VeChain – 7 reasons why VeChain will soon enter the Crypto top 5
VeChain (VEN) is one of the most hyped coins in the cryptocurrency market right now. It was one of the very few altcoins to not get caught up in the bearish market we experienced in January 2018, the latter mostly fueled by the strong correction of Bitcoin. In fact, of all large marketcap coins, VeChain was the fastest growing in January! In this analysis, we will discuss the properties of the VeChain tokens and peruse partnerships to get a glimpse of what we can expect for the future of this interesting coin.
Also have a look at our VeChain technical analysis posts!
VeChain in a nutshell
What is VeChain?
VeChain is an Ethereum token, and started of – like all others – with an ICO. The VEN ICO took place in August 2017, with a supply capped at 1 billion tokens. Vechain aims to offer supply chain management and an overall anti-counterfeiting solution to businesses. Since the start-up, they have been working on their own platform, which as of now is still private.
They use blockchain technology to store information of digitalized physical items. As these goods move through the supply chain, anyone can see where they come from and where they were at an any given time. To do this, Vechain assigns a unique ID at the beginning of the life-cycle of that physical item. This ID is recorded directly into the VeChain blockchain, and also onto the product using an RFID chip, QR code or NFC (Near Field Communication, which is a similar technology to e.g. Bluetooth) tag. Every step along the supply chain, and all changes or actions on the product, will be recorded in a distributed ledger. When the final product arrives at the consumer, he or she will be able to scan the code or tag to know all about how his product was made and how it finally arrived at his very doorstep. The consumer can now rest assured that the product is authentic. A classic example of this use case is VeChains partnership with a famous brand (still under NDA) that applies RFID chips to authenticate luxury goods. (Hint: the brand’s initials are LV).
What’s VeChain’s vision?
“To build a trust-free and distributed business ecosystem by enabling the flow of information and values at high-speeds through collaboration with enterprises.”
What are the advantages of adopting a VeChain-powered ecosystem?
- Access to transparent and symmetrical information (everyone has the same degree of information).
- Breaking silos, reducing the trust issues between different corporates.
- Each person and each enterprise has their own part to play in the ecosystem. Based on their contribution and value, they can obtain relatively fair rewards.
- A platform that supports high volume at high speed for the benefit of enterprises in the ecosystem.
Right now, half of the 1 billion tokens are in circulation, while the other half is kept by the VeChain foundation. This foundation, led by CEO Sunny Lu is a subsidiary of the leading blockchain technology company in China, BitSE.
Reason number 1 – Use cases
One of the additional advantages we believe VeChain offers, is the fact that it realises that there are a multitude of use cases that can be catered by a Blockchain-As-a-Service platform. VeChain doesn’t focus on one single use case, but goes beyond industry and product borders, looking for a wide range of strategic options in its product / service portfolio. In that way, one might even compare it to the pharma-behemoth Johnson & Johnson, which offers a wide range of pharmaceutical products for a broad range of diseases. And as soon as it starts seeing a strong uptake in interest and potential for a given product, J&J can easily decide to assign additional amounts of investments to that particular product. This seems to be something that VeChain is also well aware of. Looking at some of the use cases below for which VeChain already has a product offering, one can quickly deduct that this concerns a multi-industry offering. Applications range from luxury goods to cold chain logistics, from agriculture to the auto industry.
Quick example of a car industry use case
The auto industry requires sophisticated segregation of duties involving a good number of participants in the collaboration, which results in the slow process of digitalization in this industry. Although the auto industry is a multi-trillion USD market, the collaboration between companies still remains traditional. For instance, in most cases, car maintenance records are still recorded on physical papers to date. VeChain provides one of the most promising solutions to enhance the digitalization and collaboration in the auto industry.
Reason number 2 – Partnerships
Vechain has a number of impressive partnerships announced. First of all, a National level partnership with the Chinese government(!), where Vechain is acting as the official blockchain technology partner in the development of Gui’am, a region that’s said to be a guinea pig – but with positive connotation – for innovative technology that is designed to improve administrative efficiency.
They are also working on a blockchain-powered exchange for physical goods. A lot of rumours and hype concerning this exchange are already in circulation, but not much official news has been released thus far.
Another impressive partnership is with Price Waterhouse Coopers (PwC), as a part of the latter’s incubator program. VeChain has also partnered with DNV GL, assisting the company in cold chain logistics. For example, icecream being transported needs to be cooled sufficiently, and a combination of IOT chips and the VeChain blockchain enables the shops or even customers to ascertain that a product has been in a safe and edible condition along the entire supply chain. This signifies an enormous increases in safety and most presumably customer satisfaction as well.
Many, many other partnerships exist, such as Renault, a big wine distributor in China, and so on. In fact, VeChain is one of the blockchain companies with the most connections to other businesses, looking into a multitude of potential use cases.
However, it should be noted that many of these partnerships are obviously still in a proof of concept or experimental stage. Naturally, this is the case for most of blockchain technology though, and the fact that so many companies choose to work with VeChain shows a lot of promise for the platform. A famous example is Jim Breyer investing in VeChain and acting as a close advisor.
Reason number 3 – Impact of rebranding scheduled for end of February ’18
Right now, VEN uses the Ethereum blockchain. The VeChain platform itself will undergo a major transformation on 26/02, rebranding to “VeChain Thor”. Vechain will leave the Ethereum platform and use its own. A first major difference will be the transaction speed, which will start at a rate of 50 transactions per second (TPS) and will be scaled up to 10,000 TPS, massively increasing the usability of the blockchain platform.
The main net will launch in Q2 of 2018 with both DApp (Decentralized Apps) support, as well as wallet support on iOS and Android. DApps will allow VeChain to support a far wider range of enterprise needs and use cases as developers can use the VeChain ecosystem to build upon for any blockchain requirement their business might have.
On VeChain’s own blockchain there will be two tokens: VeChain Tokens (re-“tickered” to “VET”) and Thor Power (“THOR”), working in a very similar way as NEO and its power token GAS. First of all, everyone holding VEN at the rebranding will get the same number of VET tokens.
These VET tokens can be used to transfer value. The more VET a user or company owns the more priority they (their transactions) will have on the blockchain network. VET tokens also generate Thor Power just by holding them (hint: so please do 😉 ). THOR is generated at a rate of 0.00042 THOR per VET per day. They are the currency required to pay for smart contract executions. 70% of the THOR paid will be burned, while the remaining 30% will be given to the node holders who maintain the blockchain system (as is also common in e.g. the Bitcoin node & mining network).
A company willing to use the VeChain platform will either have to buy THOR tokens, or buy VET tokens to generate their own THOR. This will undoubtedly cause people and businesses to hoard VET tokens, increasing the price of VET. THOR prices will be more stable as they are continuously generated by VET holders and burned by usage on the platform.
Reason number 4 – Ecosystem: nodes and Norse mythology
VeChain thor will be maintained by 101 authority nodes, called Thrudheim Nodes. These will contain the public ledger and receive the data. To own a Thrudheim node you need 250,000 VET tokens and approval of the VeChain foundation, so not just anybody can buy his way into a Thrudheim Node. Owners of a certified Thrudheim node get additional rewards, including a considerable THOR generation bonus. Because of this, 101 times 2 500 000 tokens (250 million in total) will be locked up and not available for purchase on exchanges, drastically reducing the circulating supply, and drastically increasing the price of VET tokens.
Other kinds of masternodes will also be available:
- Mjolnir nodes (requires 150 000 VET)
- Thunder Nodes (50 000 VET)
- Strength node (10 000 VET)
These nodes incentivise significant long term commitment to VeChain Thor, a.o. by providing Thor generation bonuses. These nodes will also further reduce the circulating supply. How much is hard to gauge up front, but a modest estimate will be that at least half of the circulating supply will be locked up in nodes. This alone can already cause a doubling in price for the VET tokens!
Reason number 5 – An exercise in calculating VeChain Thor’s future price potential
As an exercise, we can try to estimate the future value of these THOR tokens and VET tokens. Given the total supply of 867 162 633 VET tokens and the fact that 2381 VET tokens generate 1 THOR / day, we can try to estimate the total THOR production per day. Of course, the 70% burn rate has to be taken into account, as well as the added bonuses for node holders and the fact that not all tokens will be used for staking. From our calculations we derive a total of about 500 000 THOR will be generated per day.
Businesses willing to use the VeChain platform will either have to buy these tokens from a market, or generate them from holding VET. If they hold VET, we assume they want a yearly ROI of 5%.
The largest unknown remains what the demand for THOR will be, something that will depend on the adoption rate of the VeChain platform. We can estimate this by looking at what the platform aims to achieve: reduce counterfeiting. Looking at this source, the tobacco partnership alone comes down to a $120 Billion market. Looking at our estimations, this would amount to a staggering $60,000,000 demand per day! This seems amazing, but if VeChain is actually adopted worldwide we might see a tenfold increase easily.
That means that the value of THOR can be calculated as follows:
Knowing this, one can easily calculate other values for THOR and VET using this formula, modifying the daily supply, or ROI expected by companies.
Reason number 6 – Team and social media
VeChain is run by the VeChain foundation, which is a centralized leadership committee of board members, directly voted in by node holders. The technical team consists of many members who previously worked at a.o. PwC and Deloitte, ensuring useful contacts within a strong network, and further growth potential of the VeChain platform. In total there are 43 people working at VeChain at the time of writing, a very sizable team for one cryptocurrency. Their CEO is Sunny Lu.
Furthermore, VeChain has a very strong social media presence. A lot of investors are very supportive with a strong belief in the long term potential of the project. The VeChain foundation has thought up a lot of interesting ways to engage and cooperate with the community, including competitions and a reddit AMA.
Reason number 7 – A promising Roadmap
While VeChain is already looking quite promising, its roadmap – although due for a little update – is another confirmation. The rebranding will already be introducing the VeChain wallet with its proper ERC20 token. Furthermore, Q4 2018 will bring more flesh to the bone for the use cases discussed above, with a central role to be played by IoT (Internet of Things).
VeChain is one of the tokens with the least outstanding issues. However, if we can provide a few attention points:
- Quite a lot of direct competitors such as Wabi, Waltonchain, Ambrosus… but none of them is as large as VeChain when looking at marketcap. Of course, one could argue this means VeChain has less room for growth, which brings us to…
- VeChain is already “priced in”. This is probably the most popular FUD against VEN, the fact that VeChain already has a spot in the top 20 market caps of the cryptocurrency landscape. We believe that the overall marketcap of cryptocurrencies will continue growing, and VeChain definitely deserves a spot in the top 10, maybe even top 5, which leaves us with a quite conservative potential growth estimate of 300%.
- When Vechain’s own blockchain goes public and an official whitepaper is released, other teams will copy if not “steal” their good ideas, further strengthening any possible competition. Of course, looking at Bitcoin and Ethereum, first-mover advantage is still extremely strong – if not crucial – in the cryptomarket.
- The Vechain foundation holds half of the tokens. Some people are concerned that the foundation could use this to manipulate the price of the tokens, But just as with Ripple or Stellar this tends to be FUD as there is no reason for a genuine team to tank the value of their own cryptocurrency.
VeChain offers an impressive project with multiple strong use cases and partnerships. There lies lots of potential for a B2B oriented Ethereum-esque platform. Vechain has a foot in the door with a number of incredibly powerful multinational companies and is always open in its outward communication. It is as much of a blue chip token as one can find among cryptocurrencies, and a must-have for anyone looking for a solid long term hold.