in losses. Original products may hide an encrypted chip in the product that allows tracking and verification of the product. It also allows to know the storage, maintenance and authenticity of the product . This combination of technologies has been used to track Renault vehicle components.


The current health registration system is based on an outdated and inefficient mechanism. Medical data such as analysis or other medical tests can be stored on the VeChain blockchain. Only patients and authorized parties will have access to this data. It allows the information to be accessible between different specialists to make the diagnosis easier and more agile.

The first tests of solutions for medicine based on VeChain have been carried out thanks to the E-HCert application. The Mediterranean Hospital of Cyprus and the Aretaeio Hospital have started the testing phase of this solution in 2021.

Control of carbon emissions

It seeks to reduce carbon emissions and this is done by monitoring activities that emit carbon. This solution allows the consumer to choose products from companies that seek to minimize emissions.

Additionally, the use of smart devices in cars or household appliances can show the consumer its carbon generation. If it is highly efficient and helps reduce emissions, it receives credits to use for energy consumption. China’s electric vehicle company BYD already makes use of this VeChain proposition.

Which companies collaborate with VeChain

It is a blockchain focused on the supply chain, that is why it is important to close agreements with different companies at an international level. Currently, quite a few companies are already developing solutions within the VeChain network. The most prominent are:

  • DB Schenker:They have created a third-party vendor evaluation system. They currently collaborate with third-party logistics providers in China, offering a host of seamless and logistics solutions for all types of industries and businesses across China.
  • Renault Group:They have developed a vehicle maintenance digital book within the VeChain blockchain.
  • BMW Group:They are conducting a proof of concept on the use of blockchain technology for the storage of vehicle data and the secure and controlled provision to third parties.
  • Pricewaterhouse Cooter (PwC):It is one of the four most important auditors in the world. It offers its clients different solutions based on VeChain technology. It seeks to offer a solution that allows improving the verification and traceability of products.
  • LVMH Group:Developer of limited edition luxury goods tracking systems. Luxury goods counterfeiting is a big problem globally, but especially in China and Southeast Asia.
  • Walmart China:They launched a VeChain blockchain-based traceability platform in June 2019. The products of the 23 product lines are tracked using IoT devices and blockchain technology. It goes from the point of origin until it reaches the store, offering customers a high level of confidence in the products.
  • BYD:This electric vehicle manufacturer is working on a proof of concept to control imbalances in carbon emissions. They are developing a DApp that allows them to track and record the emissions of cars, buses, trains and other vehicles on the VeChain blockchain.
  • DNV GL: It willpass your customer database to the VeChain blockchain. In addition, DNV GL and VeChain have developed MyStory, a solution for the security of the food and beverage industry that is based on audits and data collection.

VeChain Roadmap

So far the VeChain development team has delivered on the promises made. In addition, they highlight that they are working in an association with important companies in the sector. Agreements are being worked on with BMW and Renault, in addition to the support of PwC, which is helping to attract customers.

Final words on VeChain

The VeChain blockchain focuses on the supply chain, offering traceability of products. It allows to know the position of a product at all times, the external conditions of this product and that could affect it and avoids possible counterfeiting. Any type of manipulation or alteration of the product can be easily detected and know at what point in the chain it has been manipulated. It also prevents counterfeiting, since by implanting an encrypted chip that works by NFC, it allows to know if it is true or false by simply bringing a mobile device closer.

We recommend our article on what cryptocurrencies are and what they are for

Like any other blockchain, VeChain is still in an early stage of development. It seems that the companies that have used it in pilot programs have been satisfied with the results. Everything indicates that it will become a pillar for the Industry 4.0 supply chain.

by Abdullah Sam
I’m a teacher, researcher and writer. I write about study subjects to improve the learning of college and university students. I write top Quality study notes Mostly, Tech, Games, Education, And Solutions/Tips and Tricks. I am a person who helps students to acquire knowledge, competence or virtue.

Leave a Comment