VeChain uses a Proof of Authority (PoA) consensus mechanism, in which a set of 101 Authority Masternodes validate transactions. These masternodes are selected by the VeChain Foundation’s technical and governance councils, and are subject to verified hardware requirements, a KYC verification process, and a collateral minimum of 25 million VET. The VeChain Foundation will select masterndoes associated with five primary categories: enterprise, blockchain developers, business development, community contributors, and academic research. Enterprise users and dApp developers will reduce their application’s transaction costs by running their own masternode.
VeChain uses a two-token ecosystem; the primary VET token is used for network payments and governance rights, and the VeThor token functions as smart contract gas. Holders of VET accrue VeThor according to a daily issuance schedule, in a model similar to NEO and its Gas token. Token holders elect the VeChain Foundation’s Steering Committee, which has input in masternode selection and technical decision making. VeChain dApps can fund transaction fees directly through a smart contract wallet, instead of requiring users to fund these fees themselves; this feature aims to streamline the user onboarding process and experience. Approximately 30% of VeChain transaction fees accrue to the masternodes, while the remaining 70% is burned.
The initial VEN token was released as an ERC-20 token on Ethereum, with the mainnet launching in July 2018. The total supply of VEN is 1 billion, with 64% total allocated to a public sale, private sale, and enterprise investors. All VEN token holders at the time of mainnet launch receive VET at a 25:1 ratio. The protocol specifications are based loosely on the Ethereum codebase, with modifications to emphasize enterprise-grade security. Development of VeChain is centered in China, with major investors including Fenbushi Capital and Draper Fisher Jurvetson.