VeChain (CCC:VET-USD) cryptocurrency and blockchain is making a name for itself as an “enterprise-focused supply chain and logistics blockchain solution.” And now it is becoming quite popular.
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The cryptocurrency ended 2020 at 1.91 cents per VET. By the end of April 21, VeChain token was at 22.81 cents. That represents a gain of 10.9 times in less than four months.
What is going on here?
But the main attraction that VeChain seems to have is its use as a supply and logistics blockchain. A number of large enterprises are now using it to ensure that inventory from start to sale can be accounted for. The VeChain Foundation has “partnered” with a number of large enterprises.
One of the more progressive large companies using VeChain is a Norwegian company called DNV. It is the world’s largest classification society, providing services for 13,175 vessels and mobile offshore units (MOUs). According to Seeking Alpha, it has been an early adopter of blockchain logistics and used VeChain for this.
Vechaininsider.com keeps an up-to-date list of the existing VeChain partnerships and large businesses around the world using VeChain as a blockchain solution. There are five companies that have “strategic” partnerships: DNV, PriceWaterhouseCoopers, National Research Consulting Center (China), Yida China Holdings and BitOcean, a crypto exchange. Other major companies looking into using VeChain include BMW (OTCMKTS:BMWYY), LVMH (OTCMKTS:LVMHF), and BYD (China).
VeChain and a Dividend
One of the attractive features about VET is that it creates a dividend of sorts. According to a recent article in Seeking Alpha, an “offshoot coin” called THOR, or VeThor (CCC:VTHO-USD) token is paid to every holder of VET tokens. The market price for VTHO was just below 2 cents (1.91 cents) as of April 21.
However, the VTHO each VET token holder receives and on what schedule is a little complicated. Here is the best description I have found so far:
“VTHO is generated by holding the VET token. There is a fixed number of 87 billion VET tokens which generate VTHO daily at a rate of 0.000432 per VET token. This results in a fixed number of 37,584,000 VTHO tokens generated daily.”
Therefore, if you hold 10,000 VET tokens today (costing $0.2281, or $2,281), you would receive 4.32 VTHO tokens worth 1.91 cents each or 8.25 cents.
But that is a daily rate. The total dividend received on an annualized basis is $0.0825 x 365, or $30.1125 annually. That works out to an annualized dividend yield of 1.32% (e.g., $30.11 / $2,281). And remember, if the price of VTHO rises faster than the price of VET, the dividend yield will also rise.
Proof of Authority
Moreover, the blockchain itself works on a proof of authority system. This is different from Bitcoin (CCC:BTC-USD) and its proof-of-work system (which basically rewards bitcoin mining). And that is also different from the proof-of-stake system that Cardano (CCC:ADA-USD) and soon Etherium (CCC:ETH-USD) will start to transition to using.
Here is the simplest description of how the proof-of-authority system works:
“When VTHO is used, 70% of it is destroyed / burned and the other 30% is retained by Authority Masternodes. These nodes are the only full nodes on the VeChainThor blockchain that are authorized to validate and produce blocks.”
The Benefits of the Dual Token System
Therefore, the VeChain system is a dual token system with inflationary and deflationary forces. One recent article described it this way:
“The VeChainThor network uses a primary token called VET. VET has a fixed supply. Holding VET generates the secondary token called VTHO. VTHO has a controlled inflation rate, as well as a deflation rate (VTHO burn during transaction).”
The monetary policy of the system is managed by a steering committee but is voted on by those who hold VET tokens. According to the article, this managed and deflationary policy ends up with a slightly inflationary supply of the VTHO tokens, which are used in transactions.
The bottom line is the VeChain is gaining fame and use as a dual cryptocurrency that supplies logistics blockchain solutions for large businesses.
On the date of publication, Mark R. Hake held a long position in Bitcoin and Etherium.
Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.