How VET Works: A Deep Dive Into VeChain's Technology

VeChain (VET) is a blockchain project designed to streamline supply chain processes and enhance transparency through decentralized technology. Its platform enables businesses to track products throughout the entire supply chain, offering much-needed security, accountability, and trust. But how exactly does VET work? Let's break it down.

The VeChainThor Blockchain

At its core, VET operates on the VeChainThor blockchain. This blockchain hosts decentralized applications, but it’s designed to serve enterprise clients with an emphasis on supply chain solutions. The key differentiator between VeChainThor and other blockchains is its dual-token system.

Dual-Token System

The VeChain ecosystem operates with two main tokens: VET and VTHO.

• VET: This is VeChain's native cryptocurrency, used mostly for governance and operations in the network. VET is used as a value-transfer medium between stakeholders. However, it’s not just a utility token; holding VET generates VTHO.
• VTHO: This token is required to conduct transactions and execute smart contracts on the blockchain. Essentially, it covers the computational cost of interacting with VeChain's network, acting much like "gas" does on other blockchains. VTHO is automatically generated by holding VET, which incentivizes long-term holding.

Proof of Authority Algorithm

Unlike traditional proof-of-work blockchains like Bitcoin or proof-of-stake systems, VET utilizes a Proof of Authority (PoA) consensus mechanism. This algorithm allows for low computational power consumption while maintaining a high level of network security.

In PoA, authority nodes are pre-approved and are responsible for validating transactions and creating new blocks. These nodes represent trusted entities in the ecosystem, ensuring that the network remains fast and efficient without compromising on security. This makes VeChain more scalable and energy-efficient compared to other blockchain networks.

Blockchain-as-a-Service (BaaS)

One of the primary functions of VeChainThor is its “Blockchain-as-a-Service” (BaaS) model. This service allows businesses to deploy custom solutions for their supply chain needs without needing to develop their own proprietary blockchain infrastructure. VeChain provides IoT-based tracking, data recording, and product lifecycle monitoring, all on the blockchain for tamper-proof verification.

Supply Chain Applications

VeChain's supply chain solutions work through the incorporation of IoT devices such as NFC chips, RFID tags, and sensors. These tools attach to physical products and collect data across every phase of the supply chain—from manufacturing to the final consumer. Using VeChainThor, this data is recorded on the blockchain, allowing all stakeholders—whether manufacturers, distributors, or end customers—to trace product history and ensure authenticity.

Smart Contracts

Another key feature of VeChainThor is the integration of smart contracts. These self-executing code sequences facilitate secure transactions and contractual agreements without intermediaries. In the supply chain, smart contracts can automate tasks such as payment releases when certain conditions (like delivery completion) are met, reducing the potential for fraud or human error.