VeChain is well known as a trailblazer in the world of enterprise blockchain applications. A key factor in this success is our unique two-token model, with VET serving as the utility token, and VTHO, the gas token, powering transactions. By separating these functions, VeChain has been able to deliver scaled commercial applications for hundreds of enterprises thanks to our ability to solve the critical challenge of unpredictable transaction fees — a problem many blockchains face during times of market volatility.
We understand that intelligent tokenomics are crucial to the long-term success of blockchains. Looking ahead, we see many evolving opportunities to innovate and elevate our tokenomics, in pursuit of our core objectives:
Long-term growth and ecosystem scaling
Staying ahead of evolving regulations, emphasizing decentralization
Balancing stakeholder needs, from builders to institutions to end-users
Community at the core
The VeChain Renaissance unlocks our evolution.
Aligning Rewards with Impact
In the current token model, VTHO is generated uniformly by VET at a rate of 0.000432 per day, regardless of contribution to the network. Exchange wallets, for example, hold large portions of VET, and generate a significant share of VTHO without utilizing it or distributing it to users.
While this has enabled a highly liquid VTHO market, it has failed to properly incentivize behaviors that are conducive to growing and securing the blockchain. To ensure economic sustainability, VeChain needs a tokenomic model that aligns VTHO issuance with meaningful contribution.
So, what’s changing?
1. Optimized VTHO Issuance
Overall Reduction: Total VTHO generation will be reduced and redistributed to reward active stakeholders. This new model better manages VTHO inflation and leads to a healthier supply dynamic over the long term.
Stake-Based VTHO Issuance Curve: VTHO issuance rate will become dynamic, and a function of the quantity of VET staked in X/Economic & Validator Nodes.
2. New VTHO Distribution Model
The new VTHO distribution model sees network rewards go to groups who actively support the VeChain ecosystem:
Validators: The Validators of VeChain are responsible for block production, securing the network, validating transactions, and upgrading the protocol. Validators will earn rewards for successfully mining blocks.
X-Nodes and Economic Nodes: X/Economic Nodes are the backbone of governance and economic stability on VeChainThor, earning VTHO for being active ecosystem participants.
Builders: Developers will benefit from a new VTHO-based fund, providing benefits such as fee delegation (gas-free transactions) to support app development, user growth, and more.
VTHO will no longer be generated at the single VET token level. Instead, it will be generated by the groups above, increasing based on total VET staked. This new model greatly increases incentives to participate and secure the network.
3. New Opportunities in PoA 3.0
PoA 3.0 is the third iteration of our groundbreaking consensus model, with its naming convention playfully dubbed ‘Proof of Adoption’, aligned with our broader goals. PoA 3.0 delivers greater decentralization & new staking opportunities:
Validator Delegation: PoA3.0 introduces the ability for X/Economic Nodes to delegate collateral to one of the 101 Validator Nodes. In doing so, X/Economic Nodes can play an active role in block production, network decentralization and VeChainThor’s economic security, earning additional incentives for doing so.
Upgraded Validator Mechanics: In PoA3.0, block producing Validator Nodes will no longer be capped at 25 M VET to enable greater overall VET staking. The Validator selection process will no longer require KYC, introducing more decentralization and fairness. Validator positions will be opened following a fair, public and transparent process — full details of which will be shared in a future update.
New Economic Node Tiers: PoA 3.0 will introduce new tiers of Economic Node below the current minimum of 1 Million VET tokens. In doing so, we foster greater inclusivity and participation, while providing access to staking for a new generation of stakeholders.
Note: No new X-Nodes or X-Node tiers will be created.
4. Dynamic Fee Mechanism
Inspired by EIP-1559, VeChain’s dynamic fee mechanism brings new opportunities for validators and addresses key security challenges as the network scales:
Adaptive fees: Transaction costs adjust dynamically based on demand, ensuring transactions are more uniformly delivered by disincentivizing excessive consumption of block space. This helps ensure more consistent, predictable costs.
Congestion Management: By dynamically regulating fees, the network maintains optimal performance and availability, even during peak activity.
Building On the Backs Of (Community) Giants
As always, our incredible community remains central to our vision, and we build towards our macro-objectives. Through highs and lows, we’re grateful to have built such an engaged, passionate, and dedicated following and this transition, in part, is an homage to you. Our core protocol team has designed a roadmap to deliver more opportunities at every level of our ecosystem.
Your input is invaluable — before any changes are implemented, we will carry out the proper approval process and launch an all-stakeholder voting event — to allow you to voice your opinions and agree, or disagree, on the direction forward.
In the coming weeks, we encourage you to participate and be engaged with each other through Discourse, Telegram and other social channels, sharing feedback with the admins and team. Together, we are shaping a stronger, more transparent, and future-proofed blockchain ecosystem, in anticipation of mainstream adoption.
The VeChain Renaissance represents one of the most ambitious series of upgrades ever proposed for the VeChainThor blockchain and sees us maintain our industry role as a leader of innovation and real-world impact.
In two weeks, we will publish a roadmap to outline timings for the technical phases of VeChain Renaissance.
The Renaissance is here. Together, we secure the future.
About VeChain
Founded in 2015, VeChain built a world leading enterprise smart contract platform, VeChainThor, helping deliver blockchain adoption apps to hundreds of enterprise partners.
Building on this expertise, VeChain, in close partnership with Boston Consulting Group, launched the ‘Better’ ecosystem — comprised of sustainability apps that use tokenization and incentivization to reward users, businesses and other stakeholders for sustainable actions.
To learn more, including how you can build apps of your own, grants, documentation and more, visit vechain.org — or vebetter.com to explore.
VeChain Renaissance: New Tokenomics For A Next-Generation Consensus was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.