Why I’m buying VeChain (VET)

Launched in 2016, VeChain is a Shanghai-based project offering supply-chain tracking and authenticity solutions through a proof-of-authority blockchain.

While most new blockchains aim at solving scalability, privacy and/or security, Sunny Lu (Vechain’s COO) takes a slightly different approach. The venture is definitely aware of the aforementioned challenges but instead of going about it from a retail perspective, it focuses on businesses and their reliability/reputation to make sure a limited number of players can guarantee the speed, validity and immutability of the transactions. People can then view transactions involved from raw materials to manufacturing to shipping to retail delivery.

This might sound less… sexy? In practical terms, though, it’s one of the rare ventures that can demonstrate actual real-use cases making businesses better and enhancing product experience for consumers.

The protocol itself isn’t unlike Ethereum, also working through smart contract but powered by two tokens, VeChain tokens and VeThor tokens. VeChain tokens periodically issue a fluctuating supply of VeThor token. A core concept in VeChain economics is that business using smart-contracts should be able to estimate the cost of doing business through them and so that’s why instead of having just one coin whose price fluctuates with speculation, growth/decline or just the crypto market, VeChain provides a way for people to invest in the project and transact on the blockchain or issue new projects based on the protocol (VET), but, also ensure business have a steady cost to operate on it (VTHO).

VeChain’s current market cap is $ 406,924,455. If we look at crypto companies as start-up’s this is a high valuation; if we look at crypto companies compared to BTC, it might look more reasonable. Let’s take the latter approach and compare VeChain to its main competitor, Ethereum. While Ethereum is the precursor and undeniably the benchmark of any smart-contract blockchain protocol, VeChain pose a real threat by allowing large companies to actually use, now -today, the technology and add value by recording the manufacturing process, guaranteeing the authenticity and reliability of the product, and automating certain processes.

This can be extended to so many areas: luxury goods, energy, high precision manufacturing, consumer goods and food products, commodities, art and collectibles, overall supply chain, even insurances in the case of automated pay-outs. The idea that they could grab market share and reach, say, a place in the Top10 market cap is by no means wild; this would translate in +/- 5–10X growth (and probably a higher return on VET token, through market rational and irrational enthusiasm).

With a more macro view, I feel something else bodes well for VeChain. It is (luckily?) based in Mainland China. We could talk about the pressing need for reliability in the food industry (many mothers would happily pay twice as much to be sure their baby’s milk powder is healthy as opposed to some counterfeited and dangerous product, or, many wealthy businessmen would rejoice in displaying wealth by buying porc or wine of assured quality), that’s not the point I want to make. While China’s long-term goal is to advance its ‘Belt and Road’ initiative we can expect all neighbouring countries to at least be affected by trade and technological advances made. Knowing that China is looking into blockchain and will soon launch its own CBDC, it is not unlikely that a number of countries along the coasts of Asia but also in Africa (mostly owned by China already, through debt obligations) will have to use that technology -some would argue that the developing nations will adopt those easier as there is less vestigial infrastructure to modify/rework.

It is very likely that VeChain will be a key part in the business and retail adoption of usable blockchain (and smart-contract) economy of the future, adding real value by providing reliable supply chain management and quality control tools for everyone willing to -or having to- partake in this technological advancement.

Passionate about financial markets, long-term investments, the occasional short-term trade and disruptive technologies.