The VeChainThor blockchain consists of a two-token system. The VeChain Token (VET), which will act as a store and transfer of value and VeChainThor Energy a.k.a VeThor (VTHO).
In this guide, we will take a look at VeThor (VTHO), the use cases of VTHO, how you can earn VTHO and how you can buy and sell VTHO on the open market.
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VeThor (VTHO) – the gas of the VeChain ecosystem
VTHO is needed to pay for writing data to the VeChainThor blockchain. This means that every transaction (sending tokens, or sending data to a smart contract) has to be paid for in VTHO.
The amount of VTHO that is needed for a transaction depends on the size of the data you want to send. A simple VET transaction costs you around 30 VTHO, while sending a transaction filled with data to a smart contract can cost 1000 VTHO.
Reading from the blockchain is free for everyone and does not require VTHO.
When you check blockchain explorers you will see that it states “gas used”. 1000 gas currently equals 1 VTHO as defined using the VTHO/kgas variable setting.
The relationship between VET and VTHO
Both VET and VTHO are essential for the VeChainThor blockchain to function properly.
VET generates VTHO so by holding VET you will earn VTHO, which can then be used to pay for your transactions.
Without VET, there is no VTHO generated. Without VTHO, there is no way to pay for VET transactions.
VeThor (VTHO) – Generation rate
Each VET will create 0.00000005 VTHO with every block that is created (a new block gets added to the chain 10 seconds). This translates to a generation rate of 0.000432 VTHO generated per VET per day. A user that owns 10K VET in his wallet will earn 4.32 VeThor each day.
This is the default VTHO generation rate, which can increase, but not decrease over time. To have the generation increased a vote has to occur in which all stakeholders (token owners, the Foundation, enterprises, etc.) can vote.
At the time of writing, 37.5 million VTHO is generated each day.
On use, 70% of the VTHO gets destroyed, while the remaining 30% is paid out to the Authority Node as a reward for validating the transaction.
VTHO generation reward types
Next to the default generation rate, which is also called reward type 1, there are three other methods which allow you to earn more VTHO on top of the base generation rate:
Reward type 1
Requirements: Own VeChain, it does not matter how much you have. No need to stake them into a node.
Thor Power generation rate: Currently set to 0.000432 thor generated per 1 VET held per day. This number might increase in the future, but not decrease.
Reward type 2
Requirements: Own an authority node
Thor Power generation rate: 30% of all Thor Power consumed by blockchain transactions will be rewarded to the 101 owners of a Thrudheim Masternode. 70% gets burned on use.
Reward type 3
Requirements: An authority node or economic node (excluding the smallest VeThor X node)
Thor Power generation rate: The VeChain foundation has set up a special pool called the Foundation Reward Pool that has 15 billion VET in it. The Thor Power generated by this pool will be divided amongst those eligible for reward type 3.
- The foundation pool will decrease by 2,5 billion VET every 6 months, until further notice.
Reward type 4
Requirements: An authority node or X economic node.
Thor Power generation rate: The VeChain foundation has set up a special pool called the Foundation X Reward Pool that has 5 billion VET in it. The Thor Power generated by this pool will be divided amongst those eligible for reward type 4.
- The foundation x pool will remain at 5 billion VET, until further notice.
Keeping transaction costs stable
The whole idea of a two coin system is that this allows the transaction fees to remain relatively stable, compared to a system where there is only one coin.
Taking Ethereum as an example, during last years bull run the price of Ethereum rose to over $1000. This caused the average transaction fee to become over $1 dollar, compared to its current $0.10 fee. This is a big problem for anyone wanting to use the Ethereum blockchain!
The cost of a transaction can be calculated using the following formula:
Transaction cost = VTHO price x amount of VTHO needed
The key takeaway from this is that vtho price is something very different from the transaction cost
This allows for two mechanisms to keep the transaction costs stable:
- Increase the VTHO generation rate
By increasing the VTHO generation rate, more VTHO will hit the market, potentially lowering the VTHO price and bringing the transaction cost down.
When this occurs, VET owners will still generate the same amount of value from their tokens, since the VTHO price might go down, but the amount of VTHO they are generating goes up!
2. Change the amount of VTHO needed
By increasing or decreasing the amount of VTHO that is required for a transaction the transaction cost can also be influenced.
When increasing the amount of VTHO needed, the transaction cost will increase. This will also result in more VTHO being burned. More VTHO being burned will increase the demand for VTHO, further increasing the VTHO price and the cost of a transaction.
On the other side, lowering the amount of VTHO needed, the transaction cost will decrease and less of the generated VTHO supply will be burned.
Both changes have to be agreed upon by all stakeholders (enterprises, dApp owners, VET holders and Authority Nodes) of the ecosystem. Using a decentralized vote, everyone can vote if they agree to the change. Only when the majority agrees the Foundation will decide to change the parameters.
This two coin system gives users of the ecosystem multiple options to pay for their transactions:
- Enterprises wanting to use the blockchain can buy the VTHO they need from the open market, they don’t need to hold VET.
- They can however also decide to buy VET. Using this VET they can then generate VTHO which they can use to pay for their blockchain operations.
- Users can buy VET and sell the VTHO they generate on the open market.
With the adoption of the VeChain blockchain, the need for VTHO will rise. Because of this, the demand for VET will also rise.
How to send VTHO from your mobile wallet
When using the mobile wallet you will notice that VTHO is not listed in your list of Assets. The amount of VTHO you have can be viewed at the top near your wallet name and address.
By clicking on the little lightning icon you go to a page that shows all your VTHO transactions.
It also allows you to transfer VTHO to a different wallet address.