Yet another top-20 cryptocurrency has officially released live software.
As of 0:00 UTC Saturday, the first block on the VeChain blockchain, whose token supply is valued at $1.46 billion at writing, has been mined, marking a milestone for a project that aims to convince businesses to adopt code tied to a crypto asset traded on a public market.
Seeking to address obstacles with public blockchains like ethereum and bitcoin (namely alleged governance inefficiencies, economic model issues and design difficulties), the project also hopes to eclipse solutions like Hyperledger that have so far been the go-to platforms for business.
In short, founded by former CIO of Louis Vuitton China, Sunny Lu, VeChain hopes to be the first to put “real business” applications on a public blockchain.
“Right now, if we look at all the existing public blockchains, there is a common economic model which is from bitcoin that tries to motivate more people to join the network,” Lu explained. “The cost to use public blockchains is linked to the token valuation on the blockchain directly.”
For the execution of more exotic blockchain features like smart contracts and decentralized applications, Lu argues this is a problem.
He told CoinDesk:
“It kind of generates a typical paradox which is, the more utility, the more use cases, the higher valuation of the token. It also means a higher cost to use the blockchain, and that means no one will use it anymore if the cost is too high.”
To solve this, VeChain uses a twin token system in which its VET asset functions as a store of value, and the VeThor token represents the underlying cost of using the blockchain. (The project is not alone in using such a system. Both Neo and Ontology (whose launch is underway) also support twin tokens that seek to break up varying user behaviors.)
Still, another means by which VeChain has sought to differentiate is by emphasizing what Lu calls “ready to wear” software that reduces development time and costs.
“All of the public blockchains running in total decentralization mode are like naked blockchains to most enterprises,” Lu said. “Because it’s just open source for the core codes, if you want to build up an application, you’ve got to do everything by yourself starting from scratch.”
But perhaps what distinguishes VeChain from its competitors is the extent to which enterprises are already said to be involved in that process. VeChain boasts partnerships with automobile manufacturers BMW and Groupe Renault, and global quality assurance and risk management company DNV GL.
Some partners, like DNV GL, have even taken on a more technical role in the project’s execution – specifically within its governance system, a key part of VeChain’s pitch to businesses.
Notably, the project uses a system called “proof-of-authority” (PoA) to govern how its blockchain rules can be altered, which Lu says offers enterprises “a balance between decentralization and centralization.”
VeChain is not the first project to attempt to walk this line.
EOS and Tron have also experimented with new governance models in which software users are positioned as “community members” that can use their tokens to elect delegates (nodes) to validate blocks.
In this way, VeChain’s consensus system has two components. The first, what Lu refers to as the “decentralized part,’ is that token holders have the ability to vote, and that the weight of their vote corresponds to the number of VET tokens they hold and whether or not they complete a KYC process.
Some token holders, like DNV GL, also run nodes, and to do so, must meet certain requirements.
“Every node will have specifications, not only about hardware, but about the security level and process, how to manage your nodes and your contribution to the VeChain community,” Lu told CoinDesk.
All voters use their “voting authority” to have a voice in decisions about technical modifications to the blockchain and to elect VeChain’s “Steering Committee.” This is what Lu calls “the centralized part,” which is the seven-seat governing body of the VeChain Foundation and its blockchain.
“Those seven seats of the committee, we will execute any decisions coming from the voting process, even including who should be next in the Steering Committee,” Lu said. “By doing that, you maintain the publicity or transparency of a decentralized part and also maintain the efficiency of a centralized part.”
Finding a sweet spot
So, while decentralization maximalists have been critical of the DPoS and PoA systems, businesses don’t seem to share their concerns.
Renato Grottola, senior vice president of digital transformation and M&A at DNV GL, told CoinDesk that he believes VeChain’s governance model represents “an optimal balance between centralization and decentralization, reducing uncertainty related to future developments.”
Likewise, Danny van de Griend, CEO of MustangChain, a startup which intends to use VeChain’s technology to create a more transparent equine industry with better data accessibility, agrees.
“If you want to have it fully decentralized, it can become a mess,” he told CoinDesk. “You need a good balance between centralized and decentralized.”
De Griend continued:
“You don’t have to think about the basics anymore. Those basic protocols are ready to be used, so you can think more now about, ‘What can I develop now for the stakeholders?'”
Grottola added that this makes it easy for DNV GL to develop supply chain-specific solutions.
“VeChain has been conceived as a platform; it combines blockchain technology with IoT and AI thus offering the possibility to develop supply chain solutions both at product/asset and enterprise level.”
More to build
But the launch Saturday won’t mark the end of VeChain’s development.
While it marks the creation of the genesis block and the start of the generation of VeThor tokens, the blockchain won’t be fully functional for some time. Before the technology can be truly live, VeChain must migrate its tokens from the ethereum blockchain to its mainnet, a process scheduled for July.
Likewise, Lu acknowledges that mainnet launches, in which large sums of cryptocurrency are handled and transferred by developer teams, always come with risk.
“We have some enemies for sure,” Lu said. “People will try to attack.”
For this reason, he added that VeChain has enlisted several cybersecurity firms to conduct testing on its code prior to the launch. Likewise, the project has an “emergency response team” (ERT), which will “monitor the entire mainnet launch” to respond to issues.
According to Grottola, DNV GL is confident that VeChain’s measures will be sufficient to ensure a smooth launch.
“This is a normal practice in business, [but] not so common for crypto startups. That kind of structured approach has been one of the key criteria for choosing the VeChain initiative among other concurrent platforms,” he said.
Other partners are optimistic, too. Kurt Connolly, senior vice president of business development at sports and gambling platform Decent.Bet, which plans to use VeChain’s technology, said the company thinks the odds of a successful launch are in VeChain’s favor.
He told CoinDesk:
“We’re realists. We know that the next ‘perfect’ product launch will be the first ever ‘perfect’ product launch. There are always bugs to fix here or there.”