Introduction

In the ever-evolving world of blockchains and cryptocurrency, VeChain remains consistent in its vision, but nimble and adaptable in its implementation. Throughout its evolution, VeChain has consistently tackled the challenges impeding the broader adoption of public blockchains by enterprises, innovating solutions that bridge the gap between blockchain technology and practical business applications. 

From integrating IoT and NFC technologies for anti-counterfeiting measures to spearheading sustainable incentive mechanisms within global enterprises, VeChain's journey is a testament to its foundational vision of transforming enterprise operations through blockchain. 

The launch of the VeChain Foundation and its ICO in 2017 marked the beginning of a new era, further solidifying VeChain's role in the blockchain landscape. As we delve into VeChain's history, we explore its strategic initiatives, technological advancements, and new initiatives toward sustainability, unveiling how VeChain is shaping the future of blockchain applications across industries.

Vechain’s History of Sustainability

VeChain stands out as a pioneering entity that has continuously pushed what is possible at the intersection of blockchain and sustainability. Beginning its journey as a private consortium chain in 2015, VeChain initially collaborated with prominent enterprises like Renault, Viseo, and Microsoft, focusing on developing groundbreaking use cases such as digital vehicle passports. However, the realization that public blockchains offered greater potential in terms of trust, transparency, and data sharing led to the project evolving over time, defined by three distinct periods. This shift towards a public blockchain model marked a significant milestone in VeChain's evolution, aligning with broader industry trends favoring open, decentralized platforms.

Phase One

In its pursuit to address the challenges hindering the adoption of public blockchains by enterprises, VeChain, in collaboration with PwC, identified key obstacles such as transaction cost volatility, governance concerns, scalability issues, and the complexities of global supply chains. Recognizing the potential and limitations of smart contracts introduced by Ethereum, VeChain embarked on materializing a comprehensive roadmap to address key challenges such as scalability, transaction cost stability, governance, and transaction models. The establishment of strategic partnerships for the development of commercial applications marked a significant milestone, with DNV’s ‘MyStory’ use case being a notable early success. 2017 saw the launch of the VeChain Foundation and its initial coin offering (ICO). This period was crucial for VeChain as it developed tools to address the identified pain points for enterprise adoption. 

Noteworthy solutions included the Internet of Things (IoT) devices and Near-field Communication (NFC) chips. These chips are particularly suited for anti-counterfeiting purposes due to their durability, difficulty in replicating, and the ability to be embedded directly into products. This makes them ideal for items with a high risk of counterfeiting, including custom shoes, clothing, leather goods, toys, collectibles, and wine. NFC technology not only adds value to the product during its initial sale but also enhances its second-hand marketability, allowing the original purchaser to share crucial product data with potential buyers.

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The integration of blockchain technology with these two technologies presented new opportunities to secure data and ensure its integrity in a transparent manner. IoT devices hold significant relevance for supply chain applications beyond simple anti-counterfeiting tools. However, anti-counterfeiting and provenance were notable applications of Vechain’s early days, the true promises resided in the capability to amass vast amounts of data in an immutable manner, facilitating comprehensive monitoring of business processes across the supply chain spectrum—from suppliers and factories to logistical companies, storage facilities, and retailers.

Other solutions unique to Vechain’s enterprise adoption efforts include fee delegation for asset management, where gas fees could be paid through smart contracts, eliminating the need for enterprises to hold digital assets directly. Additionally, the Proof of Authority (PoA) consensus mechanism was introduced, enhancing scalability and security by utilizing KYC'd masternodes. The two-token model addressed transaction cost stability, allowing for the modification of gas fees following governance or stakeholder voting events.

Phase Two

With a robust foundation in place, VeChain embarked on building use cases on the public blockchain, partnering with high-profile entities such as Givenchy and acquiring influential partners like DNV. This period saw VeChain extending its reach to both enterprise and government-level projects. The launch of ToolChain in 2019 was a strategic move to simplify and streamline the creation of enterprise dApps, incorporating advanced features like NFC integration. This platform facilitated the development of significant projects, including collaborations with PwC and Walmart, one of the most scaled public blockchain use cases to date, boasting over 200 million transactions, and the DNV x VeChain x BYD  Low Carbon Ecosystem.

ToolChain represented a leap forward in facilitating the development of business blockchain applications within the VeChainThor ecosystem. Its intuitive interface, customizable features, and preconfigured tools enabled companies to effortlessly integrate blockchain into their operations. The introduction of a unique fiat subscription model further alleviated the need for direct cryptocurrency engagement, positioning VeChain as a frontrunner in enterprise blockchain solutions. This phase witnessed substantial growth in VeChain’s adoption, with the development of hundreds of enterprise applications across various sectors.

Phase Three

The emergence of global sustainability regulations marked a turning point for VeChain. Recognizing the burgeoning demand for sustainable practices, VeChain, at the onset of 2023, embarked on its third and current phase, focusing on sustainability. This shift was a logical progression of its accumulated experience and market developments. The emphasis on sustainability provided VeChain with an opportunity to expand blockchain use cases from enterprise data management to creating incentivized participatory ecosystems, thereby leveraging data for new forms of value creation at both individual and corporate levels.

VeChain identified key opportunities to further its mission of mass blockchain adoption, with an ambitious goal to onboard a billion users to Web3 by 2030. The strategic focus on sustainability, the potential of token-in-play business ecosystems, and the drive for Web3 adoption through engaging dApps underpinned this phase. The collaboration with the Boston Consulting Group on the 'Web3 for Better' initiative highlighted VeChain’s commitment to leveraging blockchain for societal and environmental benefits. The X2Earn model, central to this phase, exemplifies VeChain’s innovative approach to creating token-based ecosystems that reward participation and sustainability efforts.

VeChain’s Low Carbon Ecosystem, developed in collaboration with DNV and BYD, serves as a testament to the viability and impact of the X2Earn model. By rewarding electric vehicle owners with carbon credits for their contributions to reducing emissions, the ecosystem demonstrates how blockchain can facilitate sustainable behaviors and create value for participants. The transparency and reliability of blockchain ensure the authenticity of carbon credits, enabling seamless collaboration within business ecosystems. EXAMPLE

Vechain + BCG

In 2023, Vechain partnered with Boston Consulting Group (BCG) to usher in a new era of sustainability in business operations. Recognizing the urgency of integrating sustainable practices into the core of corporate strategies, this alliance focuses on leveraging technology to address global environmental challenges.

Vechain offers innovative solutions through its blockchain infrastructure, designed to enhance transparency and efficiency across various industries, while BCG brings expertise in management consulting. This partnership represents a commitment not only to commercial success but also to the well-being of future generations and the health of the global ecosystem.

To ignite these sustainability efforts, Vechain announced in January 2024 a significant upgrade to its developer grant program, now known as Grant 2.0. One of the most notable enhancements in Grant 2.0 is the substantial increase in financial support, with developers now able to access up to $100,000 in funding (up from $30,000 previously) In addition to financial backing, the program introduces new funding tracks, including marketing and microgrants, plus potential access to BCG mentorship and VC introductions for sustainability startups building X2Earn applications. These additions aim to support diverse aspects of blockchain development, from community engagement to smaller, yet impactful initiatives such as tool integrations. 

Access to the BCG mentorship network and VC opportunities opens doors for developers to refine their skills and expand their professional networks. This holistic approach to support goes beyond financial assistance, offering valuable resources for comprehensive project development.

A major announcement for this new ecosystem is due on February 28th, which we will cover in our next report. 

Tokens + Data

Vechain operates on its own blockchain, the VeChainThor. This system utilizes two distinct tokens:

• VET: The primary token serving as a store of value, governance mechanism, and source for generating VTHO.
• VTHO: The transaction token or "gas" used to power smart contracts and data storage on the network.

The key innovation lies in separating VTHO, the fuel for blockchain operations, from VET, the value-bearing token. This design aims to mitigate the impact of market fluctuations on transaction costs. In contrast, single-token systems like Ethereum experience rising gas fees during network congestion, hindering scalability and enterprise adoption.

VET's Multiple Roles:

• Value Transfer: Facilitates secure and transparent value exchange between participants.
• Governance: VET holders participate in network upgrades and protocol changes through a staking mechanism.
• VTHO Generation: Each VET passively generates VTHO at a predetermined rate, incentivizing long-term holding.

VTHO: Powering the Network:

• Smart Contract Execution: Deployed smart contracts incur VTHO costs proportional to their computational complexity.
• Data Storage: Storing data on the blockchain requires VTHO payment.

VeChain employs several mechanisms to ensure VTHO price stability:

• Predictable Generation: The fixed VTHO generation rate per VET provides consistent supply.
• Dynamic Fee Adjustment: The VeChain Foundation adjusts the minimum VTHO required per transaction based on market demand.
• VTHO Burning: 70% of used VTHO is permanently removed from circulation, creating a deflationary mechanism.

New User-Token Dynamics

With Vechain’s optimized tokenomics geared toward sustainable practices, new and novel use cases can be built atop the chain with confidence. Looking forward, the landscape of customer engagement is undergoing a significant transformation with institutions increasingly turning to Web3 for growth. 

On-chain fungible tokens, NFTs, smart contracts, and Decentralized Autonomous Organizations (DAOs) present unprecedented opportunities for customer engagement and retention. Web3's true potential lies in its ability to introduce features that incentivize participation and foster loyalty.

• Tokenization of Customer Interactions: Both fungible and non-fungible tokens can revolutionize customer engagement. They serve as spendable loyalty currencies or rewards, tracking interactions and rewarding loyalty with tangible benefits. This gamification of customer interactions not only enhances engagement but also solidifies customer loyalty.
• The Emergence of Phygital NFTs: These NFTs offer a unique blend of physical and digital benefits. They can reward ecosystem activity by providing early access, discounts, and exclusive experiences. This approach exemplifies the seamless integration of digital and physical realms, enhancing the overall customer experience.
• Blockchain-based Tokens for Partnerships: The use of blockchain tokens facilitates easier integration of external partners and merchants. Smart Contracts, with their capability for immediate transaction settlement and built-in interoperability rules, can significantly reduce the manual overhead typically associated with managing collaborations.

Specific to fostering a greener future, VeChain has been working in tandem with BCG to revolutionize enterprise sustainability through token-based ecosystems. 

As part of this transformative strategy, VeChain and BCG have embarked on a collaborative venture aimed at quantifying sustainable value using user data and creating Green Tokenized Ecosystems. These ecosystems use blockchain technology to tokenize green practices, incentivizing businesses and individuals to engage in sustainable activities. By assigning a token value to these actions, Vechain helps promote an environment-friendly behavior change.

This initiative is rooted in the belief that data plays an instrumental role in driving sustainability efforts forward. By harnessing the wealth of information available from users' interactions in the tokenized ecosystem, it is possible to glean valuable insights into their behaviors, preferences, and consumption patterns.

Case Studies: Incentivizing Electric Cars and Enhancing Batteries

One example is in the electric car domain. BYD, a leader in electric vehicles, combines its vehicle networking data with VeChain's blockchain technology, enabling users to see the amount of carbon emissions they have saved by driving an electric vehicle. DNV GL, a trusted verifier, ensures that the data is accurate and reliable. Additionally, with this new data being captured, drivers can be rewarded for their “green” choices. The incentive structure, at a high level, works as follows:

• When someone drives an electric vehicle from BYD, they earn tokens based on their contribution to a cleaner environment.
• These tokens can be redeemed for various benefits such as discounts on products or services.

Through this data-driven approach, VeChain and BCG can identify areas where sustainable practices can be enhanced or where new ones can be introduced. By offering tangible rewards, VeChain aims to inspire more individuals to adopt sustainable practices.

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Case Study: EV Battery Passport 

As we transition to a greener economy, new challenges arise that require innovative solutions. One such challenge is the recycling and reuse of electric vehicle (EV) batteries. As EV adoption increases globally, so will the need for sustainable practices around battery life cycles.

VeChain's solution to this problem comes in the form of an EV battery passport powered by blockchain technology. This digital passport records each battery's history from production to end-of-life disposal. It provides critical information that ensures transparency around battery usage history, facilitating recycling efforts.

Simultaneously, blockchain technology also addresses supply chain sustainability challenges by ensuring transparency at every stage. It allows for origins tracing, authenticity verification, and lifecycle management - essential factors in promoting sustainable practices.

VeChainThor: Enabling Greener Operations Across Industries

Playing a pivotal role in these ecosystems is VeChainThor, Vechain's proprietary blockchain platform. The VeChainThor Blockchain's ability to provide reliable, real-time data is crucial for businesses, governments, and individuals alike. For businesses, it can help them identify areas where they can reduce their environmental impact. Governments can use this data to monitor compliance with environmental regulations. Individuals gain a clear understanding of the environmental footprint of the products they use and the actions they take.

VeChain has introduced several innovative solutions that address key challenges in sustainability:

• Supply Chain Traceability: By leveraging blockchain technology, VeChain enables businesses to track the journey of products from raw materials to the end consumer. This not only helps in identifying inefficiencies in the supply chain but also ensures compliance with ethical and environmental standards.
• Carbon Footprint Monitoring: VeChain's blockchain-based system allows companies to accurately measure and report their carbon emissions. This data can then be used to implement strategies for reducing greenhouse gas emissions and mitigating climate change.
• Circular Economy Promotion: Through its partnership with recycling companies, VeChain is exploring ways to incentivize consumers for recycling products. By issuing tokens as rewards for recycling, VeChain aims to encourage sustainable consumption habits and reduce waste.

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Technical Developments to Bolster Vechain

Vechain Dapp Kit

Vechain has recently announced the launch of its advanced frontend library designed to facilitate the creation of decentralized applications (dApps) on the VechainThor blockchain. This initiative is a significant step forward in streamlining the development process, offering a suite of tools that promise to enhance the Vechain development experience significantly.

One of the core features of this toolkit is its simplified wallet management. Utilizing Connex technology, the 'vechain/dapp-kit' library introduces an additional layer that simplifies wallet management. For developers, this means less time wrestling with complex wallet integration and more time focusing on creating robust and user-friendly dApps.

For those working with React, the 'vechain/dapp-kit-react' library includes a set of hooks and components tailored for seamless integration with the dApp kit. This means React developers can now incorporate Vechain's tools with minimal disruption to their existing workflow, fostering a more efficient development process.

Additionally, the dApp kit supports a variety of languages and frameworks. This includes TypeScript, Vanilla JS, React, Vue, Angular, Svelte, and Next.js. Such flexibility and compatibility ensure that a wide range of projects can leverage Vechain's toolkit, regardless of the underlying technology.

VORJ

In addition to the Dapp kit, Vechain’s VORJ solution (covered in previous reports) continues to remove the frictions previously associated with blockchain development and use. Historically, blockchain adoption has been hindered by steep technical barriers. VORJ equips developers with a comprehensive toolkit designed to foster innovation and increase Web3 adoption. Imagine managing both fungible tokens, like loyalty points, and non-fungible tokens (NFTs), representing unique digital assets, with the ease of a familiar Web2 interface. 

VORJ accomplishes this by providing:

• No-code development: Pre-built templates and intuitive wizards eliminate the need for complex coding, enabling users to create digital assets, smart contracts, and API integrations with ease.
• Web2-like experience: The platform boasts a user-friendly interface familiar to Web2 users, minimizing the learning curve associated with traditional Web3 tools.
• Cost-effective deployment: VORJ allows dApp deployment on the VechainThor mainnet at no cost, reducing initial entry barriers for developers.

Account Abstraction

Finally, Vechain is working on the integration of Account Abstraction (ERC-4337) into the protocol. This approach introduces programmable smart contract wallets, which significantly enhance the custody experience by offering both improved user experience and increased security. The implementation of ERC-4337, developed in partnership with Electi Consulting, is presently undergoing an audit by the esteemed cybersecurity firm Hacken.

ERC-4337 marks a paradigm shift in how users interact with the blockchain, introducing contract accounts brimming with innovative features.  At the heart of this transformation lies the ability to delegate responsibilities. Imagine transactions paid not just with VTHO but with any token. Such is the versatility unlocked by smart contract accounts, eliminating the need for users to constantly manage gas fees. 

Convenience takes center stage with features like transaction aggregation, allowing you to bundle multiple actions into one, streamlining complex operations, and saving valuable time. Forget managing separate token balances for gas; these wallets handle the conversion seamlessly.

Perhaps even better, smart contract wallets elevate security to a new level. Imagine requiring approvals from multiple devices or trusted individuals for critical transactions, adding an extra layer of protection against unauthorized access. Or picture being able to freeze your account instantly if a device gets lost, safeguarding your assets with a single click. This is now possible with AA and smart contract wallets. These wallets even incorporate recovery mechanisms, allowing you to regain access with the help of pre-designated trusted accounts, ensuring continuity and peace of mind.

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The core account abstraction contracts were deployed this quarter along with Token Bound Account smart contracts. VeChain's deployment of both significantly enhances interoperability and user security within its ecosystem. This breakthrough facilitates easier access for users, merging traditional web functionalities with blockchain through innovations like social logins for dApps, thereby broadening the technology's appeal and usability.

Moreover, the update empowers NFTs with their own smart contract wallets, paving the way for novel applications and use cases. This development not only boosts the utility and flexibility of NFTs but also encourages creativity among developers, expanding the scope for enterprise solutions and community-driven initiatives within the VeChain ecosystem.

Conclusion

VeChain's future in the blockchain industry looks to lead in innovation, adaptability, and forward-thinking approaches to sustainability. By transitioning from a private consortium to a public blockchain model, VeChain has not only expanded its technological capabilities but also its impact on various sectors. The strategic collaboration with Boston Consulting Group (BCG) and the launch of initiatives like 'The HiVe' and 'Web3 for Better' whitepaper signify VeChain's commitment to leveraging blockchain for sustainable development. 

With the upcoming launch of a sustainability ecosystem on the VeChainThor blockchain, VeChain is set to further cement its position as a leader in the blockchain space, driving innovation and sustainability hand in hand. As VeChain continues to evolve, its journey offers valuable insights into the potential of blockchain technology to transform industries and promote a sustainable economic model, reflecting a steadfast dedication to innovation and a better future.

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Disclaimer: This report was commissioned by Vechain. This research report is exactly that — a research report. It is not intended to serve as financial advice, nor should you blindly assume that any of the information is accurate without confirming through your own research. Bitcoin, cryptocurrencies, and other digital assets are incredibly risky and nothing in this report should be considered an endorsement to buy or sell any asset. Never invest more than you are willing to lose and understand the risk that you are taking. Do your own research. All information in this report is for educational purposes only and should not be the basis for any investment decisions that you make.