July 5th – Guangzhou Daily ran a story on Walmart’s traceability and food safety platform, confirming it’s arrival in one of China’s most populous cities.
Today (July 5), Guangzhou Daily’s all-media reporter learned from the Wal-Mart Food Safety Promotion Week in Guangzhou that the supermarket has recently launched a packaged food blockchain traceability platform.
This is the first application of the blockchain technology to the traceability platform in the retail field. Compared with the previous traceability system, the blockchain technology can make the data real-time, tamper-proof, and improve the transparency of product information.
According to reports, the first batch of 23 kinds of products have been tested and entered the platform. In the Wal-Mart stores in Guangzhou, as long as the packaged food with retrospective code is attached, the public scans the QR code on the product through the WeChat sweep function. You can immediately get the details of the source of the goods and the geographical location of Wal-Mart’s receipt of goods, logistics process time, product testing reports and other details.
It is understood that in the second half of this year, Wal-Mart will continue to launch more than 100 kinds of products, covering more than 10 categories including fresh meat, vegetables and seafood, and free brand food. In the future, the Wal-Mart blockchain traceability platform will synchronize the product data of the regional government traceability platform and the supplier’s own platform.
The products have now been confirmed in Walmart in both Shenzhen and Guangzhou, two of Southern China’s biggest and most influential cities. News of potentially integrating with a regional government traceability platform will be quite encouraging for VeChain investors, who have heard rumors of government partnerships in the past.
In this article, we aim to provide investors with more knowledge regarding the economic model behind VeChain’s ecosystem. We will focus on a few main topics:
Why is there a separate gas token – VTHO?
How can VeChain scale without having demand increase the cost of transactions?
How will the VET token increase in value over time?
The Dual-Token Model
The VeChainThor blockchain uses what is called a ‘dual-token’ system. There are two tokens:
VET – VeChain Token
VET is the primary token of the blockchain and it has several uses. VET’s main functions are to distribute the network, store and transfer value, and generate a secondary token, VTHO. Each VET generates VTHO at a rate of .000432 VTHO per day. There is no minimum limit on what generates VTHO, even holding just one VET in a wallet will generate VTHO. Some users like to “stake” larger amounts of VET in nodes in order to speed up their VTHO generation rate. Note: If you store VET on an exchange like Oceanex the VTHO distribution is weekly. For other exchanges please double check if and when VTHO gets distributed.
VTHO – VeThor Token
VTHO is the ‘energy’ or ‘gas’ token of the blockchain. When making transactions, a small amount of VTHO must be paid as a transaction cost. Enterprises and developers using the blockchain must also use VTHO to upload data and create smart contracts. VTHO can be purchased on several exchanges, but everyone who holds VET automatically generates some VTHO, creating a form of passive income for VET holders that they can either use or sell on the open market. For every transaction, 70% of the VTHO paid gets destroyed. The other 30% gets rewarded to the authority node that verified the corresponding block.
This guide explained the underlying economic model of VeChain.
To find out approximately how much VTHO you can generate using VET, check out this handy calculator from VeChainstats.com.
At first, this dual-token system might seem a bit unnecessary. Why don’t they just use the main token (VET) to pay transaction costs, like Bitcoin and Ethereum?
The main reason is to solve a major scalability issue in traditional blockchains. As token prices increase, transaction fees become more expensive. Network congestion causes fees to increase further, making the single-token blockchain model even more expensive and inconvenient to use. VeChain’s dual-token model provides a stable business environment where fluctuations in the prices of digital assets won’t dramatically effect the cost of using the network, making it the ideal public blockchain for enterprise use.
VTHO Supply & Demand Models
Now that we’ve discussed the dual-token system, we can look at what causes demand for both the VET and VTHO token to rise. The VeChain platform will have many users – which we can cover in a later guide.
These users of the VeChainThor blockchain will have to use VTHO for everything they do on the network. Since some of them (mostly businesses and third-party apps) need more VTHO than they can produce with VET, they are going to buy the VTHO from others. You can imagine what will happen when there are a lot of people who are trying to buy VTHO: the price will go up. This results in the paradox we see in single-token blockchains:
Problem:
Higher usage results in a shrinking VTHO supply, a higher VTHO valuation, and increased transaction costs. This will lower the amount of users willing or able to use the blockchain.
Solution:
The VeChain Foundation and Steering Committee is able to adjust variables such as reducing the minimum amount of VTHO needed for a transaction (currently 21) and increasing the generation rate of VTHO per VET (currently 0.000432 per VET per day). This allows the market for VTHO to stay in an equilibrium, resulting in stable transaction costs: exactly what enterprises and developers want.
In this manner, we can see how increased usage will lead to excess demand for VTHO causing two scenarios:
Scenario A
The minimum VTHO needed for a transaction is turned down to reflect the increased price of VTHO on the open market.
Scenario B
The VTHO generation rate is turned up, allowing market price to stabilize, but increasing the passive income of VET holders.
As more companies and applications use VeChain, we will most likely see the following cycle that demonstrates the role the foundation plays in maintaining stable transaction costs:
Let’s take a look at daily supply and demand from an economic point of view:
In market equilibrium, the price of both VTHO and VET is P1 at quantity Q1
When VeChain’s blockchain gets used more, VTHO demand increases to Q2, causing a shift right in the demand curve. Price increases to P2. As the price of VTHO rises, VET demand also increases to Q2, causing the VET price to also increase to P2.
Foundation adjusts parameters, causing the VTHO demand curve to shift back to its original place. Market returns to equilibrium. VET price remains unaffected due to its increased value: 1 VET can now pay for more transactions compared to before.
Conclusion
This guide explained the underlying economic model of VeChain.
Thanks to the dual-token system, transaction costs will not significantly increase when VeChain gets used more.
When demand for VTHO increases, the Foundation can simply alter some variables to bring the market back to equilibrium. For enterprises, this feature makes VeChain much more reliable than other blockchains.
As demand for VTHO increases, demand for VET will also increase. As the VeChainThor blockchain gets used more, the price of VET will increase thanks to the tokenomics of the blockchain.
So when will all this become a reality? Each day the sum total of all VTHO produced is around 37 million. With the recent spike in mainnet traffic, on busy days VeChain is already coming close to eclipsing that. With more and more projects being developed, many are optimistic that increased demand will happen sooner rather than later.
Contributors
This guide was compiled by Reza Enayatizaman & Ben Yorke.
Just days after launching an IEO on MXC, the CEO Tao Ran accepted the blame for mismanagement of the TicTalk foundation. He acknowledged that his words might make people angry, and apologized for the fluctuations experienced by the TIC token.
“I don’t understand marketcap management. I only understand investment incubation and operations. In the first few days after IEO, I was as excited as the friends of the whole community. With the efforts of the community partners and the cooperation of investment institutions, the TIC token rose 5-10 times, and the momentum made a lot of people excited.
However, the market is so cruel, the more excited you are, the more crazy you are, the more dangerous it is. If you don’t respect the market, you will definitely be educated by the market. In the past 24 hours, Bitcoin has risen by 20%, causing huge fluctuations in the price of the the entire MXC market and the TIC token price.”
The CEO Tao Ran went on to discuss how they had released 600 million additional tokens on the exchange in order to launch the IEO. In order to protect the community, investment institutions bought back 400 million tokens, spending ￥10 million ($1.5 million USD) in the process.
He later insisted that he was not running from the problem, and vowed to “serve the community for free for an entire lifetime” as he refuses to let the TIC token fail. This apology, issued entirely in Chinese, may not be enough to win back the favor of angry community members, who raised questions about the project’s ethics on social media.
Undoubtedly, the IEO was nothing more than an attempt to manipulate the token price and please investors. Having already been on OceanEx for over 6 months, there was little reason to hold an “Initial Exchange Offering” as the project should have been past the token issuance stage. Their IEO was loaded with dubious decisions, including selling tokens at 1/3 the active trading price on OceanEx. In their Chinese language IEO information guide, they claimed to be the world’s largest incubator, with more than 1 million registered users. Other questionable statistics included boasting about 200,000 high-value users and 100,000 paid app users, despite not offering any evidence or sources to support this claim.
This comes just weeks after the project announced its intention to switch from a decentralized social media project to a project incubator. While seeing an apology may alleviate fears of an outright exit scam, the damage may already be done to investors left holding the token.
On June 25th, Walmart China announced the creation of a Blockchain Food Safety and Traceability Platform alongside partners VeChain, PwC, China Chain Store and Franchise Association (CCFA), Kerchin, and various other food producers. Walmart will use VeChain’s blockchain technology to verify products along the supply chain, increasing consumer trust. Customers will be able to scan products directly through WeChat as they browse products in stores.
What’s the significance?
Food safety and product verification were always recognized as a use case blockchain could have a major impact on. Industry-wise, the painfully slow development process has gone on for years, leaving only an underwhelming slew of pilots and proposed solutions to show for it. Walmart China’s platform is the closest we’ve seen to a fully mature implementation, with 23 active product lines making a major spike of traffic on the VeChain mainnet.
Walmart China is making notable progress in a competitive market. A revenue of $10.7 billion in 2018 gives them the 4th highest market share of all retailers, a strong return from their 443 nationwide locations and online platforms. Walmart Global boasts a higher-than-average inventory turnover, which reflects positively on their ability to rapidly stock and sell inventory, an important metric for forecasting blockchain traffic.
With 23 product lines already available, the platform is already burning more than one fourth of the average VTHO produced each day. With plans for Walmart to expand a further 100 product lines this year, it’s easy to imagine the large VTHO surplus quickly becoming a dwindling reserve, especially when considering that Walmart China is just one of a number of multinational partners. This creates some very encouraging scenarios for VeChain investors, who might suddenly find the token in high demand. If these scenarios were to play out, the foundation would need to increase the VTHO generation rate, providing VET holders with an even higher rate of return.
Who is watching?
Over the last two decades, China has been hit by a string of food safety scandals that have rocked public trust. These include counterfeit milk formula, heavy pesticide use, re-processed dead pork, and recycled “gutter” cooking oil. The Walmart China announcement took place as part of China Food Safety Publicity Week, hosted by 23 government departments, including the food safety commission of the State Council and the National Health Commission. The state council and Communist Party have recently proposed goals that would see 97% of food fulfill food safety requirements by 2020, placing pressure on farmers and manufacturers to improve. This partnership illustrates the usefulness of blockchain technology to government and corporate organizations, setting a trend for food producers, retailers, and policy-makers to follow.
As a co-host of the event, the China Chain Store and Franchise Association (CCFA) is not to be overlooked. They are a non-profit organization that represents retailers and franchises in policy-making and industry management, including most of the large franchises such as Walmart, Carrefour, and Tesco. Being able to give the CCFA a firsthand glimpse of VeChain’s blockchain technology is yet another positive takeaway from the partnership announcement.
The Future of Shopping in China
In the land where eCommerce, delivery services, and mobile payments are ubiquitous, it’s not unreasonable to expect blockchain solutions to be massively popular.
As the top employer in the US, Walmart knows the importance of innovating to maintain or gain market share. Over the past few years, Walmart China has made significant investments in technological partners, including China’s second largest eCommerce company, JD.com. This strategic alliance allows them to offer their products through a platform that saw 352 million active users in the last quarter of 2018. In addition to eCommerce, Walmart China is focusing on last mile delivery, as fleets of eBikes bring products directly to the door of consumers, with a delivery time guarantee of under an hour.
Blockchain is the latest attempt to improve the online-to-offline (o2o) customer experience. Customers browsing the physical stores are now able to scan food items using WeChat, to learn more about the products they are considering. Walmart-China recognizes the importance of this, as a joint industry report (JD.com and Walmart) in 2018 highlighted the fact that “product quality” was the most sought after trend, edging out “convenience” and “value for money” in a survey of Chinese consumers. This makes the VeChain-powered solution an integral part of their core business offering, as having verified data about products will make their goods much more attractive.
Long-term, it’s not unreasonable to expect nearly all food products to have their own unique data that consumers can view and provide feedback on when shopping both online or in physical stores. QR codes have essentially replaced cash in modern China, and their power to convey information gives blockchain a fully developed infrastructure to build on. This is an area Walmart and VeChain are primed to take advantage of as they continue to innovate and empower consumers.
This is an updating story – we will update as more info becomes available.
Tuesday, June 25th – Wal-mart China announced the creation of a Blockchain Food Safety and Traceability Platform alongside partners VeChain, PwC, China Chain Store and Franchise Association (CCFA), Kerchin, and various other food producers. Wal-Mart will use VeChain’s blockchain technology to verify products along the supply chain, increasing consumer trust. Customers will be able to scan products directly through WeChat as they browse products in stores.
This product, scannable with WeChat – gives customers vital product info
The announcement of the Walmart China Blockchain Traceability Platform came with the introduction of the first batch of 23 product lines that have been tested and launched on the Platform. The Platform is expected to scale by another 100 product lines by the end of the year covering more than 10 product categories including fresh meat product, rice, mushrooms, cooking oil, etc. It is expected that the Walmart traceability system will see traceable fresh meat account for 50% of the total sales of packaged fresh meat, traceable vegetables will account for 40% of the total sales of packaged vegetables, traceable seafood will account for 12.5% of the total sales of seafood by the end of 2020.
Wal-mart hosting the announcement ceremony.
The announcement was closely followed by some very important organizations in China. The ceremony saw VeChain COO Kevin Feng sitting next to a member of the China Academy of Information and Communications Technology, an organization directly under the Ministry of Information and Industry Technology, the top bureau in charge of key technology policies in China.
“Food Safety is at Wal-Mart”
Rice tracked via VeChain
Wal-Mart VeChain, and other partners at the ceremony
Wal-Mart China has a large national chain with over 400 stores nationwide. After heavily investing in e-commerce, curbside pickup, and home delivery platforms in 2018, they are planning to open 30-40 new stores each year. Focusing on food safety is an important area in China, where the government is keen to reduce the number of scandals and become a leader in this field.
