A supply chain is a network of businesses and activities that takes a product from raw material suppliers to end consumers. By definition, logistics refers to the processes of acquiring, transporting, and storing resources along the supply chain and logistics. A supply chain, which relies heavily on information technology, logistics and transportation, may involve numerous businesses that comprise the various links along the supply chain. A single company may oversee the majority of the supply chain and logistics for its products.

For example, a supply chain for coffee may begin with Central American farmers. The product (coffee) would then move along the supply chain from the farmers to the facilities that process it. Then, they package the coffee beans. Then, they would move to distributors that transport the product to wholesalers. These wholesalers might then deliver the product to retailers and neighbourhood coffee shops for sale to end customers. In the decentralised world, storing all the data in the logistics and supply chain process needs special care.

In the centralised world, the company needs to store all the data in a server of its own, but in the decentralised world, all the data need to be stored on a public blockchain, readable to every party. This will make the process much more efficient, reliable, and, most importantly, transparent to all parties involved.

A smart contract platform is a blockchain that provides the fundamental backbone for building decentralized applications (dapps). These dapps run when predetermined conditions are met and are thus paramount to the operation and flourishing of decentralized finance (DeFi) and other blockchain applications. There are two important features that enable a Smart Contract Platform: first, compatibility with developer-friendly programming languages so that they can build custom smart contracts. Second, a consensus mechanism is maintained by a network of nodes who periodically validate blocks to ensure transaction finality and the security of the overall network.

Smart contracts are computerized blockchain protocols that execute the terms of a contract. Smart contracts represent computer codes, ensuring that when both parties meet the terms of the contract, they will execute automatically, allowing for trustless peer-to-peer transactions. Smart Contract Platform assets are designed to build decentralized applications, layer-2 scaling solutions, decentralized autonomous organizations (DAOs), and other custom protocols. Every platform has a unique open-source user and miner incentive structure that utilizes the BFT (Byzantine Fault Tolerance) consensus mechanism. Every platform utilizes a native token for the payment toward building on the platform, providing liquidity and allowing interoperability between the native token and the newly created tokens built on the platform.

The internet of things, or IoT, is a system of interrelated computing devices, mechanical and digital machines, objects, animals, or people that are provided with unique identifiers (UIDs) and the ability to transfer data over a network without requiring human-to-human or human-to-computer interaction.

A thing in the internet of things can be a person with a heart monitor implant, a farm animal with a biochip transponder, an automobile that has built-in sensors to alert the driver when tire pressure is low, or any other natural or artificial object that can be assigned an Internet Protocol (IP) address and is able to transfer data over a network.

Increasingly, organisations in a variety of industries are using IoT to operate more efficiently, better understand customers to deliver enhanced customer service, improve decision-making and increase the value of the business.

IoT with blockchain can bring real trust to captured data. The underlying idea is to give devices, at the time of their creation, an identity that can be validated and verified throughout their lifecycle with blockchain. There is great potential for IoT systems in blockchain technology capabilities that rely on device identity protocols and reputation systems. With a device identity protocol, each device can have its own blockchain public key and send encrypted challenge and response messages to other devices, thereby ensuring a device remains in control of its identity. In addition, a device with an identity can develop a reputation or history that is tracked by a blockchain.

Smart contracts represent the business logic of a blockchain network. When a transaction is proposed, these smart contracts are autonomously executed within the guidelines set by the network. In IoT networks, smart contracts can play a pivotal role by providing automated coordination and authorization for transactions and interactions. The original idea behind IoT was to surface data and gain actionable insight at the right time.

For example, smart homes are a thing of the present, and almost everything can be connected. In fact, with IoT, when something goes wrong, these IoT devices can even take action — for example, ordering a new part. We need a way to govern the actions taken by these devices, and smart contracts are a great way to do so.

VeChain is a smart contract platform focused on providing supply chain management solutions for enterprises and integrating with the Internet of Things (IoT) devices to facilitate the process. Its goal is to leverage distributed ledger technology to streamline these operations and information flow for complicated supply chains. VeChain Token (VET) and VeChainThor Energy (VTHO) are the two tokens on the Vechain network. The former is used to relay value across VeChain’s network, while the latter is utilized to power smart contract transactions as energy or “gas.” The VeChain platform claims to give authorized stakeholders a total view of critical information related to a product and its business processes (i.e., storage, transit, supply, and authenticity), as well as increase market transparency.

VeChain is a multi-purpose enterprise blockchain for improving business operations and product tracking. VeChain blockchain development started in 2015 as a modified fork of Ethereum with a design focus on the Internet of Things (IoT) and supply chain management. Later in 2017, VeChain initially offered a token on Ethereum named VEN. They used the money to make progress and development for the project. After launching the main net, they redeemed the VEN token on the Ethereum platform to VET native token of the blockchain. To date, VeChain has expanded its focus to multi-purpose functionality with customizable support for a range of enterprise uses. On-chain governance, cheap transaction fees, interoperability with non-blockchain technologies, and regulatory compliance are all priorities for VeChain core developers. VeChain wants to make all required information from manufacture to delivery (storage, transportation, and supply) available to all authorized parties for any enterprise business process that interacts with the VeChain Thor blockchain.

The VeChainThor is a public blockchain that is designed for the mass adoption of blockchain technology by enterprise users of all sizes. VeChainThor is intended to serve as a foundation for a sustainable and scalable enterprise blockchain ecosystem, supported partly by our novel governance and economic models, and unique protocol enhancements.

Ethereum has represented the state-of-the-art in public blockchains since 2014. Some of Ethereum’s important innovations included the introduction of an account model that can store information other than balance information; the concept of a smart contract that allows blockchain to describe more complicated objects and activities in the real world; and the consensus-based computations and the invention of the Ethereum Virtual Machine (EVM) that enables smart contracts accordingly.

Despite being a major technological milestone, Ethereum has proven to be unsuitable for hosting large-scale commercial decentralized applications (dApps). One of the main reasons for this is that there hasn’t been an effective governance structure set up from Ethereum’s very beginning that would allow efficient and transparent transitions (upgrades) of the protocol to adapt to new challenges or innovations. Secondly, Ethereum lacks a suitable economic model to allow enterprises to run their dApps with a controllable and predictable cost. Considering the Ether price volatility level, it is almost impossible for companies to predict the future price of Ether or the cost of running a dApp based on Ethereum for a given period.

The VeChainThor Blockchain is designed to tackle the above problems. It is not built from scratch; it expands upon some of the essential building blocks of Ethereum (e.g., the account model, the EVM, the modified Patricia tree, and the RLP encoding method) and provides innovative technical solutions that are powered by our novel governance and economic models, which, we believe, will push forward broader blockchain adoption and the creation of new business ecosystems with more efficiency and trust. VeChain Thor is packed with technical features that are tailor-made for the actual needs of enterprises, individuals, and developers.

These features are:

• Meta-Transaction Features

• PoA (Proof of Authority)

• Governance

• Economic Model

Meta-Transaction Features

Meta-transaction features native to VeChain Thor blockchain’s core protocol, such as multi-party payment, multi-task transaction, controllable transaction lifecycle, and transaction dependency, make the development more user-friendly for enterprise adoption.

• Controllable Transaction Lifecycle - With BlockRef and Expiration transaction fields, users can set the time when the transaction is processed or expired if not included in a block

• Multi-task Transaction (MTT) - Multi-function atomic transactions allow developers to batch payments, add multiple calls to different contract functions into one transaction and determine their sequence.

• Multi-party payment (MPP) – Flexible transaction fee delegation schemes enable a freemium model within a decentralized application to onboard users without friction

• Transaction Dependency – Set dependencies to ensure the execution order meets the business need, transactions that specify a dependency will not be executed until the required transaction is processed.

Proof of Authority (PoA)

Authority Masternode Operators maintain the VeChainThor protocol according to the Foundation’s governance policy, with an aligned interest in developing the VeChain ecosystem. PoA addresses enterprises’ common concerns of inefficient upgrades and waste of energy.

• Low computation power required to achieve the network security and consensus integrity

• Controlled via the built-in smart contract, hard forks can be avoided in case Authority Masternodes fail to upgrade

• The Foundation strictly verifies all Authority Masternode Operator identities.

Governance

The balance between decentralization and centralization ensures efficiency and transparency. The community-elected Steering Committee, as the governing body of the ecosystem, facilitates decision-making and execution supported by the on-chain governance mechanism.

• Role-based voting reduces the uncertainty in the platform’s technical and organizational development.

• The on-chain governance mechanism, divided into three phases - propose, approve, and execute- is designed to support the governance model.

Economic Model

The unique two-token system (VET+VTHO) significantly helps separate the cost of using blockchain from market speculation. Due to the correlation with blockchain resource utilization, the cost is more predictable with monitoring the VTHO supply and demand. In addition, Foundation’s governance mechanism further stabilizes the cost.

• VTHO generation from any address holding 5*10^-8 VET at the predetermined velocity of per VET per block (10s)

• 70% of VTHO paid in each transaction is destroyed, and the rest is awarded to the Authority Masternode Operator

• Adjustments to variables (e.g., gas price, velocity) can be made to maintain the equilibrium of VTHO demand and supply.

One of the biggest decisions when designing a public blockchain system is about designing the consensus algorithm. The protocol not only dictates how blockchain participants agree on the blockchain grows but embodies the governance model imposed upon the system.

Recall that the underlying design philosophy of our governance model is that neither a total centralization nor a total decentralization would be the correct answer, but a compromise from and balance of both would.

VeChainThor implements the Proof of Authority (PoA) consensus algorithm, which suits our governance model and states that there would not be anonymous block producers, but a fixed number of known validators (Authority Masternodes) authorized by the steering committee of the VeChain Foundation.

To be an Authority Masternode (AM), the individual or entity voluntarily discloses who they are (identity and reputation by extension) to the VeChain Foundation in exchange for the right to validate and produce blocks. It is their identities and reputations placed at stake that give all the AMs additional incentives to behave and keep the network secure. In VeChainThor, each AM has to go through a strict know-your-customer (KYC) procedure and satisfy the minimum requirements set by the Foundation.

When discussing a consensus algorithm, we must answer the following questions:

• When is a new block produced?

• Who generates the block?

• How to choose the “trunk” from two legitimate blockchain branches?

When

VeChainThor schedules a new block to be generated once every Δ seconds. We set Δ=10, which is based on our estimation of the usage of VeChainThor. Let t0 be the timestamp of the genesis block. The timestamp of the block with height h>0 and th, must satisfy h=t0+mΔ where m is natural positive numbers and greater than or equal to h.

Who

PoA allows every available AM to have an equal opportunity to be selected to produce blocks. To do that, we introduce a Deterministic Pseudo-Random Process (DPRP) and the “active/inactive” AM status to decide whether a particular AM is legitimate for producing a block (h,t) with height h (uint32) and timestamp t (uint64). Here t must satisfy (t-t0)modΔ=0. We first define the DPRP to generate a pseudo-random number gamma(h,t) as:

where o denotes the operation that concatenates two-byte arrays.

Let A_B denote the sorted set of AMs with the “active” status in the state associated with block B. Note that in VeChainThor each AM is given a fixed index number and the numbers are used to sort elements in A_B. To verify whether a is the legitimate AM for producing $B(h,t), we first define:

where PA() returns the parent block. We then compute index i^a(h,t) as:

here AM a is the legitimate producer of B(h,t) if and only if A^a_B(h,t)[i^a(h,t)]=a. Note that we put double quotes around the word “active” to emphasize that the status does not directly reflect the physical condition of a certain AM, but merely a status derived from the incoming information from the network.

AM Status Updating

Given the latest block B(h,t1) and its parent B(h-1,t1), for any t0<t<t1 and (t-t0)modΔ=0, the system computes AM a_t such that

and mark a_t as “inactive” in the state associated with B(h,t1). In addition, the system always sets the status of the AM that generates B(h,t1) as "active". Note that we set all the AMs as “active” from the beginning.

One of the major obstacles for ordinary people, or even enterprises, to adopt a public blockchain is the uncertainty and complexity of dealing with crypto assets. On the one hand, users have to face high price volatility when acquiring crypto from the market; on the other hand, they need to understand related concepts and get familiar with various tools to be able to use and manage their crypto assets.

Can we find a way around the difficulties mentioned above? The answer is most likely negative for the existing blockchain networks such as Bitcoin and Ethereum. This is because, for those systems, the transaction fee has to be paid by whom sends the transaction, and sending transactions is the way we interact with a public blockchain.

In VeChainThor, we come up with the multi-party payment protocol (MPP) to tackle this problem. Basically, MPP says that the transaction fee can be paid by someone other than those who send the transaction if certain conditions meet. In this way, users can interact with VeChainThor even with a zero balance.

Let us first define the terminology to be used to describe MPP as follows:

• Sender - an account that signs the transaction;

• Recipient - account to which the transaction is sent;

• Sponsor - an account that sponsors the recipient to pay for the transaction fee;

• User - VeChainTor allows any account to register other accounts as its users and conditionally pay for the cost of the transactions sent to them;

• Credit - available VHTO for paying for transaction costs for a particular user of a particular account.

The above figure shows the decision-making flow within MPP. When it comes to the question of who should pay for a transaction, VeChainThor first checks the usership and sponsorship associated with the Sender and Recipient. It then tries to deduct the transaction fee from the corresponding account. For instance, if both the usership and sponsorship are in place, the system will first try to deduct the transaction fee from the Sponsor’s balance; if it fails, then from the Recipient’s balance; and if it fails again, from the Sender’s balance.

In practice, a DApp is most likely built upon multiple smart contracts deployed on VeChainThor. Its users interact with our public blockchain by sending transactions to the smart contracts to call a certain function. With MPP, the DApp owner can register its users’ accounts as the User of the smart contracts such that all the legit transactions from the DApp users can be paid by the owner. In this way, people can use the DApp almost in the same way they use other apps without dealing with crypto. Moreover, the owner can set up a single account to sponsor all the smart contracts, making maintenance much easier.

Although decentralization is the well-known cornerstone of blockchain technology, in its pure form, it has obvious defects leading to inefficiency and poor capacity to conduct fast iterations. We believe scalability issues relating to blockchain are not linked to technical problems but to consensus concerns of governance. Continuous updates and additions to the features and functions of blockchain are a natural product of the evolution of the technology, its use cases, and applications.

A proper governance system, with transparency and operational efficiency, will enable continual and rapid innovation.

To achieve the main goal of operating a decentralized public blockchain with the capacity to scale and at the same time complying with regulators and governments and to meet the needs of large enterprises, the next step in VeChain’s decentralization journey is to improve its governance model with the ability for continuous iterations alongside rapid progression in ecosystem development. To achieve this new governance consensus, we aim to identify the right stakeholders and determine how such stakeholder classes will be represented and how the authority to make decisions will be allocated.

It is important that such a governance model is both efficient and cost-effective while resulting in consensus and decisions that balance the views of all stakeholders of the blockchain. The following Governance Principles and Charters are adopted by the VeChain Foundation to serve as a flexible framework to assist the Board of Steering Committee (referred to as the “Board” or “SC”) in the exercise of its responsibilities.

These Governance Principles reflect the Board’s commitment to monitor the fairness and effectiveness of policy and decision-making for the Foundation. They should be interpreted in the context of all applicable laws, VeChain Foundation charter documents, and other governing legal documents and are subject to modification from time to time by the Board.

Foundation Governance Structure

The VeChain Foundation is a non-profit entity committed to developing, governance, and advancing the VeChain ecosystem. The decentralized operating mechanism of blockchain technology grants the Foundation a unique governance structure. The diagram below provides a stylized view of the Foundation’s current governance structure.

The Board of Steering Committee is the governing body of the VeChain Foundation. It is selected by Stakeholders with Voting Authority. The Steering Committee lays out the critical strategies and selects functional committee chairs to oversee the operational units of the Foundation. However, for fundamental subjects that could significantly impact the Stakeholders, all stakeholder voting is required. The fundamental subjects are as follows:

1. The election of the new Board of Steering Committee

2. A fundamental change to the consensus mechanism of the VeChainThor blockchain (updates or enhancements on the existing PoA consensus are not included)

3. Modification to the generation velocity of VTHO via holding VET

4. Other subjects that the Board of Steering Committee deems necessary for all stakeholder voting

Stakeholders with Voting Authority

In the VeChain ecosystem, stakeholders with voting authority are comprised of three categories, i.e., Authority Masternodes, Economic X Nodes, and Economic Nodes. Each category has a different voting authority. The stakeholders can be individuals, corporations, government agencies, nonprofit organizations, and other institutions with a stake in the VeChain ecosystem. Additionally, Authority Masternode holders must go through Foundation’s identity verification and background check. The stakeholder voting mechanism ensures the inclusiveness of all designated stakeholders in the VeChainThor Blockchain ecosystem.

1. Authority Masternodes

   Authority Masternodes are network maintainers of the VeChainThor blockchain, and each node operator must hold at least 25,000,000 VETs at any given time. Currently, there are 101 active Authority Masternodes held by either corporations or individuals whose identities have been verified by the Foundation. Authority Masternodes are the only nodes that are authorized to pack blocks on the VeChainThor blockchain, and they are rewarded with 30% of the transaction fee in each block. The other 70% of the transaction fee is burned.

2. Economic X Nodes

   Economic X Nodes and Economic Nodes were created as the Foundation’s initiative at the early stage of the ecosystem. Each node holder needs to stake a minimum amount of VETs and wait for the maturity period according to the node type and tier. The status of Economic X Node and Economic Node is tokenized according to VIP181 standard and managed via open-source VeChainThor Node smart contracts.

   Economic X Node holders lie at the center of the VeChain community. The initiative was started on 20 March 2018 in a way that no new Economic X Node can be created, and Economic X Nodes can only upgrade their node tier. Therefore, the total number of Economic X Nodes will only decrease over time. Economic X Node holders are considered long-time supporters of the VeChain ecosystem.

3. Economic Nodes

   While the number of Economic X Nodes can no longer increase, any VET holder can apply to become an Economic Node anytime. Any VET address above the minimum holding requirement can apply via the VeChainThor Node smart contract and wait for the maturity period before the creation or upgrade is completed.

VeChainThor blockchain is actually a copy of the Ethereum blockchain, and they even mentioned this in their main net code, as in the image below:

This image is also in Sunny Lu’s tweet with thanks to Vitalik Buterin and the whole Ethereum team.

Even though VeChainThor is a copy of Ethereum, there are many differences that have been mentioned before, especially the consensus mechanism and the fee-paying mechanism.

The code does what Ethereum does with a small number of changes, but the time needed to be more to read the whole code. But as upgrades and commits in their GitHub, they are constantly upgrading the blockchain.

Along with the blockchain, they have Connex, the API for developers, and Sync2, the second version of Sync, which is the wallet and UI of Connex. Both of these parts are constantly upgraded by the team.

Speaking in a nutshell, the code is good, and they are working on it to make it better.

Sunny Lu – CEO

With over 13 years of experience as an IT executive, Sunny Lu, a graduate of Shanghai Jiao Tong University, has a major in Electronics and communication engineering. He is also the former CIO of Louis Vuitton China and has been working on the VeChain project since the beginning of 2015. He is currently the CEO of VeChain.

ttps://www.linkedin.com/in/sunny-lu-55456915/

Jay Zhang – CFO

He is the Chief Finance Officer at VeChain and boasts over 14 years of experience working as the senior manager for both Deloitte and PwC. He also joined VeChain in 2015 and has been leading the Blockchain governance framework design and digital assets establishment teams at VeChain.

https://www.linkedin.com/in/jie-zhang-9426a74a/

Dr. Peter Zhou - VP R&D

Peter Zhou graduated from the University of Southampton with a Ph.D. in Computer Vision and Gait Recognition. He was involved in projects funded by the European Commission and Academy of Finland when working as a research scientist at the University of Kent in the UK and the University of Oulu in Finland. Peter has ten years of experience in computer science research and development and published his research results in leading international academic journals and conferences. After joining VeChain in 2017, Peter has been leading the research and development of blockchain technology and the collaboration with universities worldwide. He is also in charge of intellectual property protection.

https://www.linkedin.com/in/peter-zhou-797608b/

Yvette Xia – VP Marketing

Yvette is an expert with a deep understanding of both marketing and enterprise blockchain applications, coupled with her professional experience: from a premium luxury brand, Louis Vuitton, to the world’s leading enterprise-grade blockchain company VeChain. As the CMO of VeChain Tech, Yvette oversees VeChain’s global marketing and communications in the enterprise blockchain space. She has developed strong skills in building global marketing and communication strategies, overseeing executions, manage lead acquisition and engagement across digital marketing channels.

https://www.linkedin.com/in/yvette-xia-69b03050/

Some good advisors have advised VeChain, like Bo Shen, strategist advisor at DigixDAO, Daniel Kellman, General Counsel, and Jim Breyer, Founder and CEO at Breyer Capital.

VeChain has established partnerships with many leading enterprises in various industries, including Walmart China, Bayer China, BMW Group, BYD Auto, PICC, Shanghai Gas, LVMH, DIG, ASI Group, etc.

Many capital firms have invested in VeChain token, VET, but almost none of them are the “big ones.”

We can mention Whales Capital and Cipher Ventures of all the 23 investors.

VeChain is the top logistics public blockchain in the world. No other public blockchain in this field is bigger in terms of market cap. There are many private blockchains in the logistics and supply chain area, but only a few have a token or are purchased through exchanges.

VeChain has provided a milestone but lacks a roadmap. But looking at the work that has been done, we can suspect that the team is working to make more and more partners worldwide and make some progress in the code and programming.

The principle of designing the model is to prevent transaction fees from being directly exposed to the volatility of the price of VET, making the VeChainThor blockchain more suitable for conducting business / financial activities for both individual and enterprise users.

In our design, there are two levels of blockchain usage. The lower level concerns blockchain-level operations such as token transfer and smart contract execution, while at the higher level, developers and application owners conduct complex business and financial activities.

In the VeChain model, they designed a two-token system to facilitate activities at both levels, namely, VET and VTHO. The function of VET is to serve as a value-transfer medium, or in other words, smart money, to enable rapid value circulation within the ecosystem. On the other hand, VTHO represents the underlying cost of using the VeChainThor blockchain and will be consumed (or, in other words, burned) after certain blockchain operations are performed.

Since VET represents the right to use the VeChainThor blockchain, the model is designed in such a way that VTHO has generated automatically via holding VETs. In other words, whoever holds VET gets VTHO and is able to use the VeChainThor blockchain for free as long as the operations performed consume less than the VTHO generated. VTHO can be transferred and traded to allow users to acquire extra VTHO for performing a larger scale of operations, such as running a blockchain application.

Let us first define some variables to be used to describe our model settings.

V: the amount of VET

E: the amount of VTHO

G: the amount of gas (in units of one thousand gas), where gas is the internal unit of the VeChainThor blockchain to price various blockchain operations. The name ‘gas’ is adopted from the Ethereum blockchain.

t: the amount of time used to accumulate VTHO from VET. Note that t is counted in the number of blocks rather than conventional time units.

p: the gas price in VTHO

v: the generation speed of VTHO from VET Mathematically, we can write our model as:

E = v ∗ V ∗ t (1)

E = p ∗ G (2)

Equation 1 tells us that there would be v VTHO generated from 1 VET every time a block is generated. Equation 2 shows how VTHO is spent in the system. More specifically, when a transaction is put in a block, the system first calculates the amount of G required and then E using Equation 2, which means that there would be E VTHO spent. Note that p is set by the transaction initiator and can differ from transaction to transaction. A larger p would result in the transaction being processed with a higher priority at the cost of more VTHO consumed and vice versa.

We expect the use of the VeChainThor blockchain to be modest at the beginning but will increase over time. We initialize the model parameters v and p so that the amount of VTHO generated from 1M VETs daily will be enough to conduct twenty VET payment transactions. According to our design, the VeChainThor blockchain generates one block every 10 seconds, and each VET payment transaction requires 21,000 gas. The current setting for parameter v is 5 * 10-8 VTHO per VET per block. Therefore, for 10K VET, there will be 4.32 VTHO generated every 6 × 60 × 24 = 8,640 blocks (24 hours).

Ideally, most of the VTHO generated would be spent to pay for transactions on the VeChainThor blockchain. In our model, we give users the flexibility to vary p when submitting transactions. Theoretically, one could set a very small p to allow transactions to consume near-zero VTHO. If a large number of users followed such a practice, there would be a large stock of VTHO unspent, increasing the uncertainty of the stability of the VeChainThor blockchain.

In order to prevent p from going below the minimum cost of running transactions, users can only choose p in the range of *[pCOEF, 2 × pCOEF], where we currently set pCOEF = 1* VTHO/Kgas. We expect average p would be correlated with the number of applications running on the blockchain and active users who make transactions regularly. The minimum and maximum gas price in VTHO are designed to prevent people from exclusively occupying blockchain resources and harming other transaction makers. All the transactions that have a gas price outside the range would not be executed as a penalty by the system.

Also, the image below shows the distribution and rewards of the different types of nodes.

The VeChain Foundation distributed its network’s native token to private, enterprise, and crowd-sale investors back in 2017. At the time, the token was an ERC-20 that ran on Ethereum. The team later discarded VEN in favor of VET when they launched a mainnet version of the VeChainThor blockchain. A token swap allowed holders to swap VEN for VET at an exchange rate of 1:100. VEN is no longer an active token.

VeChain initially minted 1 billion VEN tokens, which equates to 100 billion VET. The initial distribution of VEN (which, in terms of percentages, is the same as VET) is as follows:

• Private investors received 90 million tokens (9%); now, 9 billion VET

• Enterprise investors received 230 million tokens (23%); now 23 billion VET

• Crowdsale investors purchased 277,162,634 VEN (27.7%); now 27,716,263,400 VET

• The VeChain Foundation burned 132,837,366 VEN as part of the token sale refund process (13.3%)

• Project team members received 50 million tokens (5%); now, 5 billion VET The

• Foundation gave themselves 220 million VEN (22%) for operations and development expenses; now 22 billion VET

• VeChain Explorer | Home, https://explore.vechain.org/. Accessed 19 December 2021.

• Connex Environment, https://env.vechain.org/#thor-wallet. Accessed 19 December 2021.

• VeChain Documentation, https://docs.vechain.org/. Accessed 19 December 2021.

• VeChainInsider.com | The latest news and information about VechainThor, https://vechaininsider.com/. Accessed 19 December 2021.

• Coin Bureau. “Supply Chain Blockchains: Set To EXPLODE in 2021?” YouTube, 22 November 2020, https://www.youtube.com/watch?v=2RFxO52Go0M. Accessed 19 December 2021.

• Coin Bureau. “Vechain Review 2019: Still Worth It??” YouTube, 4 October 2019, https://www.youtube.com/watch?v=Zkb-wPlRHPo. Accessed 19 December 2021.

• Coin Bureau. “VeChain (VET): Latest Updates For 2020.” YouTube, 2 February 2020, https://www.youtube.com/watch?v=XVvXh4TgQ9I. Accessed 19 December 2021.

A supply chain is a network of businesses and activities that takes a product from raw material suppliers to end consumers. By definition, logistics refers to the processes of acquiring, transporting, and storing resources along the supply chain and logistics. A supply chain, which relies heavily on information technology, logistics and transportation, may involve numerous businesses that comprise the various links along the supply chain. A single company may oversee the majority of the supply chain and logistics for its products.

For example, a supply chain for coffee may begin with Central American farmers. The product (coffee) would then move along the supply chain from the farmers to the facilities that process it. Then, they package the coffee beans. Then, they would move to distributors that transport the product to wholesalers. These wholesalers might then deliver the product to retailers and neighbourhood coffee shops for sale to end customers. In the decentralised world, storing all the data in the logistics and supply chain process needs special care.

In the centralised world, the company needs to store all the data in a server of its own, but in the decentralised world, all the data need to be stored on a public blockchain, readable to every party. This will make the process much more efficient, reliable, and, most importantly, transparent to all parties involved.

A smart contract platform is a blockchain that provides the fundamental backbone for building decentralized applications (dapps). These dapps run when predetermined conditions are met and are thus paramount to the operation and flourishing of decentralized finance (DeFi) and other blockchain applications. There are two important features that enable a Smart Contract Platform: first, compatibility with developer-friendly programming languages so that they can build custom smart contracts. Second, a consensus mechanism is maintained by a network of nodes who periodically validate blocks to ensure transaction finality and the security of the overall network.

Smart contracts are computerized blockchain protocols that execute the terms of a contract. Smart contracts represent computer codes, ensuring that when both parties meet the terms of the contract, they will execute automatically, allowing for trustless peer-to-peer transactions. Smart Contract Platform assets are designed to build decentralized applications, layer-2 scaling solutions, decentralized autonomous organizations (DAOs), and other custom protocols. Every platform has a unique open-source user and miner incentive structure that utilizes the BFT (Byzantine Fault Tolerance) consensus mechanism. Every platform utilizes a native token for the payment toward building on the platform, providing liquidity and allowing interoperability between the native token and the newly created tokens built on the platform.

The internet of things, or IoT, is a system of interrelated computing devices, mechanical and digital machines, objects, animals, or people that are provided with unique identifiers (UIDs) and the ability to transfer data over a network without requiring human-to-human or human-to-computer interaction.

A thing in the internet of things can be a person with a heart monitor implant, a farm animal with a biochip transponder, an automobile that has built-in sensors to alert the driver when tire pressure is low, or any other natural or artificial object that can be assigned an Internet Protocol (IP) address and is able to transfer data over a network.

Increasingly, organisations in a variety of industries are using IoT to operate more efficiently, better understand customers to deliver enhanced customer service, improve decision-making and increase the value of the business.

IoT with blockchain can bring real trust to captured data. The underlying idea is to give devices, at the time of their creation, an identity that can be validated and verified throughout their lifecycle with blockchain. There is great potential for IoT systems in blockchain technology capabilities that rely on device identity protocols and reputation systems. With a device identity protocol, each device can have its own blockchain public key and send encrypted challenge and response messages to other devices, thereby ensuring a device remains in control of its identity. In addition, a device with an identity can develop a reputation or history that is tracked by a blockchain.

Smart contracts represent the business logic of a blockchain network. When a transaction is proposed, these smart contracts are autonomously executed within the guidelines set by the network. In IoT networks, smart contracts can play a pivotal role by providing automated coordination and authorization for transactions and interactions. The original idea behind IoT was to surface data and gain actionable insight at the right time.

For example, smart homes are a thing of the present, and almost everything can be connected. In fact, with IoT, when something goes wrong, these IoT devices can even take action — for example, ordering a new part. We need a way to govern the actions taken by these devices, and smart contracts are a great way to do so.

VeChain is a smart contract platform focused on providing supply chain management solutions for enterprises and integrating with the Internet of Things (IoT) devices to facilitate the process. Its goal is to leverage distributed ledger technology to streamline these operations and information flow for complicated supply chains. VeChain Token (VET) and VeChainThor Energy (VTHO) are the two tokens on the Vechain network. The former is used to relay value across VeChain’s network, while the latter is utilized to power smart contract transactions as energy or “gas.” The VeChain platform claims to give authorized stakeholders a total view of critical information related to a product and its business processes (i.e., storage, transit, supply, and authenticity), as well as increase market transparency.

VeChain is a multi-purpose enterprise blockchain for improving business operations and product tracking. VeChain blockchain development started in 2015 as a modified fork of Ethereum with a design focus on the Internet of Things (IoT) and supply chain management. Later in 2017, VeChain initially offered a token on Ethereum named VEN. They used the money to make progress and development for the project. After launching the main net, they redeemed the VEN token on the Ethereum platform to VET native token of the blockchain. To date, VeChain has expanded its focus to multi-purpose functionality with customizable support for a range of enterprise uses. On-chain governance, cheap transaction fees, interoperability with non-blockchain technologies, and regulatory compliance are all priorities for VeChain core developers. VeChain wants to make all required information from manufacture to delivery (storage, transportation, and supply) available to all authorized parties for any enterprise business process that interacts with the VeChain Thor blockchain.

The VeChainThor is a public blockchain that is designed for the mass adoption of blockchain technology by enterprise users of all sizes. VeChainThor is intended to serve as a foundation for a sustainable and scalable enterprise blockchain ecosystem, supported partly by our novel governance and economic models, and unique protocol enhancements.

Ethereum has represented the state-of-the-art in public blockchains since 2014. Some of Ethereum’s important innovations included the introduction of an account model that can store information other than balance information; the concept of a smart contract that allows blockchain to describe more complicated objects and activities in the real world; and the consensus-based computations and the invention of the Ethereum Virtual Machine (EVM) that enables smart contracts accordingly.

Despite being a major technological milestone, Ethereum has proven to be unsuitable for hosting large-scale commercial decentralized applications (dApps). One of the main reasons for this is that there hasn’t been an effective governance structure set up from Ethereum’s very beginning that would allow efficient and transparent transitions (upgrades) of the protocol to adapt to new challenges or innovations. Secondly, Ethereum lacks a suitable economic model to allow enterprises to run their dApps with a controllable and predictable cost. Considering the Ether price volatility level, it is almost impossible for companies to predict the future price of Ether or the cost of running a dApp based on Ethereum for a given period.

The VeChainThor Blockchain is designed to tackle the above problems. It is not built from scratch; it expands upon some of the essential building blocks of Ethereum (e.g., the account model, the EVM, the modified Patricia tree, and the RLP encoding method) and provides innovative technical solutions that are powered by our novel governance and economic models, which, we believe, will push forward broader blockchain adoption and the creation of new business ecosystems with more efficiency and trust. VeChain Thor is packed with technical features that are tailor-made for the actual needs of enterprises, individuals, and developers.

These features are:

• Meta-Transaction Features

• PoA (Proof of Authority)

• Governance

• Economic Model

Meta-Transaction Features

Meta-transaction features native to VeChain Thor blockchain’s core protocol, such as multi-party payment, multi-task transaction, controllable transaction lifecycle, and transaction dependency, make the development more user-friendly for enterprise adoption.

• Controllable Transaction Lifecycle - With BlockRef and Expiration transaction fields, users can set the time when the transaction is processed or expired if not included in a block

• Multi-task Transaction (MTT) - Multi-function atomic transactions allow developers to batch payments, add multiple calls to different contract functions into one transaction and determine their sequence.

• Multi-party payment (MPP) – Flexible transaction fee delegation schemes enable a freemium model within a decentralized application to onboard users without friction

• Transaction Dependency – Set dependencies to ensure the execution order meets the business need, transactions that specify a dependency will not be executed until the required transaction is processed.

Proof of Authority (PoA)

Authority Masternode Operators maintain the VeChainThor protocol according to the Foundation’s governance policy, with an aligned interest in developing the VeChain ecosystem. PoA addresses enterprises’ common concerns of inefficient upgrades and waste of energy.

• Low computation power required to achieve the network security and consensus integrity

• Controlled via the built-in smart contract, hard forks can be avoided in case Authority Masternodes fail to upgrade

• The Foundation strictly verifies all Authority Masternode Operator identities.

Governance

The balance between decentralization and centralization ensures efficiency and transparency. The community-elected Steering Committee, as the governing body of the ecosystem, facilitates decision-making and execution supported by the on-chain governance mechanism.

• Role-based voting reduces the uncertainty in the platform’s technical and organizational development.

• The on-chain governance mechanism, divided into three phases - propose, approve, and execute- is designed to support the governance model.

Economic Model

The unique two-token system (VET+VTHO) significantly helps separate the cost of using blockchain from market speculation. Due to the correlation with blockchain resource utilization, the cost is more predictable with monitoring the VTHO supply and demand. In addition, Foundation’s governance mechanism further stabilizes the cost.

• VTHO generation from any address holding 5*10^-8 VET at the predetermined velocity of per VET per block (10s)

• 70% of VTHO paid in each transaction is destroyed, and the rest is awarded to the Authority Masternode Operator

• Adjustments to variables (e.g., gas price, velocity) can be made to maintain the equilibrium of VTHO demand and supply.

One of the biggest decisions when designing a public blockchain system is about designing the consensus algorithm. The protocol not only dictates how blockchain participants agree on the blockchain grows but embodies the governance model imposed upon the system.

Recall that the underlying design philosophy of our governance model is that neither a total centralization nor a total decentralization would be the correct answer, but a compromise from and balance of both would.

VeChainThor implements the Proof of Authority (PoA) consensus algorithm, which suits our governance model and states that there would not be anonymous block producers, but a fixed number of known validators (Authority Masternodes) authorized by the steering committee of the VeChain Foundation.

To be an Authority Masternode (AM), the individual or entity voluntarily discloses who they are (identity and reputation by extension) to the VeChain Foundation in exchange for the right to validate and produce blocks. It is their identities and reputations placed at stake that give all the AMs additional incentives to behave and keep the network secure. In VeChainThor, each AM has to go through a strict know-your-customer (KYC) procedure and satisfy the minimum requirements set by the Foundation.

When discussing a consensus algorithm, we must answer the following questions:

• When is a new block produced?

• Who generates the block?

• How to choose the “trunk” from two legitimate blockchain branches?

When

VeChainThor schedules a new block to be generated once every Δ seconds. We set Δ=10, which is based on our estimation of the usage of VeChainThor. Let t0 be the timestamp of the genesis block. The timestamp of the block with height h>0 and th, must satisfy h=t0+mΔ where m is natural positive numbers and greater than or equal to h.

Who

PoA allows every available AM to have an equal opportunity to be selected to produce blocks. To do that, we introduce a Deterministic Pseudo-Random Process (DPRP) and the “active/inactive” AM status to decide whether a particular AM is legitimate for producing a block (h,t) with height h (uint32) and timestamp t (uint64). Here t must satisfy (t-t0)modΔ=0. We first define the DPRP to generate a pseudo-random number gamma(h,t) as:

where o denotes the operation that concatenates two-byte arrays.

Let A_B denote the sorted set of AMs with the “active” status in the state associated with block B. Note that in VeChainThor each AM is given a fixed index number and the numbers are used to sort elements in A_B. To verify whether a is the legitimate AM for producing $B(h,t), we first define:

where PA() returns the parent block. We then compute index i^a(h,t) as:

here AM a is the legitimate producer of B(h,t) if and only if A^a_B(h,t)[i^a(h,t)]=a. Note that we put double quotes around the word “active” to emphasize that the status does not directly reflect the physical condition of a certain AM, but merely a status derived from the incoming information from the network.

AM Status Updating

Given the latest block B(h,t1) and its parent B(h-1,t1), for any t0<t<t1 and (t-t0)modΔ=0, the system computes AM a_t such that

and mark a_t as “inactive” in the state associated with B(h,t1). In addition, the system always sets the status of the AM that generates B(h,t1) as "active". Note that we set all the AMs as “active” from the beginning.

One of the major obstacles for ordinary people, or even enterprises, to adopt a public blockchain is the uncertainty and complexity of dealing with crypto assets. On the one hand, users have to face high price volatility when acquiring crypto from the market; on the other hand, they need to understand related concepts and get familiar with various tools to be able to use and manage their crypto assets.

Can we find a way around the difficulties mentioned above? The answer is most likely negative for the existing blockchain networks such as Bitcoin and Ethereum. This is because, for those systems, the transaction fee has to be paid by whom sends the transaction, and sending transactions is the way we interact with a public blockchain.

In VeChainThor, we come up with the multi-party payment protocol (MPP) to tackle this problem. Basically, MPP says that the transaction fee can be paid by someone other than those who send the transaction if certain conditions meet. In this way, users can interact with VeChainThor even with a zero balance.

Let us first define the terminology to be used to describe MPP as follows:

• Sender - an account that signs the transaction;

• Recipient - account to which the transaction is sent;

• Sponsor - an account that sponsors the recipient to pay for the transaction fee;

• User - VeChainTor allows any account to register other accounts as its users and conditionally pay for the cost of the transactions sent to them;

• Credit - available VHTO for paying for transaction costs for a particular user of a particular account.

The above figure shows the decision-making flow within MPP. When it comes to the question of who should pay for a transaction, VeChainThor first checks the usership and sponsorship associated with the Sender and Recipient. It then tries to deduct the transaction fee from the corresponding account. For instance, if both the usership and sponsorship are in place, the system will first try to deduct the transaction fee from the Sponsor’s balance; if it fails, then from the Recipient’s balance; and if it fails again, from the Sender’s balance.

In practice, a DApp is most likely built upon multiple smart contracts deployed on VeChainThor. Its users interact with our public blockchain by sending transactions to the smart contracts to call a certain function. With MPP, the DApp owner can register its users’ accounts as the User of the smart contracts such that all the legit transactions from the DApp users can be paid by the owner. In this way, people can use the DApp almost in the same way they use other apps without dealing with crypto. Moreover, the owner can set up a single account to sponsor all the smart contracts, making maintenance much easier.

Although decentralization is the well-known cornerstone of blockchain technology, in its pure form, it has obvious defects leading to inefficiency and poor capacity to conduct fast iterations. We believe scalability issues relating to blockchain are not linked to technical problems but to consensus concerns of governance. Continuous updates and additions to the features and functions of blockchain are a natural product of the evolution of the technology, its use cases, and applications.

A proper governance system, with transparency and operational efficiency, will enable continual and rapid innovation.

To achieve the main goal of operating a decentralized public blockchain with the capacity to scale and at the same time complying with regulators and governments and to meet the needs of large enterprises, the next step in VeChain’s decentralization journey is to improve its governance model with the ability for continuous iterations alongside rapid progression in ecosystem development. To achieve this new governance consensus, we aim to identify the right stakeholders and determine how such stakeholder classes will be represented and how the authority to make decisions will be allocated.

It is important that such a governance model is both efficient and cost-effective while resulting in consensus and decisions that balance the views of all stakeholders of the blockchain. The following Governance Principles and Charters are adopted by the VeChain Foundation to serve as a flexible framework to assist the Board of Steering Committee (referred to as the “Board” or “SC”) in the exercise of its responsibilities.

These Governance Principles reflect the Board’s commitment to monitor the fairness and effectiveness of policy and decision-making for the Foundation. They should be interpreted in the context of all applicable laws, VeChain Foundation charter documents, and other governing legal documents and are subject to modification from time to time by the Board.

Foundation Governance Structure

The VeChain Foundation is a non-profit entity committed to developing, governance, and advancing the VeChain ecosystem. The decentralized operating mechanism of blockchain technology grants the Foundation a unique governance structure. The diagram below provides a stylized view of the Foundation’s current governance structure.

The Board of Steering Committee is the governing body of the VeChain Foundation. It is selected by Stakeholders with Voting Authority. The Steering Committee lays out the critical strategies and selects functional committee chairs to oversee the operational units of the Foundation. However, for fundamental subjects that could significantly impact the Stakeholders, all stakeholder voting is required. The fundamental subjects are as follows:

1. The election of the new Board of Steering Committee

2. A fundamental change to the consensus mechanism of the VeChainThor blockchain (updates or enhancements on the existing PoA consensus are not included)

3. Modification to the generation velocity of VTHO via holding VET

4. Other subjects that the Board of Steering Committee deems necessary for all stakeholder voting

Stakeholders with Voting Authority

In the VeChain ecosystem, stakeholders with voting authority are comprised of three categories, i.e., Authority Masternodes, Economic X Nodes, and Economic Nodes. Each category has a different voting authority. The stakeholders can be individuals, corporations, government agencies, nonprofit organizations, and other institutions with a stake in the VeChain ecosystem. Additionally, Authority Masternode holders must go through Foundation’s identity verification and background check. The stakeholder voting mechanism ensures the inclusiveness of all designated stakeholders in the VeChainThor Blockchain ecosystem.

1. Authority Masternodes

   Authority Masternodes are network maintainers of the VeChainThor blockchain, and each node operator must hold at least 25,000,000 VETs at any given time. Currently, there are 101 active Authority Masternodes held by either corporations or individuals whose identities have been verified by the Foundation. Authority Masternodes are the only nodes that are authorized to pack blocks on the VeChainThor blockchain, and they are rewarded with 30% of the transaction fee in each block. The other 70% of the transaction fee is burned.

2. Economic X Nodes

   Economic X Nodes and Economic Nodes were created as the Foundation’s initiative at the early stage of the ecosystem. Each node holder needs to stake a minimum amount of VETs and wait for the maturity period according to the node type and tier. The status of Economic X Node and Economic Node is tokenized according to VIP181 standard and managed via open-source VeChainThor Node smart contracts.

   Economic X Node holders lie at the center of the VeChain community. The initiative was started on 20 March 2018 in a way that no new Economic X Node can be created, and Economic X Nodes can only upgrade their node tier. Therefore, the total number of Economic X Nodes will only decrease over time. Economic X Node holders are considered long-time supporters of the VeChain ecosystem.

3. Economic Nodes

   While the number of Economic X Nodes can no longer increase, any VET holder can apply to become an Economic Node anytime. Any VET address above the minimum holding requirement can apply via the VeChainThor Node smart contract and wait for the maturity period before the creation or upgrade is completed.

VeChainThor blockchain is actually a copy of the Ethereum blockchain, and they even mentioned this in their main net code, as in the image below:

This image is also in Sunny Lu’s tweet with thanks to Vitalik Buterin and the whole Ethereum team.

Even though VeChainThor is a copy of Ethereum, there are many differences that have been mentioned before, especially the consensus mechanism and the fee-paying mechanism.

The code does what Ethereum does with a small number of changes, but the time needed to be more to read the whole code. But as upgrades and commits in their GitHub, they are constantly upgrading the blockchain.

Along with the blockchain, they have Connex, the API for developers, and Sync2, the second version of Sync, which is the wallet and UI of Connex. Both of these parts are constantly upgraded by the team.

Speaking in a nutshell, the code is good, and they are working on it to make it better.

Sunny Lu – CEO

With over 13 years of experience as an IT executive, Sunny Lu, a graduate of Shanghai Jiao Tong University, has a major in Electronics and communication engineering. He is also the former CIO of Louis Vuitton China and has been working on the VeChain project since the beginning of 2015. He is currently the CEO of VeChain.

ttps://www.linkedin.com/in/sunny-lu-55456915/

Jay Zhang – CFO

He is the Chief Finance Officer at VeChain and boasts over 14 years of experience working as the senior manager for both Deloitte and PwC. He also joined VeChain in 2015 and has been leading the Blockchain governance framework design and digital assets establishment teams at VeChain.

https://www.linkedin.com/in/jie-zhang-9426a74a/

Dr. Peter Zhou - VP R&D

Peter Zhou graduated from the University of Southampton with a Ph.D. in Computer Vision and Gait Recognition. He was involved in projects funded by the European Commission and Academy of Finland when working as a research scientist at the University of Kent in the UK and the University of Oulu in Finland. Peter has ten years of experience in computer science research and development and published his research results in leading international academic journals and conferences. After joining VeChain in 2017, Peter has been leading the research and development of blockchain technology and the collaboration with universities worldwide. He is also in charge of intellectual property protection.

https://www.linkedin.com/in/peter-zhou-797608b/

Yvette Xia – VP Marketing

Yvette is an expert with a deep understanding of both marketing and enterprise blockchain applications, coupled with her professional experience: from a premium luxury brand, Louis Vuitton, to the world’s leading enterprise-grade blockchain company VeChain. As the CMO of VeChain Tech, Yvette oversees VeChain’s global marketing and communications in the enterprise blockchain space. She has developed strong skills in building global marketing and communication strategies, overseeing executions, manage lead acquisition and engagement across digital marketing channels.

https://www.linkedin.com/in/yvette-xia-69b03050/

Some good advisors have advised VeChain, like Bo Shen, strategist advisor at DigixDAO, Daniel Kellman, General Counsel, and Jim Breyer, Founder and CEO at Breyer Capital.

VeChain has established partnerships with many leading enterprises in various industries, including Walmart China, Bayer China, BMW Group, BYD Auto, PICC, Shanghai Gas, LVMH, DIG, ASI Group, etc.

Many capital firms have invested in VeChain token, VET, but almost none of them are the “big ones.”

We can mention Whales Capital and Cipher Ventures of all the 23 investors.

VeChain is the top logistics public blockchain in the world. No other public blockchain in this field is bigger in terms of market cap. There are many private blockchains in the logistics and supply chain area, but only a few have a token or are purchased through exchanges.

VeChain has provided a milestone but lacks a roadmap. But looking at the work that has been done, we can suspect that the team is working to make more and more partners worldwide and make some progress in the code and programming.

The principle of designing the model is to prevent transaction fees from being directly exposed to the volatility of the price of VET, making the VeChainThor blockchain more suitable for conducting business / financial activities for both individual and enterprise users.

In our design, there are two levels of blockchain usage. The lower level concerns blockchain-level operations such as token transfer and smart contract execution, while at the higher level, developers and application owners conduct complex business and financial activities.

In the VeChain model, they designed a two-token system to facilitate activities at both levels, namely, VET and VTHO. The function of VET is to serve as a value-transfer medium, or in other words, smart money, to enable rapid value circulation within the ecosystem. On the other hand, VTHO represents the underlying cost of using the VeChainThor blockchain and will be consumed (or, in other words, burned) after certain blockchain operations are performed.

Since VET represents the right to use the VeChainThor blockchain, the model is designed in such a way that VTHO has generated automatically via holding VETs. In other words, whoever holds VET gets VTHO and is able to use the VeChainThor blockchain for free as long as the operations performed consume less than the VTHO generated. VTHO can be transferred and traded to allow users to acquire extra VTHO for performing a larger scale of operations, such as running a blockchain application.

Let us first define some variables to be used to describe our model settings.

V: the amount of VET

E: the amount of VTHO

G: the amount of gas (in units of one thousand gas), where gas is the internal unit of the VeChainThor blockchain to price various blockchain operations. The name ‘gas’ is adopted from the Ethereum blockchain.

t: the amount of time used to accumulate VTHO from VET. Note that t is counted in the number of blocks rather than conventional time units.

p: the gas price in VTHO

v: the generation speed of VTHO from VET Mathematically, we can write our model as:

E = v ∗ V ∗ t (1)

E = p ∗ G (2)

Equation 1 tells us that there would be v VTHO generated from 1 VET every time a block is generated. Equation 2 shows how VTHO is spent in the system. More specifically, when a transaction is put in a block, the system first calculates the amount of G required and then E using Equation 2, which means that there would be E VTHO spent. Note that p is set by the transaction initiator and can differ from transaction to transaction. A larger p would result in the transaction being processed with a higher priority at the cost of more VTHO consumed and vice versa.

We expect the use of the VeChainThor blockchain to be modest at the beginning but will increase over time. We initialize the model parameters v and p so that the amount of VTHO generated from 1M VETs daily will be enough to conduct twenty VET payment transactions. According to our design, the VeChainThor blockchain generates one block every 10 seconds, and each VET payment transaction requires 21,000 gas. The current setting for parameter v is 5 * 10-8 VTHO per VET per block. Therefore, for 10K VET, there will be 4.32 VTHO generated every 6 × 60 × 24 = 8,640 blocks (24 hours).

Ideally, most of the VTHO generated would be spent to pay for transactions on the VeChainThor blockchain. In our model, we give users the flexibility to vary p when submitting transactions. Theoretically, one could set a very small p to allow transactions to consume near-zero VTHO. If a large number of users followed such a practice, there would be a large stock of VTHO unspent, increasing the uncertainty of the stability of the VeChainThor blockchain.

In order to prevent p from going below the minimum cost of running transactions, users can only choose p in the range of *[pCOEF, 2 × pCOEF], where we currently set pCOEF = 1* VTHO/Kgas. We expect average p would be correlated with the number of applications running on the blockchain and active users who make transactions regularly. The minimum and maximum gas price in VTHO are designed to prevent people from exclusively occupying blockchain resources and harming other transaction makers. All the transactions that have a gas price outside the range would not be executed as a penalty by the system.

Also, the image below shows the distribution and rewards of the different types of nodes.

The VeChain Foundation distributed its network’s native token to private, enterprise, and crowd-sale investors back in 2017. At the time, the token was an ERC-20 that ran on Ethereum. The team later discarded VEN in favor of VET when they launched a mainnet version of the VeChainThor blockchain. A token swap allowed holders to swap VEN for VET at an exchange rate of 1:100. VEN is no longer an active token.

VeChain initially minted 1 billion VEN tokens, which equates to 100 billion VET. The initial distribution of VEN (which, in terms of percentages, is the same as VET) is as follows:

• Private investors received 90 million tokens (9%); now, 9 billion VET

• Enterprise investors received 230 million tokens (23%); now 23 billion VET

• Crowdsale investors purchased 277,162,634 VEN (27.7%); now 27,716,263,400 VET

• The VeChain Foundation burned 132,837,366 VEN as part of the token sale refund process (13.3%)

• Project team members received 50 million tokens (5%); now, 5 billion VET The

• Foundation gave themselves 220 million VEN (22%) for operations and development expenses; now 22 billion VET

• VeChain Explorer | Home, https://explore.vechain.org/. Accessed 19 December 2021.

• Connex Environment, https://env.vechain.org/#thor-wallet. Accessed 19 December 2021.

• VeChain Documentation, https://docs.vechain.org/. Accessed 19 December 2021.

• VeChainInsider.com | The latest news and information about VechainThor, https://vechaininsider.com/. Accessed 19 December 2021.

• Coin Bureau. “Supply Chain Blockchains: Set To EXPLODE in 2021?” YouTube, 22 November 2020, https://www.youtube.com/watch?v=2RFxO52Go0M. Accessed 19 December 2021.

• Coin Bureau. “Vechain Review 2019: Still Worth It??” YouTube, 4 October 2019, https://www.youtube.com/watch?v=Zkb-wPlRHPo. Accessed 19 December 2021.

• Coin Bureau. “VeChain (VET): Latest Updates For 2020.” YouTube, 2 February 2020, https://www.youtube.com/watch?v=XVvXh4TgQ9I. Accessed 19 December 2021.