What Is VeChain (VET) and How Does It Work?

What Is VeChain (VET)?

VeChain is a public Layer 1 blockchain that runs on the VeChainThor network. A Layer 1 is its own blockchain where transactions and applications can run directly.

VeChainThor also supports smart contracts. These are programs on the blockchain that automatically carry out actions when certain conditions are met.

The network uses two main tokens: VET and VTHO. VET is the main token of the VeChainThor network and is used, among other things, for transferring value. VTHO is used to pay for transactions and running smart contracts.

That distinction is an important part of VeChainThor. So VET and the token used to pay network fees are not the same thing. VTHO is used for fees on the network.

VeChainThor also has a special transaction model. One transaction can consist of multiple separate actions. VeChain calls these actions clauses.

For example, a clause can be a token transfer, but it can also be a smart contract call. That lets you bundle multiple actions and send them to the network all at once.

For example, one transaction can pay multiple addresses at the same time, or first transfer a token and then run a smart contract. All of these actions are then processed together as one transaction.

This can be useful for applications and businesses that want to carry out multiple steps one after another. Instead of sending a separate transaction for every action, multiple actions can be combined into one transaction.

The VeChainThor mainnet went live on June 30, 2018.

Key Takeaways

• VeChainThor is a public Layer 1 blockchain with VET as its native token.
• VET is used, among other things, for transferring value and staking, while VTHO is used to pay network fees.
• Since the Hayabusa upgrade in December 2025, VeChainThor has used Delegated Proof of Stake (DPoS).
• The network works with 101 active validators, and VET holders can delegate their VET to a validator through StarGate.
• Transactions can bundle multiple actions, and transaction fees can be paid by another party through fee delegation.

How Does VeChain Work?

VeChainThor works in many ways in a way that fits into the Ethereum ecosystem. The network is EVM-compatible. That means developers can use many tools, programming languages, and smart contracts from the Ethereum Virtual Machine ecosystem on VeChainThor too. VeChainThor also has its own features and protocol changes.

New blocks are produced about every 10 seconds on average. A block is a collection of transactions that gets added to the blockchain.

For actions that change something on the blockchain, such as sending VET or running a smart contract, VTHO is used. Simply reading data from the blockchain normally does not cost gas.

VeChainThor uses BLAKE2b as its hash function. A hash function turns data into a kind of digital fingerprint. This lets the network check whether data has changed. This is different from Ethereum, for example, which uses Keccak-256 for many parts.

One standout feature of VeChainThor is the multi-clause transaction. One transaction can consist of multiple separate instructions. VeChain calls such an instruction a clause.

For example, a clause can be a transfer of VET, but it can also be a smart contract call. That lets you combine multiple actions and send them to the network together as one transaction.

Example: An application can send VET to multiple addresses in one transaction and also run a smart contract. Those actions are then processed together.

VeChainThor also supports fee delegation. With this, another party can pay the VTHO costs of a transaction. That means a user does not always need to have VTHO in their wallet to carry out a certain action.

This can be especially useful for applications that want to make blockchain use easier. For example, a company can pay the transaction fees for its users so they do not have to buy VTHO first.

VeChainThor also uses a BFT mechanism to eventually record transactions as final. BFT stands for Byzantine Fault Tolerance. This means participants in the network can reach agreement even if some nodes or validators are not working properly.

Once a transaction has reached finality, it is considered final and its order cannot just be reversed anymore.

VeChain (VET) Overview

What Is Proof of Authority on VeChain?

Proof of Authority, often shortened to PoA, was originally VeChainThor's consensus mechanism. A consensus mechanism determines how participants in a blockchain agree on new blocks and transactions.

On VeChainThor, the active group consisted of 101 Authority Masternodes. These were well-known validators that had permission to produce new blocks. Validators had to reveal their identity and go through a KYC process. KYC is a check used to verify the identity of a person or organization.

Because of that, the network was not permissionless for validators. Not everyone could become a block-producing validator without conditions.

Later, this system was expanded to Proof of Authority 2.0. In that setup, new block production was combined with Byzantine Fault Tolerance for finality. Simply put, there was one process for producing blocks and an additional process that let validators decide that a block was final.

In this old PoA 2.0 model, consensus and finality required at least two-thirds plus one of the active validators. With 101 validators, that meant at least 68 validators had to take part in the agreement.

From Proof of Authority to DPoS

VeChainThor no longer uses Proof of Authority as its consensus mechanism. With the Hayabusa hard fork on December 2, 2025, the network switched to Delegated Proof of Stake, or DPoS.

The network still has 101 active validators, but the way they participate has changed. Validators now have to stake VET, among other things, to take part in the network. VET holders can also delegate their staked VET to a validator through StarGate.

Delegators do not need to run validator infrastructure themselves. By delegating their VET to a validator, they do help increase that validator's weight and can receive VTHO rewards.

So Proof of Authority is mainly important for understanding VeChainThor's history. VeChainThor's current consensus mechanism is Delegated Proof of Stake.

How Does VeChain's Dual-Token Model Work?

VeChain uses a dual-token model with VET and VTHO. The two tokens have different roles within VeChainThor.

VET is the network's main token. It is used, among other things, for transferring value and staking. VTHO is the token used to pay for transactions and running smart contracts.

This separates the token used for value and staking from the token used to pay network fees.

The cost of a transaction depends in part on how much gas an action needs and the gas price in VTHO. Gas is a unit that measures the work the network has to do to process a transaction or smart contract.

Since the Galactica upgrade, transaction fees have had two parts. The BaseFee is burned, which means that VTHO is removed from circulation. Any priority fee goes to the validator that produces the block.

How Is VTHO Generated?

Before the Hayabusa upgrade, VET holders automatically generated VTHO by holding VET in their wallet. Since Hayabusa, the issuance of new VTHO has been tied to actively staked VET.

New VTHO is generated with each block. How much VTHO the network creates per year depends on the total amount of VET that has been staked.

The current formula is:

annual VTHO issuance = 1200 × 64 × √(total staked VET)

Because of the square root, the amount of new VTHO does not grow at the same pace as the amount of staked VET. So if more VET is staked, VTHO issuance does increase, but less and less strongly.

How Are VTHO Rewards Distributed?

VET holders can stake VET through StarGate and delegate it to a validator. If a validator has no delegators, that validator receives the full block reward.

If a validator does have active delegators, the block reward is split:

• 30% goes to the validator
• 70% goes to the delegators

The delegators split that 70% based on their share of the delegations to that validator. Validators also receive the priority fees from the blocks they produce.

So the current model is clearly different from the old system. Simply holding VET is no longer enough to automatically generate VTHO. Since Hayabusa, VTHO rewards are tied to staking and delegation.

Who Founded VeChain?

Sunny Lu started the VeChain project in 2015. In the original VeChainThor whitepaper, he is listed as co-founder and CEO. Today, VeChain usually refers to him as the project's founder.

Jay Zhang also joined VeChain in 2015 and was listed in the original whitepaper as co-founder and CFO. Among other things, he worked on the design of the governance framework and the digital asset management framework.

So in VeChain's early documentation, Sunny Lu and Jay Zhang are both named as co-founders. In newer communication, Sunny Lu is mainly referred to as the founder.

What Are the Benefits of VeChain?

VeChainThor has a number of features that can be especially useful for applications, developers, and users:

• Fee delegation. Another party can pay the VTHO costs on behalf of a user. That means someone using an application does not always need to have VTHO in their wallet.

• Multi-clause transactions. Multiple transfers or smart contract calls can be combined into one transaction. That can be useful when an application needs to carry out several actions at once.

• Separate gas token. VET and VTHO have different roles. VET is used, among other things, for transferring value and staking, while VTHO is used to pay for transactions and smart contracts. That separation is an important part of the token model.

• Average block time of about 10 seconds. New blocks are produced relatively quickly, which means transactions can be included in a block quickly.

• EVM compatibility. VeChainThor fits into the Ethereum ecosystem. That means developers can use many existing Ethereum tools and programming languages, while VeChainThor also has its own features.

• Transaction dependencies. A transaction can be made dependent on an earlier transaction. The second transaction is then only processed if the specified earlier transaction was completed successfully. This can be useful when different actions need to happen in a fixed order.

• Staking and delegation. VET holders can stake their VET and delegate it to validators. That means users who do not run a validator themselves can still take part in the staking model.

VeChainThor's official Thor client is also open source and written in Go. Open source means the code is publicly available and can be viewed and checked by others.

What Are the Drawbacks of VeChain?

The design choices in VeChainThor also come with a few trade-offs.

• Limited number of active validators. VeChainThor works with up to 101 active validators. That makes the group smaller than on some blockchains with a much larger number of active validators.

• High barrier to becoming a validator. A validator must stake at least 25 million VET and run its own node infrastructure. That makes it hard for smaller VET holders to become validators themselves.

• Stake affects the chance of producing blocks. Within DPoS, the amount of staked and delegated VET plays a role in the chance that a validator gets to produce a block. Validators with a lot of stake can therefore get more weight within the network.

• Delegation is not active right away. When you delegate VET to a validator, the delegation only becomes active when a new validator period begins. Rewards build up during such a period and are then made available afterward.

• Exiting is not always immediate. An active delegation cannot be ended instantly at any time. The moment when you can exit depends on the validator period.

• VET is locked during staking. VET that is actively staked or delegated is tied up during the staking period. That means you cannot freely use that VET at any moment.

• Block production and finality are not the same thing. New blocks are produced about every 10 seconds on average, but that does not mean a block is final right away. VeChainThor also uses a finality mechanism where more than two-thirds of the weighted staked VET must contribute to agreement on finality.

The old Proof of Authority model also had other drawbacks, such as mandatory identity checks for validators. Those points are now mainly part of VeChainThor's history, because the network has used Delegated Proof of Stake since the Hayabusa upgrade.

Conclusion

VeChain is a public Layer 1 blockchain that runs on VeChainThor. The network uses two main tokens: VET and VTHO. VET is used, among other things, for transferring value and staking, while VTHO is used to pay for transactions and smart contracts.

Technically, VeChainThor stands out for features like multi-clause transactions, fee delegation, transaction dependencies, and EVM compatibility. New blocks are produced about every 10 seconds on average.

Since the Hayabusa upgrade, VeChainThor has used Delegated Proof of Stake (DPoS) as its consensus mechanism. The network works with up to 101 active validators. To become a validator yourself, you need at least 25 million VET. VET holders who do not want to run a validator can delegate their VET to a validator through StarGate.

There are also trade-offs. The active validator group is limited, the minimum validator stake is high, and staked VET can be locked during a staking period.

VeChainThor combines its own dual-token model and several application-focused features with a DPoS model in which validators and delegators both play a role in securing the network.