Web3 for Better

Whitepaper 3.0

MARCH 2023

1
Table of Contents

01 Vechain’s Journey Appendix

02 Our Aspiration Glossary of Terms

03 How We Identify
Sustainability Needs
Table of Figures

04 Building the Blockchain

Biosphere for Sustainability
Works Cited

05 What Does an Ecosystem

Look Like?
Credits

06 Engaging the Individual and

Building Communities

07 Vechain Technology Landscape

and Roadmap

08 Vechain Governance

09 What’s Next for vechain?

10 Conclusion

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Vechain’s Journey
We established vechain when it was still rare In Whitepaper 1.0, we argued we had entered the
to see major business applications running on early phase of the second stage. Our VechainThor
public blockchains and before public enthusiasm blockchain incorporated all the basic requirements
for blockchain’s potential was on the rise. We for enterprise adoption of blockchain technology,
wanted to change that by providing enterprises including:
with a trusted, distributed platform that could
enable transparent flow of information, efficient A proper governance model with the
collaboration, and high-speed value transfers. transparency and operational efficiency
We released Whitepaper 1.0 in June 2017 necessary to enable continual and rapid
to present this vision and our aspiration to innovation
become the platform of choice for blockchain-
based business applications offering concrete
economic, environmental, and societal value. A sustainable economic model (two-
token model: VET and VTHO) designed
As is the case with many technologies, we to prevent transaction fees from being
understood VechainThor blockchain would directly exposed to the volatility that
go through several sequential stages of afflicts most single-token economic
development: models
1. Overcoming technical barriers

2. Removing business obstacles to drive A flexible blockchain developed to

enterprise adoption comply with changing regulation and
to be easily integrated with a variety of
3. Reaching scale
complementary technologies such as
1 2 3 4
4. Subdividing into new breakthroughs IoT , RFID , 5G, AI /ML , big data, etc.
in specific fields
1. Internet of Things, 2. Radio-frequency identification,
5. Starting a new technology cycle
3. Artificial Intelligence, 4. Machine Learning Machine Learning

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Subsequently, we published Whitepaper 2.0 in The final step to widespread enterprise adoption
December 2019. In that whitepaper, we expanded (development stage 2) was achieving Governance
upon our commitment to enable mass blockchain Consensus. In this phase, legal authorities around
adoption by established businesses, with the long- the world join corporations in driving the regulatory
term goal of creating value and solving real world development of blockchain. Specifically, regulatory
economic problems. With this in mind, we pinpointed requirements must be merged with advanced
the three major phases of blockchain evolution blockchain features.
which would form the foundation of our strategy
to become the world’s first choice for blockchain: In our Whitepaper 2.0, we envisioned a comprehensive
Technical Consensus, Business Consensus, and governance consensus for the blockchain protocol,
Governance consensus. attempting to find an efficient balance between
centralised and decentralised governance models
We had already moved past the Technical and technologies. As our infrastructure matured, we
Consensus stage, which is typically driven by continued to embrace decentralisation, gradually
developers and focused on building up the initial tipping the scales in its favour. We designed the
technology infrastructure, and were building vechain Governance Principles and Charters with
features that could improve business use cases and a focus on transparency, fairness, and operational
activities, including: efficiency to enable continuous future iterations
and rapid progression in developing solutions.
Proof of Authenticity consensus algorithm (PoA
2.0), which provides safety guarantees on blocks Our governance must allow individuals to be
and transactions at a faster speed than the previous stakeholders, alongside corporations, governments
algorithm. agencies, and other institutions, empowering people
as owners and creators rather than just users. As
Meta transaction features, such as Transaction we will see in Chapter 7, we are still progressing
Lifecycle Control, which grants users control over through this phase. We are constantly improving
when a transaction is executed or abandoned, even our governance to achieve the goal of operating a
when the blockchain is running at high capacity. This decentralised public blockchain with the capacity
is critical for business applications. to scale and meet the needs of large enterprises
that create concrete value. At the same time, we
Transaction fee delegation, which allows users to are turning regulatory compliance into a valuable
interact with decentralized applications (dApps) transition; provided regulations evolve as rapidly as
and make payments directly, without having to the blockchain industry itself, we can leverage our
purchase cryptocurrencies. resources to facilitate the cooperation of institutions,
enterprises and people within this constantly
With the adoption of the VechainThor platform by evolving framework.
major enterprises and assurance companies, we
were entering the Business Consensus phase, a Throughout this journey, we've created relationships
critical process in which businesses shape the with supportive individuals and organisations who
evolution of blockchain applications towards share both our passion for blockchain technology
features that fulfil their specific needs. We began and our vision of creating a more transparent way to
to focus on identifying companies and solutions collaborate. We have built differentiated underlying
capable of bridging the digital space with the technologies and formed strong strategic
physical one (e.g., IoT and tagging companies), partnerships focused on lowering the barrier to
while maintaining a particular focus on business entry for enterprises, while leveraging blockchain
use cases. Additionally, many developer tools technology to create value and solve tangible
such as Connex.js and Sync were released to economic problems.
simplify the development process and improve
the accessibility of the VechainThor blockchain
ecosystem, further accelerating the adoption of
our technology.

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Differentiating underlying technologies:
VechainThor is a constantly evolving public blockchain committed to helping
global enterprises and governments achieve Sustainable Development Goals
(SDGs) efficiently, quickly, and at low cost. VechainThor’s unique Proof-of-Authority
consensus mechanism allows for fast and secure transaction processing
while also enabling secure governance of the platform by a group of trusted
nodes. Additionally, VechainThor is designed to handle many transactions per
second, making it suitable for use by solutions that demand scalability and
high-volume processing of transactions.

Two-token Design embedded within VechainThor platform includes vechain token

(VET) and veThor (VTHO). VET serves as a value-transfer medium (utility token),
whereas VTHO represents the underlying cost of using VechainThor (Energy).
The unique, two-token design significantly helps to separate the cost of using
blockchain from market speculation, a fundamental requirement for enterprise
use of a platform.

PoA 2.0 “Proof of Authority 2.0” is designed to guarantee data integrity while
also providing high-throughput and scalability capabilities to meet the evolving
needs of businesses. PoA 2.0 is meant to combine the strengths of Nakamoto and
Byzantine Fault Tolerance (BFT) architectures while eliminating their individual
weaknesses, solving one of the great trade-offs in blockchain design — scalability
versus data finality.

Our enterprise partnerships include widely recognised consulting firms, retail and
wholesale businesses, and luxury goods companies. Our strategic partnerships
have fostered an array of real-world applications. Some examples of applications
developed with our partners include:
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• My StoryTM, a blockchain-powered digital assurance solution that enables
brands to share the true and authentic story behind every product directly
with consumers.

• Walmart China Blockchain Traceability Platform, which allows supermarket

users to scan 30+ product categories (e.g., fresh meat, rice) and acquire
detailed information, including the product’s source and geographic location,
logistics processes, and product inspection reports.

• A solution for tracking the origin of plastics recovered during

clean-up activities.

Fundamentally, throughout our years of research, study of pain points in numerous

industries around the globe, modelling of industries and initiatives connected by
and collaborating through blockchain, and our cooperation with industry experts,
we have always focused on solving tangible problems for enterprises. Recently,
we have seen an urgent desire across industries to tackle growing sustainability
challenges. We believe our blockchain solution can support a viable system of
sustainability that will serve our planet for generations to come.

In this whitepaper, we will articulate our aspirations for a future where sustainable
living and conduct of business is the norm and not the exception.

5. Trademark owned by DNV (Det Norske Veritas)

5 5
 Figure 1 - Timeline of the vechain Project Journey
Traceability · Enterprise Applications · Sustainability

2015
Establishment of the vechain Project

• Vechain ICO
2017
• Vechain Foundation formed
TRACEABILITY

• Vechain 1st Steering Committee Formed

• Anchored 4 POCs with enterprise clients in France, Norway and China

2018 Whitepaper 1
Launch VechainThor
PoA 1.0
2 token Model
Enabled multiple tech innovation integration
Token Swap from VEN to VET
Xnode campaign
• Authority node set up
• Launch of the Vechain Wallet
• Draper Dragon, PwC Venture Hub SG, DNV GL partnership
• LVMH Innovation Award – Special Mention
ENTERPRISE APPLICATIONS

• Participant of BMW Startup Garage - VerifyCar

• Launched Carbon Credits ecosystem with BYD,DNV and Brightfoods
• DNV launches MyStory, built on VechainThor

2019 Whitepaper 2
Meta transactions
Transaction fee delegation
On-chain governance
Built in smart contracts
• Announced Vechain ToolChain™ at Vechain Summit
• Walmart China Blockchain Traceability Platform
• Number of startup and enterprise applications using Vechain ToolChain grew steadily
• Launch of VeVote
• San Marino MOU with vechain for national Carbon Neutrality signed

2020-2021 • Vechain & I-Dante launched E-HCert, a Digital Lab Test Wallet
deployed at Aretaeio Hospital, Cyprus
• BayerChina launches CSecure a traceability platform
for clinical trial supply chains
SUSTAINABILITY

• DNV launched MyCare and MyBaby, Tag.Trace.Trust

• Hydro Norsk implemented Tag.Trace.Trust for 'green aluminium',
TTT built on the VechainThor blockchain
• San Marino National 'Green Pass' roll out

2022 • Completion of POA 2.0

• Launch VeUSD Stablecoin
• Launched Draper x vechain Fellowship Accelerator Program
• Launched a technical centre in Ireland
• Establishing a new Headquarter in San Marino
• UFC, ATP Finals sponsorship
• Launched vechain Accelerator program
• VeCarbon Launch
• New VeWorld wallet

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Our Aspiration
Anyone who wants to change the world for the better knows
humanity’s greatest challenges will only be overcome by a
collective global movement. We all must work together in Blockchain for
ways previously unimagined to successfully combat climate
change, address threats to the environment, bring equity to our better world
our societies and ensure companies act in the best interests
of all stakeholders. Blockchain is ushering in a new
era. It is a technology with the
Taking on our world’s greatest sustainability challenges
requires collaborative action. And so, our aspiration is clear: potential to unite people around
We seek to multiply individual impact to unleash our a common sustainability goal
collective potential for sustainability. and combine their impact
so that the sum is greater than
Empowered by blockchain and other technologies, we are
building partnerships that will catalyse and support the the parts.
coming sustainability transition. Previously, individuals had
limited power to address the critical challenges of our time. As
we enter the Web3 era, we will build platforms to put sustainability
within reach.

Small individual efforts, things like reducing personal food waste, will be multiplied across the community. For
instance, our blockchain solutions will be integrated with municipal initiatives to help people donate food that
is about to expire. We can then track the reduction in food waste at scale. And this is but one, small example.
Our overall goal is to enable people to engage with sustainability every day. We will do this by putting more
power in their hands to make impactful, informed decisions that influence the fundamental environmental and
societal factors underpinning our existence as humans, such as access to healthy food, clean water, and fresh
air. With ever-evolving technologies like blockchain, we will help people develop real, meaningful partnerships
with organisations, governments, and enterprises. These partnerships will help create a more sustainable
society and economy.

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We must leverage technology and digital innovation for the good of all humanity — not only for the benefit
of the few — and also provide a system of trust and transparency, if we want to meaningfully address the
sustainability issues facing us today. Consequently, we propose a new paradigm, one that will allow us to
quantify the impact of discrete actions, ensure individuals maintain ownership of their personal data and
control its use, and provide secure, trustworthy, and transparent transfer of information and services, as well as
distributed ownership, among individuals, enterprises, and governments.
This is the promise of Web3.

Figure 2 - Core ideas for vechain today

OWNABILITY DESTINATION IMPACT

We have the vision and We imagine a future Saving our planet is the
cutting edge technology where our systems are most pressing challenge
to silently shape society interwoven in a way that of our time, and it
in ways yet not imagined creates trust, efficiency, will take radical new
and optimal decision ways of approaching
It takes a conductor making sustainability solutions
in these moments of
transition to be successful The interwoven And we must bring this
society will flourish vision to the world for it
for generations to have an impact

We believe technology can foster the trust between people, organisations and governments required to
bring about this new paradigm. By facilitating transparency and accountability, Web3 provides people
with a basis to trust that enterprises and institutions will uphold their sustainability commitments; that
corporate and governmental reports and communications on sustainability initiatives are substantiated;
and that technology companies are tracking and selling user data properly.

We aspire to surpass Web 1.0 and Web 2.0 and their outmoded philosophy wherein a select few owned and
controlled most data and access. Because Web3 systems are built atop decentralised networks, people
have control over their personal data and identities. As a practical matter, this translates to greater security
and privacy compared to the incumbent centralised setup and creates a generation of owners and co-
creators — rather than users or customers — who can hold each other accountable in pursuing similar
passions and achieving similar goals.

However, Web3’s impact extends beyond information exchange. Web3 is an enabler of value exchange,
too. Moreover, this value is not only economic but also environmental and societal. Indeed, a key driver of
the sustainability transition will be a fundamental redefinition of “value” as a concept. Web3 technologies
enable us to understand, qualify, quantify, and share the value of an action, including its societal,
environmental, and economic factors.

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Figure 3 - Journey from Web 1.0 to Web 3.0

WEB 1.0 WEB 2.0 WEB 3.0

1990-2005 2005-2020 2020+

Introduction of the Web Rise of the Platform Emergence of the Semantic Web

Users read content on Users both read and Users read, create, and own their
static sites create content content and exchange value

Publishers collect revenue Networks and platforms control Users transact their data across
creators' revenue streams in a decentralized, blockchain-based
centralized manner networks without using third parties

In the future, everyday life will be defined by a merger between the physical and digital worlds. Web3 is a phygital
environment powered by blockchain, IoT and other technologies. Collectively, these Web3 technologies
help create sustainable value chains and achieve sustainability missions shared by a variety of different
parties. Individuals will participate equally with other partners in collaborative missions, whether acting as
part of a platform, a corporation, an association, a government body, or even on their own. The priority of
every initiative will become consensus identification and collaboration to execute actions. This will multiply
individual actions so that everyone has the chance to make a perceptible difference in how the world will look
in the decades to come.

Society faces a critical need for new business models, which must encompass activities related to the
physical value chains where sustainability issues are most pressing (e.g., manufacturing, transporting,
and purchasing goods). These business models must enable collaboration with other parties and
provide governance that facilitates interactions and transactions. Web3 will be the basis of these new
ways of doing business, and blockchain technology like VechainThor — alongside smart contracts,
6
fungible tokens, non-fungible tokens (NFTs ), and decentralised autonomous organisations (DAOs) —
is evolving every day to support these collaborative missions. These Web3 features are the ideal engine
for meeting the world’s sustainability needs and transforming the way we understand and unlock value.

What does it mean to be “Phygital”?

“Phygital,” a combination of the words “physical” and “digital,” is a term describing the blending of digital
experiences with physical ones. As communication channels between organisations and users grow, the
role of vechain is to build a trusted bridge between the digital and physical. Through blockchain and other
technologies we can acquire data from the physical world for use in the digital space, where we can create
new concepts of value and new ways of collaborating.

6. See chapter 4 for details on smart contracts, fungible tokens, NFTs and DAOs.

9
At vechain, we are building an interconnected platform where individuals will play an active role in making
sustainability aspirations real. This could mean engaging in small actions, such as riding a commuter train
instead of driving a car and then receiving rewards for doing so, or building trailblazing solutions to critical
climate challenges. We envision a world where everyone — individuals, enterprises, and governments — is
accountable to the new value systems we collaboratively establish to promote healthier communities, protect
the environment, ensure humane working conditions, and provide easy access to clean drinking water.

Our personal actions, big and small, are the basis of this transition. Web3 makes every action count.
Blockchain-enabled technology will help everyone make informed decisions that engender a greener, more
mindful, more responsible global community. Together, our impact will be multiplied across a network of
networks, connecting people, governments, and entire industries to sustainable outcomes that will benefit
us all. In these trusted ecosystems, individuals and institutions will link their efforts to ensure the full value of
every action is recognised and rewarded.

At vechain, we believe in the power of blockchain to transform individual action into collective steps that
incentivise cooperation and improve how we perceive value. In such a world, one plus one no longer equals
two, but three, or four, or five. With these new models of interaction, we can all participate in defining,
creating, scaling, and sustaining new value systems that will protect our shared world and unleash our
collective potential.

Figure 4 - Our Journey of Inspiration

“
2017 To build a trust-free and distributed business
ecosystem platform to enable transparent
information flow, efficient collaboration,
“
and high-speed value transfers

“
2019 …lowering the barrier and enabling established
business with blockchain technology to create
“
value and solve real world economic problems…

“
2023 Multiply individual impact
to unleash our collective
“
potential for sustainability.

1010
How We Identify
Sustainability Needs
The previous sections detailed how Web3 can
be used to promote a more sustainable future. Environment: greenhouse gas emissions
Now, we will examine what sustainability really means (e.g., CO2, methane, nitrous oxide) and
in this context. air quality; energy management; water
and wastewater management; waste
Sustainability is often instinctively associated with management circularity; natural
environmental consciousness and broad actions such resource use; biodiversity protection
as reducing emissions, reusing goods, and recycling
waste. However, the concept of sustainability is much Social conditions: human rights and
broader. Indeed, sustainability encompasses the total community relations; customer privacy
functioning of our global society. Sustainability entails and data security; customer welfare;
selling practices and accessibility
granting access to essential goods and services
to all people, protecting vulnerable individuals and Labour conditions: human rights and
communities, providing humane working conditions community relations; customer privacy
to employees, ensuring that consumer products and data security; customer welfare;
and services are healthy and safe, and enabling the selling practices and accessibility
regeneration of natural resources.
Leadership and governance: business
Building a global culture of sustainability requires ethics and competitive behaviour;
a common definition. In the business community, management of the legal and regulatory
sustainability is typically discussed under the rubric of environment; risk management
Environment, Social, Governance (ESG). We go a step
further and break down this universe of sustainability- Business model and innovation: supply
related topics into five primary dimensions chain and responsible sourcing; business
7
and 24 sustainability needs. resilience

7. The five dimensions and 24 sustainability needs are based on the Sustainability Accounting Standards
Board’s (SASB) taxonomy. See appendix 1 for further details. Source of the sidebar: “Why do we need to
protect biodiversity?”, European Commission

11
Protecting biodiversity:
a key challenge for the future
“Biodiversity” refers to the variety of
life on Earth (species, genera within
a single species, ecosystems). Every
living being, including human beings,
is involved in complex networks of
interdependent relationships, which
are called ecosystems. Many such
ecosystems are currently endangered.
For example, the global animal
population has declined 68%
since 1970, highlighting an urgent
need to act.

Healthy ecosystems provide us with food,

clean our water and air, regulate the
climate, provide resources for medicines
and other benefits. For this reason,
biodiversity must be protected and,
where needed, restored.

When we apply the five dimensions of

sustainability to different industries, the
most pressing issues vary considerably. A
carmaker might be more concerned about
emissions, while a clothing manufacturer
When we apply the five dimensions of
or distributor might pay more attention to
sustainability to different industries, the
labour conditions in factories. most pressing issues vary considerably.
To account for this variability, we have built A carmaker might be more concerned
8 about emissions, while a clothing
a Sustainability Topics Matrix which
manufacturer or distributor might pay
highlights the most important sustainability
more attention to labour conditions in
needs in different industries. The Sustainability factories.
Topics Matrix was developed using the
Materiality Maps published by hundreds of To account for this variability, we have
companies in each sector as part of their built a Sustainability Topics Matrix
most recent sustainability reports (2019-2021) which highlights the most important
(see appendix 3 for the methodology of the sustainability needs in different industries.
9 The Sustainability Topics Matrix was
Sustainability Topics Matrix).
developed using the Materiality Maps
The Matrix helps us identify the most pressing published by hundreds of companies in
issues for each sector today. It can be each sector as part of their most recent
updated to take account for how those needs sustainability reports (2019-2021) (see
appendix 3 for the methodology of
evolve over time.
the Sustainability Topics Matrix).

The Matrix helps us identify the most

pressing issues for each sector today. It
can be updated to take account for how
those needs evolve over time.

8. See appendix 3 for the methodology, 9. Maps used by

firms to disclose the sustainability needs they consider
most relevant (see appendix 2 for further details)
12
12
Figure 5 - Sustainability Topics Matrix

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PROTECTING BIODIVERSITY

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COMMUNITY RELATIONS
SOCIAL CONDITIONS

CUSTOMER PRIVACY
& DATA SECURITY

CUSTOMER WELFARE

SELLING PRACTICES
& ACCESSIBILITY
CONDITIONS

EMPLOYEE HEALTH & SAFETY

LABOR

EMPLOYEE ENGAGEMENT,
DIVERSITY & INCLUSION

SUPPLY CHAIN &

INNOVATION
BUSINESS
MODEL &

RESPONSIBLE SOURCING

BUSINESS RESILIENCE

BUSINESS ETHICS &

COMPETITIVE BEHAVIOR
GOVERNANCE
LEADERSHIP &

MGMT OF THE REGULATORY

ENVIRONMENT

RISK MANAGEMENT

The Sustainability Topics Matrix is the tool we developed to identify and show the relevance of
sustainability needs across industries
13
Specific trends in materiality of sustainability needs

Environmental needs are particularly important to heavy industry and sectors that use natural resources.
Those needs include addressing emissions in industries with carbon-intensive production processes,
like oil and gas, and improving waste management in industries where hazardous waste is produced, such as
chemical manufacturing.

Social and Labour conditions are more significant in sectors that are customer centric or labour-
intensive. Needs related to social conditions range from ensuring safety and quality in pharmaceuticals
and healthcare to protecting customer privacy and data security in e-commerce and financial services.
Employee health and safety is particularly relevant for sectors where production sites present a risk of
safety incidents.

Leadership, governance and business model innovation needs apply to all industries that are subject
to sudden changes stemming from, among other causes, energy transition, new regulations, disruptive
technologies, or consumer innovation.

The complexity of sustainability derives both from the broad environmental and societal scope it
encompasses and from an inherent need for collaborative action. A wide variety of actors must work
together to move the needle on sustainability, even at the local level.

Consider the everyone involved in the life cycle of a simple chocolate bar: Farms provide the raw
materials and the energy and labor to cultivate them; power companies supply the electricity used
during the production process by the manufacturer; logistics companies manage transportation;
and wholesalers and retailers handle distribution. Finally, consumers buy and consume it, leaving
municipalities to dispose of or recycle the waste generated by wrappers and shipping materials. And then
the process begins again.

If citizens wish to consume a product without causing an excessive environmental impact, they must
be sure that the raw materials have been obtained in a manner that protects biodiversity, that the
manufacturer uses renewable energy to run its plants and has employed an efficient and low-polluting
production process, that the greenest possible forms of shipping are used, and that retailers have
been careful to manage orders in such a way as to avoid waste. The citizen must then make a personal
commitment to properly dispose of packaging and food waste, ultimately relying on the municipality to
recycle them.

14
Figure 6 – Collaboration systems
Example of each actor’s contribution to sustainability needs

All these actors should have an interest in making their actions sustainable. Moreover, since they are
interconnected, they can multiply the impact of their individual sustainability actions and unleash their
collective potential by collaborating and acting in a coordinated, synergistic manner.

More often than not, the greatest sustainability challenge is getting every player on board and coordinated
with the others. This requires inspiring, facilitating, and managing long-term cooperation and collective
action. However, several obstacles may prevent the creation of effective collaborative ecosystems:

15
 Need for trust and
Proof of Authenticity
Lack of visibility into the
sustainability of suppliers’
operations (e.g., difficulties for
retailers in identifying the amount
of emissions generated by their
suppliers when manufacturing a
specific product)

No traceability and brand

liability regarding the usage
and end-of-life of products (e.g.,
no opportunities for municipalities
to verify whether end consumers
dispose of products correctly)

Inadequate or absent proof of

authenticity or definitive product
identification (e.g., difficulties in
identifying whether second-hand
luxury products are authentic)

Absence of traditional trust

A lack of trust and proof of authenticity can prevent
mechanisms among specific
different players from cooperating and addressing
actors in a digitized and hyper-
sustainability needs. Everyone must trust each other
connected world (e.g., lack of
and possess sufficient visibility into each other's work.
trust among players who have
They must know that the information they receive from
never met one another in person
their counterparts is trustworthy in order to collaborate
when interacting in an online
productively. Similarly, customers must be sure the
marketplace)
products they are buying are authentic and sustainably
manufactured, which means they need insight into how
the goods were produced and distributed. Without this Data ownership &
assurance, consumers will be reluctant to recognise the
full value of these goods. For example, if retailers and
privacy challenges
end consumers cannot trust information on emissions
Poor digital maturity and tools
or wastewater generated though manufacturing and
for data collection and sharing
transportation of products, they cannot base their
(E.g., when refugees flee war zones
purchasing behaviour on environmental impacts. If
without proper documentation,
consumers do not account for environmental impacts
there is no unified platform where
when choosing products, then manufacturers will not
their home country and NGOs or
be incentivised to improve their environmental policies.
host countries can collect and
Another obstacle to collaboration is a lack of data share information needed to
ownership and privacy. People and organisations with identify them.)
a common sustainability goal must be able to safely
Concerns about the sharing and
store data and make it accessible to each other in a
protection of sensitive data (E.g.,
secure fashion. If they are reluctant to share sensitive
companies may be reluctant to join
information due to privacy concerns, this will reduce
ecosystems that require them to
visibility into each other’s sustainability actions.
share data with competitors.)
Conversely, more data sharing and greater visibility
will make collaboration easier and more successful. Incomplete or incorrect tracking of
Indeed, the lack of innovative and fast ways to safely customer information (E.g., despite
share data may slow down necessary activities (e.g., loyalty programs companies do not
if the sale of medical products requires individuals to know how consumers interact with
provide a medical prescription on paper). their products after point of sale, if
they use them, waste them, recycle
the packaging, etc.)
16
Furthermore, people and organisations can only Need for attribution of
effectively collaborate if the externalities generated
by their actions are valued correctly. If someone’s value to externalities
actions produce positive effects for others, but go
unrecognised, they will be less inclined to repeat the Absence of ways to monetize
behaviour. Conversely, if someone’s harmful actions positive externalities or incentives
go unnoticed and are not penalised, they may be more to reduce negative ones (E.g., there
inclined to replicate the conduct, either because they are no incentives for consumers
are unaware of the harm created or because they lack to bring their clothes back to
incentives to improve. For instance, consumers who manufacturers to allow
choose environmentally conscious options, such as for the recycling of fabric.)
food packaged in compostable or reusable materials, Lack of penalisation for generation
often do not receive a reward for their choice, leading of negative externalities (E.g., No
to lower consumer demand and minimal investment effective measures are in place to
from companies in compostable packaging; if there is penalise firms that outsource their
no demand from consumers, firms are not motivated operations to foreign countries that
to go the extra mile employ child labour.)

Figure 7 - Obstacles to Collective Sustainability Action

Need for trust and Proof of Authenticity

• Lack of visibility on sustainability of suppliers’ operations

• No traceability and brand liability on the usage and end-of-life of products

• Inadequate or absent proof of authenticity and definitive product identification

• Absence of traditional trust mechanisms among specific actors

Data ownership & privacy

• Poor digital maturity and tools for data collection and sharing

• Concerns about the protection of sensitive data shared

• Incomplete or incorrect tracking of customer information

Need for attribution of value to externalities

• Absence of ways to monetize positive externalities
or incentives to reduce negative ones

• Lack of penalization for generation of negative externalities

17
17
The obstacles detailed above obstruct lasting, Examples of positive or
collective, positive action. Indeed, when the impact negative compensation
on society caused by certain actions fails to be
fully captured, or there is lack of trust and privacy in mechanisms
data exchange, actors in the value chain are more
Adding a charge for shopping bags
reluctant to pursue virtuous behaviours.
in supermarkets creates an incentive
On the other hand, well-structured compensation for customers to re-use bags they
mechanisms can encourage people and already have.
organisations to join forces and collaborate. When
Congestion charge zones discourage
individuals act in an environment that recognises
citizens from using private vehicles,
and values actions beneficial to the community
thereby reducing emissions (e.g.,
(on a social, financial, or legal level, for instance), it
congestion charge zone in London).
generates a virtuous circle of positive improvements.
If the system encourages choices that create Emissions trading systems incentivise
more sustainable value for society, then we can companies to finance carbon-removal
count on a rising number of people, enterprises, projects in exchange for a monetary reward.
and organisations addressing sustainability needs
collectively, while also reaping a personal benefit: a
true win-win situation.

Today, most sustainability focused regulations, enforcement regimes, taxation policies, and even the SDG
infrastructure itself, are centred on the actions and initiatives of governments and enterprises. As a result,
individuals are rarely directly involved in sustainability efforts, and their actions and contributions are not
fully captured nor credited. This also reduces the effectiveness of initiatives undertaken by governments
and companies.

Presently, companies can design their products so that their components are recyclable, but if consumers
are not encouraged to dispose of them properly, or if their municipalities tax them equally regardless
of whether they recycle or not, such efforts will be in vain. It is crucial to identify methods for measuring,
evaluating, and recognising individual contributions.

This is a substantial opportunity.

Consequently, vechain partners with enterprises that serve as facilitators and advocates of collaborative
systems aimed at engaging institutions, local governments, and — most importantly — citizens themselves.

18
18
Building the Blockchain
Biosphere for Sustainability
Blockchain Biosphere for Sustainability Framework
In the previous chapter we discussed the Sustainability Topic Matrix and areas where there is an acute
sustainability need. We also outlined several challenges that prevent collaboration to address those
sustainability needs. In this chapter, we propose a new conceptual solution to these challenges by
developing a framework for how innovative Web3 technologies can thrive in a collaborative model.

Borrowing from the concept of Earth’s biosphere, we aim to enable and support the Blockchain Biosphere
for Sustainability. This will eventually consist of many ecosystems dedicated to solving specific needs,
everything from monitoring logistics to get food from point A to point B safely to reducing emissions by
shortening a supply chain.

The Biosphere represents a framework within which we can develop blockchain powered solutions
for sustainability challenges around the globe. These solutions, connected with Web3 technology, will
galvanise the collective action required to overcome the challenges we see today.

The Biosphere will provide a platform for developing ecosystems to solve different sustainability needs, such
as by establishing a circular economy for the fashion sector or mitigating emissions in the energy industry.
Through an interconnected network, individuals will be able to seamlessly explore and participate in
the full spectrum of ecosystems and build or grow their own ecosystems as well.

Two critical components make up the Blockchain Biosphere for Sustainability: the platform infrastructure
and disparate but interconnected ecosystems.

19
Figure 8 - The Blockchain Biosphere for Sustainability

As discussed in Chapter 3, mapping sustainability needs by industry sector helps us identify the materiality
of the needs and specific industries where there is high demand for a solution.

Sustainability needs might be industry-specific, like a circular economy in the fashion sector, or they might
span multiple industries, like mitigating emissions across the mining, automotive, and energy sectors.

Platform infrastructure comprises the technical components of the connected technologies, the layer 1
blockchain, and the applications that power and connect all ecosystems.

We aim to expand our current enterprise partnerships and technical and operational capabilities
throughout the Biosphere. Vechain’s operational capabilities complete the support functions of the
platform infrastructure.

The platform infrastructure connects and supports all individual ecosystems similar to how
a power grid connects a community. One can build a house and connect it to the grid for full
access to the electricity the grid supplies, plus integration with the wider network. Similarly, the
platform infrastructure enables the functionality of all ecosystems to deliver value in the broadest
sense of the word.

20
Naturally, for the ecosystems to be sustainable, What is a DAO?
the infrastructure itself must also be sustainable.
VechainThor, vechain’s layer 1 blockchain, is
built with this vision in mind, and it offers an A Decentralised Autonomous Organisation
energy efficient, user friendly, open platform for (DAO) is an institution operating under
collaboration.
10 member control that is transparent and
not influenced by a central governance.
VechainThor’s base infrastructure is necessary to The members of a DAO vote to determine
connect ecosystems to each other and provide their internal regulations and make shared
the entire Biosphere with the decentralised trust decisions. The number of tokens owned
and transparency that only a public blockchain determines voting power.
can offer. Furthermore, VechainThor will enable
the potential implementation of DAOs — uniting For example, people living in a neighbourhood
sustainability communities — while non- may join together in a DAO to set goals for
fungible tokens (NFTs) and fungible tokens (FTs) the community and assign specific prizes
may drive the trade of assets for sustainable (fungible tokens) to citizens who contribute to
applications. Meanwhile, smart contracts will reaching those goals.
power sustainability reporting, monitoring, and
transaction facilitation.

In this new Biosphere, a seller can receive a token What is a Token?

for selling a second-hand coat in a sustainable
fashion ecosystem and then spend that token Tokens are a unit of value, that enable
at a charging station in the electric vehicle different actors to:
(EV) ecosystem.
• Interact with each other
While blockchain will anchor the Biosphere,
next generation technologies such as AR, VR, • Carry out transactions
AI, IoT, and 5G, will contribute to the Web3
environment and will be key components of • Transfer value
the platform infrastructure required to meet
sustainability needs. There are 2 types of tokens:

10. Please refer to Chapter 7 for further details on our Fungible tokens are equivalent to one
platform’s sustainability. another and can be interchanged. Examples
include cryptocurrencies, carbon credits,
rewards, etc.

Non-fungible tokens represent unique

assets, which are not interchangeable.
NFTs are unique. Examples include product
passports and digital art.

21
We are already seeing these technology What is a smart contract?
combinations at work in supply chains that
use a secure blockchain record paired with IoT
and GPS to track food, raw materials, and other A smart contract is a decentralised
critical products. This is an early step in creating application built on top of the blockchain
a full-fledged sustainability solution. Similarly, which will automatically enforce contract
a crypto token-driven circular economy can parameters when a condition occurs.
leverage AI and big data analytics to incentivise
A company can use a smart contract to
reuse and recycling, while cloud computing
associate an immediate and certain reward
helps enable digital wallets. The integration of
with a specific positive action by a community
these technologies into ecosystems will require
member, such as the return of empty glass
both hardware and software solutions, plus a
bottles to the supermarket in exchange for
tech platform that connects these functionalities
some form of value.
within the Biosphere infrastructure.

Collaboration Is Key
The alliances vechain has already formed with founding partners will enhance the ability of ecosystems
to leverage existing markets and expertise. We aim to expand our current enterprise partnerships while
adding strategic, technical, and operational partners and collaborators, including governments, NGOs,
and sustainability experts, throughout the Biosphere.

While vechain currently has the capability to integrate many advanced IoT offerings into the blockchain
Biosphere, with the help of developer partners we plan to explore the creation of even more technologies
to enable a mature Web3 environment and better support users. We are currently seeking formal,
dedicated partners who want to be involved in an ecosystem as owners, not just participant. These
partners will contribute to the design of ecosystems, build dedicated solutions, attract additional users, and
communicate the ecosystems’ value to the community, all while generating additional value for themselves.
With this in mind, we are committed to enhancing collaboration between start-ups, academia, financing
partners, and developer communities through grants, accelerator programs and other similar initiatives
(see Chapter 7).

The vechain Environment

Vechain’s operational capabilities will complete the support functions of the platform infrastructure. We will
not only provide the infrastructure, but also ensure the availability of helpful tools, services, and educational
resources to seamlessly adopt our blockchain for all relevant applications. Through these efforts, we hope
to engage and encourage all builders to grow their ecosystems within vechain’s favourable environment.
We act as the custodian of the blockchain platform infrastructure that connects the Biosphere and enables
partnerships that support and connect ecosystems. By hosting native features designed to facilitate the
11
construction and execution of specific sustainability-related solutions, vechain’s layer 1 blockchain is
uniquely qualified to enable the sustainability biosphere.

11. See chapter 7 for a technology roadmap which provides an overview of the technology
features that will be developed for VechainThor.

22
Ecosystems are distinct communities devoted to solving
specific sustainability challenges. Each ecosystem is
designed with its own unique business model, stakeholders,
incentives, value flows, and technology requirements, so as
to maintain its long-term viability.

The modular environment we envision provides an

agile development environment where stakeholders can
create their own ecosystems independently, similar to the
development of apps for a mobile phone, and incorporate
them into the Biosphere. The resulting scalability allows for
tailored ecosystems to achieve their own specific goals while
still enabling connectivity with the other ecosystems of the
Biosphere. Thus, anyone who builds an ecosystem will have
unlimited access to the myriad possibilities provided by other
ecosystems in the Biosphere.

Each ecosystem can include a number of key roles, filled by

individuals or enterprises who share an interest in achieving
the ecosystem’s common mission, such as waste reduction
or fashion recycling.

The main roles one might find in an ecosystem are:

• The sponsor who funds development and go-to-market

strategy or invests in a growing ecosystem by financing
events, conferences, and hackathons.

• The adopter who demands a solution to a sustainability

need and consumes the offering, while adjusting Why are
behaviour based on incentives set up by the ecosystem. there different
• The promoter who attracts enterprises and individuals ecosystem roles?
to the ecosystem by communicating the value of the
solution and encouraging existing users to understand
and leverage the full range of the offering. Each role serves a distinct purpose
within an ecosystem, ensuring its
• The developer who builds applications and technical long-term success through the
solutions to meet specific needs of the ecosystem, following actions:
addressing pain points relevant to adopters and
unlocking the platform’s capabilities. Incentivizing participation in an
ecosystem as a sponsor through
• The partner who offers unique tech and operating activities such as financing events
capabilities that plug-in to the platform, thereby helping
to create the sustainability use-case offerings and Serving the ecosystem
providing additional technology and auditing capabilities as an adopter who actively
when required. participates or a promoter who
helps attract participants
• The enabler who acts as the “glue” of the whole ecosystem,
filling in interoperability gaps to fulfil customer and Creating the ecosystem’s
developer needs and bridging business development design and implementation as
shortfalls. a developer, platform provider,
enabler, or other partner type
• The platform provider who supports developers with
tools and resources such as SDKs and APIs and creates
the structures and incentives for the whole ecosystem.

23
Depending on the needs of a given ecosystem, the same actor can play multiple roles, or multiple actors can
play the same role. For instance, a start-up software company primarily playing the developer role within an
ecosystem may also serve as the promoter by proactively marketing the ecosystem in its commercial channels.
In that same ecosystem, the start-up may also partner with other start-ups or with independent developers to
create and maintain dApps for the ecosystem, resulting in multiple actors fulfilling the developer role.

Not only does each actor bring a different skillset to the ecosystem, but each one also receives different benefits
in return. For example, developers bring with them expertise and knowledge of programming languages and
know-how about complex smart contract creation. In return, the community might incentivise developers to
contribute to the ecosystem through financial rewards or recognition.

Corporations may provide resources or infrastructure to support the development and growth of the ecosystem.
Their benefit will be the ability to extract tangible value from what used to be intangible; for example, blockchain
powered traceability of a product’s origin can enable a company to ask for a premium price. Users can create
value for the ecosystem by adopting and using the offering (paying for it monetarily or otherwise), increasing the
circulation and value of tokens. In return, those same consumers can participate in the decision-making process
for improvements.

All these players are vital for the success and evolution of the ecosystem and the validation
of its business model.

Figure 9 - Purposes and Roles in an Ecosystem

24
An ecosystem’s business model must make good economic sense and provide the right incentives to all
actors in the ecosystem. If it fails to do this adequately, people and organisations won’t see a compelling
reason to join or maintain membership in an ecosystem. Indeed, companies and individuals have a long
history of defaulting to a concept of value dictated by fiat currency and cash flows. For new ecosystems
to take hold, we must translate this new, broader concept of value that incorporates societal impacts into
a system that rewards and promotes pro-societal and eco-friendly behaviours.

We believe that a self-sufficient, well-planned ecosystem will benefit all stakeholders and provide positive
incentives for everyone to participate and contribute. Everyone should benefit from their participation
in ecosystem. Furthermore, the ecosystems that make up the Biosphere will not only interconnect and
provide individually functioning business models but will also be able to constantly evolve and improve
sustainability outcomes and value delivery for everyone involved. Web3 technology is integral to instilling
transparency, ownership, and stakeholder agency among participants, so that the business models and
incentives of an ecosystem are equitable and trusted.

The Role of Web3

within the Biosphere
These modular ecosystems will have specific technological
needs which must be addressed for them to operate
seamlessly. Integrating innovative technology tools and
capabilities is critical. As discussed in Chapter 3, we
must overcome three primary challenges to facilitate an
environment of collaboration:

• The necessity of trust and proof of authenticity

• The challenges related to data ownership & privacy

• The need for attribution of value to externalities

We must ensure that individuals have the right incentives

to participate in an ecosystem, that trust is fostered
and guaranteed between actors, and that ownership
is distributed equitably using Web3 technology. The
environment created with Web3 technology is uniquely
positioned to provide tools and innovative behaviours
to overcome the obstacles experienced in Web2.

Trust forms the backbone of all transactions in Web3 and

depends on the certainty that the terms of an agreement will
be fulfilled. Because blockchain is a decentralised, distributed
ledger and uses trusted oracles to facilitate and manage the
off-chain to on-chain data connections, records are tamper-
proof and can be notarised at any time. Thus, blockchain
enables secure and trustworthy storage of data for
any transaction.

However, beyond just data, Web3 also facilitates transactions

through smart contracts, which empower parties to enter into
transaction agreements without requiring significant due
diligence on the trustworthiness of other parties. Once the
terms laid out in a smart contract are fulfilled, an unalterable,
pre-determined outcome is triggered.

25
25
In the current Web2 world, individuals do not fully control of Network effects
their data. The rewards for their work are distributed among
middlemen and, in many instances, the original creators may for social media
only see a small return on their investments. Web3 promises to
usher in a wave of distributed ownership where the creators Social media platforms rely
are the ones who reap the benefits of their creations. on network effects, where the
value of the service increases
This reorganisation of ownership is possible because of two proportionally with an increase
key features in a blockchain-enabled ecosystem: tokens,
in the number of users. As more
which act as both a stake and proof of ownership, and DAOs,
users join the platform, the service
which are engines for a collaborative community.
becomes more valuable, which in
Web3 and blockchain allow for the tokenization of positive turn attracts even more users. This
externalities that are created through an individual’s actions. creates a self-reinforcing cycle that
Today, societal, environmental, and economic dimensions benefits the platform by increasing
are often not considered in totality when evaluating the full its user base and making it more
value of an action. Consequently, such value is not stored and valuable to advertisers, content
exchanged among its creators and consumers. However, creators, and other stakeholders.
positive externalities which go beyond mere monetary value
can be digitized via fungible tokens and awarded to different
ecosystem participants.

The tokenization of value in an ecosystem gives participants

a stake in its success. Token holders are motivated to
contribute to and build on the ecosystems they participate
in, thus growing the value of their own holdings. Furthermore,
for ecosystems with a DAO element, token holders can use
tokens to vote on proposals, initiatives, or other DAO-related
activities. In simple terms, these Web3 elements distribute
ownership and decision-making among all ecosystem
stakeholders, incentivising participation and allowing them
to collectively chart a more sustainable course.

Redefining the Concept of Value

Value is the foundation of any business activity: It drives
business investment decisions and incentivises key players
in any ecosystem to improve their contributions. However, the
concept of value has traditionally been confined to economic
value, which mainly considers cash flow projections without
accounting for other potential sources of value.

The concept of value has been evolving for several years

now. For example, the economic valuation of internet-based
platform companies is not only tied to their cash flow but also
to how many users they can harness. This is the result of the
network effect, where users derive more value and benefits
from a product or service the more users there are.

Similarly, the value in the Blockchain Biosphere for

Sustainability contains not just the benefits enjoyed by
shareholders in a given company, but also the collective
benefits for society at large. This new concept of value
encompasses economic, environmental, and societal
impacts. This concept also prices positive and negative
externalities, similar to how carbon taxes try to price the
negative externality of carbon emissions.

26
Consumers are beginning to change their behaviour to reflect their personal preferences and a broader
definition of value beyond just the monetary. Indeed, many people are increasingly incorporating societal
and environmental elements into their own personal definitions of value and are using their purchasing
power to select products and services from companies that have demonstrated commitment to similar
12
values beyond profit. For instance, a recent Boston Consulting Group survey of approximately 19,000
consumers worldwide found that 16% of them said sustainability was one of the top-three drivers in their
most recent purchase and a significantly larger share said they can be persuaded to make sustainable
choices if the products or services deliver other related needs. (Case in point, 43% of consumers seek
beverages that are “healthy, high quality, guilt free, and socially responsible”.)

Figure 10 - A new concept of value

In other words, social and environmental consciousness matters; these externalities have value, and
traditional forms of worth assessment fail to take those factors into account. It is through this lens that we
challenge the traditional thinking on valuing goods, services, and actions in search of a more complete,
holistic concept of value as it relates to sustainability.

Web3 with blockchain provides the mechanisms to expand our perspective beyond traditional value
conceptions. A more comprehensive view of value includes consideration of a company's commitment to
sustainability initiatives and its willingness to cooperate and collaborate with users or other companies to
fulfil those initiatives.

12. “Consumers Are the Key to Taking Green Mainstream”, by Kanika Sanghi, Aparna Bharadwaj, Lauren Taylor, Léa Turquier, and
Indira Zaveri, September 2022 – https://www.bcg.com/publications/2022/consumers-are-the-key-to-taking-sustainable-
products-mainstream

27
In the Blockchain Biosphere for Sustainability, we unlock significant sustainability values from the following
key sources:

Blockchain Biosphere for Sustainability: Sources of sustainability value

Source Definition

Creating partnerships among individuals, developers,

1. Enabling multi-stakeholder collaboration
organisations, and institutions, so they can share
towards a common objective
resources and expertise

Bringing people together to work toward a common goal

2. Creating communities of impact to spark
with the belief that the combined efforts of a group can
network effects for sustainability
lead to a greater impact than individual efforts alone

3. Establishing a decentralised governance Giving individuals the opportunity to be active

and ownership mechanism to empower participants in the decision-making and ownership of a
all stakeholders and maximize project or initiative, rather than being passive recipients of
sustainability impacts services

4. Establishing clear rules of Ensuring different individuals and organisations share

participation with distributed benefits; creating mechanisms to coordinate and
benefits for all contributors encourage cooperative efforts

Allowing all players to have visibility on the full range of

5. Incorporating and giving transparency
consequences and externalities — positive and negative
on the full value of assets, supply chains,
— of actions and choices made by other players and
and behaviours
valuing them correctly

Building an infrastructure that is designed to be

8. Using a platform with more energy-
sustainable over the long-term, taking into account
efficient infrastructure and operation
environmental impacts of operations

Creating an open platform that gives space for grass-

7. Providing a platform facilitating
roots innovation to anybody who has a vision and/or
sustainability-focused projects
project ideas on sustainability

Addressing key sustainability issues will require cooperative and collective actions among all players in
an ecosystem coupled with a commitment to identifying and capturing value that traditional finance
overlooks. To that end, we can employ crypto tokenomics design in an array of ecosystems, which we will
discuss further in this white paper.

Tokenomics — including the tokenomics of VET, VTHO, and potentially newly created tokens designed for
specific ecosystems — will become the next wave of not only a more holistic definition of value but also act
as a foundation for more inclusive governance in the Web3 era. By embodying digital representations of
ownership and value, tokens enable the creation of new models for doing business.

By rectifying flaws in traditional valuation methodology, this new paradigm will incorporate traditional
economic value as well as more comprehensive environmental and societal value for all stakeholders.
At the same time, tokens can be used to facilitate governance of ecosystems and communities by giving
members the ability to vote on important decisions, with the tokens acting as a form of digital equity. And the
incentivisation of positive contributions to ecosystems is made easier by rewarding those who participate
in sustainable activities, create content, or take on leadership roles in communities. Overall, tokenomics
empowers a decentralised, transparent, and secure way for communities to govern themselves.

Educating markets and users on this new concept of value and developing new standards, mechanisms,
and metrics will be critical to successfully account for sustainable actions alongside profits.
28
What Does an
Ecosystem Look Like?
Considerations When Designing an Ecosystem

Successful ecosystems will disrupt current value 1. Second-hand market for fashion: bridging the
chains and generate monetary, environmental, physical and the digital part of a product
and societal value, without necessarily needing (through a tagging process) and creating a
large investments. digital passport (based on an NFT) for fashion
and luxury items, so as to provide an authenticity
When designing an ecosystem, we must first guarantee on second-hand markets and thus
evaluate current pain points (sustainability incentivise resale and reuse, extending the life of
challenges and obstacles to actors’ collaboration) the product and thereby reducing waste.
within the traditional value chains we are seeking
to change. The solutions created by an ecosystem 2. EV battery management: using blockchain to
generate the additional value necessary to attract enable battery passports (based on an NFT) to
and retain new developers, actors, and investors. provide for traceability of EV batteries (tagging),
streamlining the recall process and easing the
Leveraging BCG’s broad experience in sustainability recycling process.
issues and pressure testing our ideas with a wide
array of industry experts, we have constructed 3. Supply Chain at the Edge: harnessing blockchain
a number of blockchain-enabled example to enable real time 3D printing of spare parts
ecosystems related to food & beverage, fashion, close to end users, thereby decreasing emissions
pharma, automotive and energy sectors. We have from logistic processes, increasing efficiency,
included case studies for the three examples that and guaranteeing the immutability of the
demonstrate the most promise in the near term: design for certified original spare parts.

29
Each of these example ecosystems identifies
specific sustainability and societal needs,
all of which will generate additional value
for ecosystem participants and society at
large once addressed. For each of the three
proposed ecosystems, we have conducted
an in-depth examination of how the
existing process operates today to identify
its unique pain points. We then explore how
blockchain adoption can help address
these pain points while also creating
functional communities to maintain these
ecosystems for the long haul. We propose
these ecosystems as examples of what
can be built using vechain’s technology
platform. While they will not be developed
and built by vechain directly, we aim to
provide the technology tools to developers
and a collaboration environment that will
make such endeavours possible.

The diversity of the ecosystems we present

reflects the wide-ranging applications of
vechain’s blockchain solution as a catalyst
for change. And new applications can
be developed quickly to tackle a diverse
set of problems across industries. Due
to the modular nature of the Blockchain
Biosphere for Sustainability, the ideation
and design process for new ecosystems
can be done independently of other pre-
existing ecosystems.

30
Ecosystem
Concept 01
Second-hand market for fashion Counterfeits:
An expensive problem
The first example ecosystem reflects the need for a second-
hand marketplace dedicated to promoting sustainable fashion. According to the Organisation
The objective of this proposed ecosystem is to promote the for Economic Co-operation
second life of used clothes and reduce the environmental and Development (OECD), the
impact of the fashion industry, while giving ecosystem volume of international trade in
participants control over the authentication process of their counterfeit and pirated products
sales and purchases. in 2019 amounted to $464 billion
(2.5% of world trade).
The current secondary marketplace model for fashion has three
primary pain points: Footwear, clothing, and leather
goods/handbags combined
1. Expense of verifying brand authenticity make up over 50% of global
in the second-hand market customs seizures.

2. Information asymmetry for buyers regarding

second-hand product information
Importance of 2nd
3. Low fashion resale rates, which result in greater waste hand markets
and lead to environmental and social harm as a result
As a society, we are buying
The first pain point — authenticity — is most applicable in
more and using less. Our
marketplaces selling luxury goods and other valuable items at
average textile consumption
a high risk of counterfeiting. The marketplace counters this risk
has doubled in the last 15 years
by providing additional authentication services to shield buyers
as fast fashion has become the
from fake goods. However, these authentication costs are passed
trend. As the amount of clothing
on to buyers and sellers as additional fees. Unfortunately, manual
we buy increases, the number
authentication not only creates additional friction in an already
of times that we wear garments
complex process but also results in added emissions because
decreases — by 36% globally in
of the need to ship items to authenticators prior to selling them
the last 15 years according to
on the secondary market.
the Ellen MacArthur Foundation.
The second pain point — information asymmetry — encompasses This leads to a situation where
two points of asymmetry for buyers. First, buyers must rely on the the fashion industry churns
marketplace’s reputation and its assurances that a product is out more items than we can
authentic. Buyers lack substantial insight into the authentication wear. And when we no longer
process, and thus cannot make their own judgements about the wear clothes and instead buy
accuracy of the authentication. Second, buyers lack access to new ones, the items often get
product history for items sold on the marketplace, which further landfilled rather than resold.
deepens the gap in transparency.
31
Low buy-In for The last pain point — low resale rates in the second-
second-hand markets hand market — leads to environmental and social
harm: If the initial buyers no longer want an item and
According to the BBC, only 15% of resalable cannot sell it in a second-hand marketplace, they
luxury goods are sent to second-hand will most likely discard it in a landfill. The blockchain-
stores annually. This level of waste amounts powered ecosystem adds an element of digital
to an environmental and sustainability identity, enabling a network effect that boosts the
problem. Discarded clothes take decades number of users and goods that are traded rather
to break down. Meanwhile, the fashion than trashed.
industry tries to meet the demand of the
primary market and the opportunity to Given these pain points, a new ecosystem powered
recycle and reuse clothing goes by. by Web3 technologies can offer some solutions that
benefit all participants. It all starts with companies
embedding clothing or accessory items with
Tagging enables brand and tags containing unique ID codes at the time of
manufacturing. Each unique ID code will be digitized
customer connection onto the blockchain through the creation of an
Tagging articles of clothing is something associated NFT and item profile. The item profile
that the fashion industry has already been will capture manufacturing information related to
testing to connect with consumers: sustainability (e.g., emissions generated) as well as
product details like colour, make and model, and
• Adidas uses tags to activate a year of production.
mobile experience for customers.1
The tag will remain embedded throughout the
• Burberry enhances customer lifespan of the item. Each time the item is repaired or
experiences by using a tag to maintained, the action will be recorded onto the NFT as
connect media content specific a new, immutable data point. Thus, the NFT becomes
to an item.2 a complete history of the item. To participate and
receive an authentication guarantee, buyers will only
• Nike embeds tags in the soles of shoes need to use their smartphone to unlock the benefits
to enable broadcasting of data.3 provided by the ecosystem during each stage of
We can harness this innovative method the transaction. This further helps reduce emissions
of engagement to help brands and because items no longer need to be shipped for
customers interact with each other authentication.
after the initial purchase of an item. Alongside tagging technology, blockchain will play
a fundamental role in the design and operation of
this ecosystem. It enables a high degree of data
transparency, making buyers, sellers, and the
marketplace responsible for their actions. Because
of its transparency and immutability, blockchain
disintermediates the ecosystem by removing the
third-party authenticator role. By incorporating Web3
elements into the ecosystem, participants will have
greater control over the second life of their clothes,
marketplace operations, and the distribution of the
ecosystem’s financial benefits.

The benefits of the ecosystem extend beyond simply

solving the pain points in the traditional business
model. The ecosystem also generates additional
value. For example, first and second-hand buyers
could benefit from increased communication with
brands via the NFTs, receiving brand updates, access
to discounts, curated content, and unique loyalty
rewards such as special releases. The increased
direct interaction between brands and buyers ideally
fosters brand loyalty as buyers feel more connected
with the brand.

32
Under the new model, brands will gain insights into the second-hand marketplace. This improved
understanding of second-hand sales will in turn help them curate product offerings to serve future
consumer demand.

In conclusion, the ecosystem provides an opportunity for individuals to extend the life of their clothing and
accessories. Surveys show that consumers are already highly motivated to consider sustainability when
making purchasing decisions.

Web3 capabilities to drive customer engagement & loyalty

Institutions are starting to lean on Web3 and more creative and open ways to engage customers. Recent
examples in 2022 include Tiffany’s NFTiff, which offers exclusive rights to jewellery pieces resembling the
CryptoPunks NFTs to their owners, and Starbucks Odyssey, which provides the ability to earn and buy NFTs
and unlock coffee experiences and benefits.

With the emergence of capabilities such as on-chain fungible tokens, NFTs, smart contracts, and
DAOs, Web3 can help drive greater customer engagement and stickiness within the ecosystem.
Beyond employing digital assets, elements of Web3 can be used to roll out features that incentivise
participation and promote loyalty.

• Fungible and non-fungible tokens (e.g., spendable loyalty currencies, NFTs) can be used to gamify
interactions, track engagements with sellers, and reward loyalty with real-world perks and benefits.

• Utility or “Phygital” NFTs, can be issued to reward activity in the ecosystem by unlocking early access,
discounts, and unique experiences.

• Employing blockchain-based tokens opens creative avenues to plug-in external partners and
merchants more easily. With immediate transaction settlement and interoperability rules programmed
in, Smart Contracts can automate a lot of the manual overhead that typically goes into managing such
collaborations.

• Token gating is gaining popularity as open and connected ecosystems become an alternative to
traditionally closed ecosystems, enabling smoother collaboration between parties to engage and
reward users.

• Brands can also use DAO-like structures to easily enable voting on brand decisions, such as which
product to launch or partnership to bring onboard next. Governance can be configured through the DAO
to give certain token holders’ votes more weight depending on loyalty status, history of engagement,
participation in key challenges, and so on.

33
Figure 11 - Consumer Sentiment

1
2

5 2
3 6 2
14 2
4 7 2
6
18
18 16
19
26
33 46 25
33 29
30

42 41 32 45 37 55

Overall US UK FR CN BR

Not at all important Neutral Extremely important

Somewhat important Very important

Consumers are already displaying a strong preference for sustainability when making purchasing decisions

(Source: BCG Pulse of the fashion industry report 2019)

Thanks to favourable consumer sentiments about sustainability and the monetary savings provided by
the elimination of third-party authentication, the ecosystem will replace the old model of only sporadically
reselling clothing and accessories with a new model where resale becomes the norm. This ecosystem
— built on blockchain and Web3 technologies — will power a broad and all-inclusive marketplace where
individuals and enterprises participate collectively to extend the life of clothing.

34
In the traditional resale market, sellers list goods on the marketplace. Higher value goods require
authentication at physical locations, in exchange for a commission. Once purchased, the goods are
shipped to the buyer, who relies on the credibility of the marketplace for authentication. Payment flows
from the buyer, through the marketplace, to the seller.

In the second-hand market for fashion ecosystem, the seller lists goods on the marketplace.
However, instead of the seller shipping the goods to an authentication site, the goods are sent straight to
the buyer. The buyer can scan the tag to verify the authenticity of the goods. Payments are executed by
smart contracts.

35
Ecosystem Concept 02
EV Battery Management
Our second ecosystem case study reflects the demand for a more sustainable electric vehicle (EV) batteries.
The objective of this ecosystem is to use blockchain to create battery passports to enable traceability of
the EV battery, ease the recycling process, and promote the reuse of critical materials.

EVs are estimated to make up half of all automobiles sold in the US by 2030, according to Bloomberg.
However, that rapid growth means we must examine the challenges facing the sector as it continues
to evolve and scale. We have identified three significant pain points for EVs and their batteries:

1. High initial carbon footprint for manufacturing EVs

2. Low recycling and second life usage of EV batteries Figure 12 - Leveraging battery
3. Lack of engagement after initial EV sale 2nd life usability

The first pain point — the high carbon footprint

of EV manufacturing compared to traditional
internal combustion engine vehicles — is the result
of resource-heavy production methods. EVs only
begin to have a lower carbon footprint when
compared to their internal combustion counterparts
13
if they are driven for more than 21,700 kilometres
(13,500 miles).

The second pain point derives from a lack of

sufficient recycling options for EV batteries. To
maximise the sustainability benefits of EVs, batteries
need to be used for as long as possible, a major
challenge given the batteries’ short lifespans for EV
use. Current projections indicate less than a third
of EV batteries will enter a second life when no
longer suited for EV use.

Additionally, data from the International Institute for Sustainable Development indicates that less than 5%
of lithium batteries are recycled. The combination of the two trends leads to significant resource waste,
since battery components are not integrated back into the supply chain. A solution for these problems is
made all the more necessary due to a predicted shortage of the precious metals used to construct new
EV batteries.

13. Argonne National Laboratory estimates the breakeven point of a Tesla Model 3 and a Toyota Corolla to be 13,500 miles,
considering thousands of parameters from the type of metal in the battery to the amount of plastic in the car itself.
36
Regarding the third pain point, when an EV is sold on a first- or second-hand market, the communication
between the buyer and the manufacturer or seller may be limited or non-existent after the purchase.
This is a missed opportunity for information sharing. The EV owner may not fully understand the charging
infrastructure available to them or miss important announcements from the manufacturer. Furthermore,
there is additional post-purchase support or education that the owners could benefit from, and clear,
ongoing communication would improve the overall EV ownership experience.

Governments around the globe are applying regulatory pressure to the original equipment manufacturers
(OEMs) of EV batteries and are requiring them to increase the recycled content of batteries. For example,
the European Union’s battery mandate requires that a certain percentage of a lithium-ion battery’s content
come from recycled sources. Additionally, governments are providing significant monetary incentives to
build-out the EV battery supply chain and set up recycling systems. These trends, taken together, further
incentivise the adoption of new solutions.

New regulations around the globe are fuelling an EV surge:

EUROPEAN UNION UNITED STATES CHINA

The EU will use €127B The Inflation Reduction China’s 14th 5-year plan will
to develop the battery Act (2022) will provide focus on electric transport
value chain in Europe, approximately $370B of and building a complete
with investment of €382B energy-related spending, battery recycling system
1 3
expected by 2030. including up to $20 billion by 2025.
in loans and $2 billion in
1. Source: “Questions and Answers: grants for new and existing 3. Source: “China's 14th Five-Year
The European Battery Alliance: 2 Plan (2021-2025): Spotlight on New
EV facilities.
progress made and the way Energy Vehicles (NEVs)”, Global
forward”, European Commission Policy Watch
2. Source: “The Inflation Reduction
Act deal could benefit clean energy,
EVs", iShares

To address these challenges and establish a more sustainable and transparent EV market, we propose
creating an EV battery management ecosystem. This ecosystem would use blockchain to establish an
NFT battery passport to store information about the EV battery, including manufacturing information
related to sustainability (e.g., emissions generated), battery specifications, and ownership. The battery
passport will be attached to the EV and transferred to the new EV owner if the vehicle is ever sold on
the secondary market.

37
The NFT passport enables verification along multiple
stages of an EV battery’s lifecycle. Manufacturers
can use the NFT passport to track recycled content Second life applications
of batteries to meet regulations, while second-
hand buyers can leverage the passport to obtain for EV batteries
information about the battery for both second-hand
usage of the EV or second life applications for the Second life repurposing of
EV battery itself. EV batteries in pilot stage:

By leveraging Web3 elements such as NFTs and • Storage of solar or wind power
blockchain technology in the EV battery ecosystem
• Backup for smaller power grids
to create an NFT passport, we can increase trust
or single-family homes
and transparency around sustainability in the supply
chain and secondary market and promote recycling • Power source for smaller
and reuse of EV batteries to reduce waste vehicles such as forklifts
and emissions.
• Increased power stability and
NFTs are a critical enabler of information dissemination capability by providing power
and interaction in this ecosystem. Through the battery during energy usage peaks
passports, OEMs and EV sellers can communicate with
first and second-hand buyers throughout the lifespan
of the vehicle.

The volume and complexity of transactions needed to trace the composition and use of EV batteries over
their lifespan is substantial. This makes processing performance critical to the success of any EV battery
tracing ecosystem. Blockchain plays a foundational role in enabling this type of complex data tracking in
a transparent and trustworthy manner. Blockchain will also facilitate interoperability between the multiple
actors in the ecosystem through data consolidation and integration of disparate data systems. Lastly,
given the increased regulatory oversight of EV battery supply chains, the data security that blockchain can
provide is critical for companies seeking to reduce their compliance risk with government mandates.

38
38
In the traditional EV battery lifecycle, there is a lack of credibility regarding sustainability throughout
the supply chain. Consumers have little insight into the manufacturing of EVs, including the batteries.
Additionally, there is a lack of traceability of the battery after the initial sale of the associated EV, as batteries
are then often brought to landfills or recycled.

In the EV Battery Ecosystem, a battery passport becomes an enabler of sustainability behaviour.

The passport collects information throughout the manufacturing process. Second-hand customers, and
eventually recycling facilities, can access the EV battery passports to retrieve battery information.

39
Ecosystem Concept 03
Supply Chain at the Edge (SC@E)
Logistics industry
Ultimately, we want enterprises to join vechain in reimagining
the world’s manufacturing supply chain and logistics industry. & its pain points
By harnessing the power of 3D printing and combining
it with blockchain technology, we can create innovative As the logistics industry grows, the
solutions to address the sustainability and economic needs existing pain points will only grow
of the logistics industry. more profound across industries.
To illustrate the potential of this ecosystem, we will focus on the In the automotive sector, there
supply chain and logistics industry for automobile spare parts. is high demand for repair and
While this is a well-established industry, there are three significant maintenance services coupled
pain points which cause friction among the different actors: with unpredictable needs for
1. Supply chains as significant spare parts.
contributors to emissions The aerospace sector must
2. Expensive and lengthy transportation of spare parts from grapple with multi-year product
original equipment manufacturers (OEMs) to end users development and long lead times
for products, rising fuel costs driving
3. Unused stock leading to waste and up the cost of aeroplane ownership,
working capital losses by the OEMs and low volumes of production.

The medical sector’s pain points

The current global supply chain accounts for 8% of global
include the need for speedy
emissions, according to the International Energy Agency. And
turnaround times for parts and a
the magnitude of supply chain and logistics emissions is only
requirement of patient-specific
projected to grow in the coming decades. The International
components in many therapies
Transport Forum has predicted that global demand for freight
will triple by 2050, driven by economic growth in Africa, Latin
America, and Asia. This increase in demand is expected to
double emissions from the supply chain sector.

40
In addition to the emissions generated by transporting
materials and parts around the globe, transportation also
involves an expensive and lengthy logistics process. Many
suppliers manufacture goods overseas at facilities which are
often thousands of miles away from their final destination. For
already manufactured parts, end users must often endure
significant wait times when ordering new spare parts due to
long-distance shipping and all its potential delays. If inventory
levels are low and new parts must be manufactured, buyers
may have to wait weeks or months for orders to arrive.

Rather than endure unexpected delays and long delivery

times, many OEMs instead stock up on spare parts inventory.
However, this is an inefficient and costly solution which leads
to a suboptimal use of resources and can result in working
capital losses, since OEMs must maintain an overstock. And if
parts never sell, they end up as waste.

These pain points make the overall supply chain and logistics
industry for spare parts inefficient and environmentally
damaging. However, we have devised a solution called Supply
Chain at the Edge (SC@E) to address these pain points and Examples of
reimagine how supply chains will work across the globe. 3D printing
SC@E functions by replacing traditional manufacturing with Legacy companies and
blockchain-enhanced 3D printing. A customer will initiate the institutions are already using
process by placing a request for a spare part. The request will be industrial 3D printing to reinvent
sent to the owner of the spare part’s intellectual property who and decarbonize their supply
will relay a digital blueprint of the part to a 3D printing facility chains. Aboard the amphibious
close to the customer. The 3D printing facility will use the digital assault ship USS Essex, the U.S. Navy
blueprint to print the part and ship it only a short distance to is testing the use of a liquid metal
the customer. 3D printer to fabricate metal parts
— from hand wheels to spanner
To make the switch to a new logistics process possible,
wrenches — at sea. Volkswagen
VechainThor will securely facilitate data transfer and intellectual
became the first major automaker
property management. Automobile OEMs can send blueprint
to implement 3D printing in their
files to service bureaus anywhere in the world, and those
production process when the
service bureaus will then print the needed part, all while
German carmaker installed a
keeping proprietary data safe and secure.
binder jetting machine at their
The SC@E ecosystem will generate three sources of value production plant in Wolfsburg
and yield savings and incentives for participants while also in 2021.
directly addressing the three pain points identified with the
traditional ecosystem:

• The first source of value is the emissions savings that results from using blockchain-enabled 3D
printing to manufacture physical goods and parts closer to the end customer, rather than shipping
parts thousands of miles.

• The second source of value derives from delivery time savings due to the drastically sped up supply
chain process in SC@E. 3D printing a part in a local facility takes only 12–24 hours, followed by a quick
delivery time, compared to manufacturing oversees and transporting a part for days or weeks to a
final customer located in a different country or continent.

• The third source of value stems from additional economic opportunities enabled by faster supply
chains. A faster supply chain allows OEMs to reduce their inventory stockpiles since they can rely on
just-in-time and on-demand 3D printing to cover any short-term spare parts needs. This reduces
OEMs’ working capital costs and lets OEMs scale down their inventory warehouses.

41
Furthermore, a faster supply chain also allows end customers Ecosystem economic
(car dealerships or repair shops in the spare auto parts
industry example) to avoid over-purchasing parts to meet benefits summary
potential future demand. Customers can rely on spare parts
being delivered quickly to cover any maintenance issues. • Faster manufacturing of parts
with 3D printing over traditional
These sources of value will incentivise individuals and firms manufacturing
to participate in the ecosystem. However, the differentiating
• Faster delivery times for parts,
elements of blockchain are key to facilitating this ecosystem.
since they are 3D printed close to
The complex exchange of highly sensitive blueprints makes the location of the end-user
blockchain’s security features critical to protect intellectual
property (IP) rights and maintain transaction integrity. By • Reduced need for spare parts
establishing clear ownership rights and transparent tracking, inventory due to on-demand
blockchain enables OEMs to maintain clear control over manufacturing, reducing working
their IP to prevent fraud and maintain visibility into how the capital costs
blueprints are being used and by whom. With the technology • Elimination of tooling costs
innovations enabled by Web3, an ecosystem that reimagines associated with subtractive
how the world’s supply chains function could create a new manufacturing such as CNC tools
norm for manufacturing in the near future.
• Agility to address unforeseen
industrial challenges that
affect physical supply chains

42
In the current supply chain and logistics industry, OEMs manufacture a spare part far away from the end
user. This part may be transported hundreds or thousands of miles to the end user through a variety of
transportation methods, generating significant emissions. The whole process can take days or weeks,
leading to long lead times in the case of supply chain shocks.

Supply Chain at the Edge is a more versatile and streamlined process in which the OEM is only responsible
for designing the parts. When an end user has a request for a part, that part will be printed close to them
after the digital file has been sent to a 3D printer via blockchain. The lead time for parts shrinks drastically,
as does the emissions related to the product’s manufacturing and delivery.

43
Ecosystems reflections
In this chapter we examined three examples of
how Web3 tools can be used to build ecosystems
and how, through collective action, participants can
achieve their sustainability objectives and solve pain points.
The ecosystems demonstrate that communities can come
together and contribute to building solutions to address waste
in the fashion industry, enable the recycling and reuse of critical
materials in EV batteries and reimagine the world’s supply
chains. By detailing potential ecosystems, we hope to inspire
people, companies, and communities to participate
in and build their own ecosystems. As we move
owards a more decentralised and inclusive
Web3, the power of the individual to
shape the world around them and
unlock new flows of value will
continue to grow.

44 44
Engaging the Individual
and Building Communities
15
The power of individuals should never be In 2022, we attended Nitto ATP Finals (the
underestimated. The belief that power should be thrilling final instalment of the ATP tennis tour)
distributed among the many and not concentrated with inspiring professionals across industries. This
within a few has been at the core of blockchain’s shared experience naturally sparked stimulating
history and development. We believe that every exchanges that inspired ideas and collaboration.
person’s efforts count, and every voice matters in These interactions build momentum and make
the Web3 world. This is especially true when it comes projects come to life. We create and foster
to solving sustainability challenges, and it makes communities from screens to arenas to connect
Web3 a conducive environment in which to tackle individuals and ultimately unleash our
these issues. Small changes, such as choosing collective potential. Through these strength-
to recycle or resell something rather than throw it building efforts, we hope to inspire each member
away, can have an enormous positive impact when of our community to actively imagine, create, and
multiplied across an entire population. grow the ecosystems they believe in.

Vechain is investing heavily in building an engaged For the fair and successful deployment of these
and inviting community that will eventually help ecosystem, we take inspiration from DAOs, which
solve sustainability and other global challenges. remove barriers to entry and guarantee all
In our early years, we focused on building a solid members have an equal opportunity to propose
technological community. We will now extend our improvements and influence decisions. The DAO
efforts to also foster large-scale involvement by model allows individuality to shine and efforts to
enterprises and sustainability-minded individuals. collide.
Such virtual communities grow from shared interests
and goals across the globe, and we want to extend Beyond democratising the decision-making
that bond beyond the screen. process and giving power to community members,
we believe that DAOs can be powerful tools to
We aim to create spaces for passionate minds to connect individuals across the globe, regardless of
connect, exchange, and ultimately build. Through professional background, age, race, or education
several international events, we have witnessed the level. They can unite people with common values
impact of bringing our virtual connections to the and goals via borderless collaboration and
field. For instance, our regular events in community building and foster a sense of belonging
partnership with UFC14 (the world’s premier mixed and inclusivity.
martial arts organisation) provide a conducive
space to build real life bonds within our existing
community. On the sidelines, projects are
brainstormed, argued, and built.

14. Ultimate Fighting Championship; trademark owned by Zuffa, LLCS,

15. Season-ending championship of the ATP (Association of Tennis Professionals) Tour; trademark owned by ATP 45
We envision a community where everyone can a DAO grants flexibility as the community and their
participate and make meaningful contributions goals mature.
to initiatives they believe in. By forming DAOs,
our community members become active and That being said, DAOs may not yet be suitable for
empowered contributors and owners of their every ecosystem due to variations in their size, culture,
ecosystems and are able to multiply their governance structures, and sustainability needs.
individual impacts to advance the chosen initiative. DAOs may gradually be considered and established
depending on each ecosystem’s overarching goals
DAOs remain a relatively new concept, yet we believe and governance needs.
they could revolutionise human organisations.
We are therefore actively exploring their potential To motivate participation, provide a more interactive
to create an inclusive decision-making system. platform, and enhance community engagement
Starting from research and practical applications, beyond DAOs, we intend to implement incentive
vechain aims to study and experiment with this mechanisms to reward individuals and developers
in internal governance (see chap. 8) and broader who are active members of ecosystems.
organisational contexts. Furthermore, adding more action-based activities
can make the ecosystems more interactive, socially
A community brought together in a DAO could engaging, and approachable.
set out to achieve multiple goals. For instance, in
the second-hand market for fashion ecosystem For instance, these activities could include
presented in Chapter 5, participants may gradually granting active participants access to special
shift to focus on a more philanthropic aim: events and curated experiences with brand
Members can choose which community-focused partners, creating new customisation features
projects to support, which environmentally and for community developers, setting up bounty
ethically conscious brands to promote, and whom programs to foster a sense of achievement and
to endorse as social justice advocates. For a progression for blockchain users, and awarding
member participating in the ecosystem as a seller prizes to the winners of hackathons hosted
or buyer, fungible tokens could empower them to by vechain.
vote and propose new plans of action. Establishing

Examples of reward mechanisms in the sustainable second life for

fashion & luxury ecosystem

DESIRED INDIVIDUAL ENGAGEMENT REWARD / INCENTIVE RECEIVED

Join the second-hand marketplace to promote the • Sense of accomplishment: instant digital NFT
circular economy and sustainability in luxury and badges issued for “Your first listing,” “Your first
the fashion industry. review,” “Your first sold item,” etc.

Make frequent purchases in the second-hand • Sense of ownership: Rewarding tokens with DAO
marketplace and leave quality reviews on governance voting rights to repeat buyers who
purchased items give fashion/luxury items a second life

• Pleasant surprises: A mystery box with a

discount code for a virtual store in the metaverse
sent to buyers who make recurring purchases or
submit detailed reviews with pictures

Promote frequent interactions among buyers and • Process of co-creation: Empowerment as

sellers on the second-hand marketplace, including an essential marketplace builder through
sharing product stories and answering questions. contributions that make the marketplace more
reliable and honest

46
 Examples of reward mechanisms in the sustainable second life for fashion & luxury ecosystem (cont.)

DESIRED INDIVIDUAL ENGAGEMENT REWARD / INCENTIVE RECEIVED

Encourage self-authentication of second-hand • Sense of ownership: Rewarding tokens with DAO

luxury items by buyers and sellers to promote governance voting rights to repeat buyers who
marketplace credibility and anti-counterfeiting. give fashion/luxury items a second life

Invite others to join and educate them about the • Social influence and sense of belonging:
meaningful impact of sustainable fashion. Participation in community channels and
access to new connections with those who
share a common mission of sustainability and
waste reduction

• Access to invite-only events: Access to closed-

list events (e.g., SDG TED Talk, Web3 conferences),
fashion made of recycled material, and other
customised options

We plan to further engage with the community, leveraging gamification design and Web3 capabilities (e.g.,
fungible / non-fungible tokens, or phygital NFTs) to incentivise engagement and enhance user experience.

In a gamified environment, incentives act as a form of behavioural feedback to motivate participation. People
are at the centre of game design, as their motivations and needs will shape how the incentives are designed
in the game.

For ecosystem enablers/developers, gamification can enhance community engagement, generate deeper
insights into consumer behaviour, increase retention, and more. For participants, gamification can promote
feelings of belonging, accomplishment, and ownership. Tactics tied to these drivers can effectively alter
an individual’s behaviour.

What is gamification?
Gamification is the process of incorporating game
style mechanics into everyday or non-game activities
to drive specific behaviors emphasizing human
motivation and increasing actors’ engagement.
Game design leverages as points, rewards, leader
boards, and social gifting, etc. to incentivise
specific behavior based on customised needs from
different participants.

47
 For example, a journey can be created to increase
Tech integration use cases second-hand buyer engagement with brands,
for sustainability and leveraging NFT and token-gated access. The digital
community engagement product passport (tokenomics design as an NFT)
can transfer ownership of a product from seller to
Enabled by maturing Web3 technology, buyer in a secure and immutable way, providing
we are building a future of true individual additional emotional assurance and an engaging
ownership and collective accountability. experience for the buyer,to, further enhance the
We live in an exciting time where many sense of ownership. As the buyer collects more
fast-evolving technologies like IoT, Big product digital passports, they can monitor their
Data, and 5G have already begun to status along the journey and be motivated to
scale and allow for phygital integration, earn the extra tokens rewarded when a milestone
with many successful use cases and is reached (e.g., their tenth purchase). Token-
applications already on the books: gating can expand the aperture of gamification
across multiple brands, enabling more nuanced
• The State of California has allowed
hurdles created with a combination of different
its residents to choose blockchain-
brands (e.g., partnering brands) to achieve a
based delivery of vital records,
higher level status. We plan to further explore
including birth certificates and
which incentives best drive engagement for
marriage licenses, allowing for
our community members.
faster, cheaper, and more efficient
record services.
Vechain is determined to support and encourage
• The city of Raleigh, North Carolina,
people striving for a better future, and gamification
uses machine learning and AI-
is one tool we can use to drive engagement and
powered video analytics to improve
participation. We will do this, in part, by adding
mobility and urban planning. The
more engaging features and incentives to our tech
city has transitioned from employing
platform. The vechain platform and the Blockchain
personnel to manually count cars to
Biosphere for Sustainability will act as a conduit for
analysing traffic patterns in real time
socially responsible individuals to contribute to and
through machine-learning software,
collaborate on far-reaching sustainability goals
thus providing policy makers with
while enjoying the rewards of their contribution
more accurate traffic data.
to society.
• Disney has leveraged IoT and
RFID technologies in their Disney
MagicBand to allow park visitors to
digitally consolidate park tickets,
credit cards, and room keys,
while also providing for a more
personalized guest experience.

Sources:
"New Law Allows Californians to Store Vital
Records on Blockchain." Pymnts.com

"Raleigh, North Carolina Taps NVIDIA and Esri for

Traffic Management Machine Learning Project."
State Scoop

“Disney’s Internet of Things MagicBand.” IEEE

Innovation at Work

“Disney's MagicBand: The Secret Tech

Behind the Happiest Place on Earth.” Wired,
Conde Nast

48
Vechain Technology
Landscape and Roadmap
Update on VechainThor blockchain
Since the inception of vechain in 2015, we have had products, participants, and business activities onto
the pleasure of working with amazing people and the blockchain, facilitating opportunities to drive
organisations who share our passion for blockchain holistic growth and maximize economic benefits.
technology and our vision for the future. Our business
partners have been incredibly supportive and have Then, in vechain Whitepaper 2.0, we outlined our
demonstrated a serious belief in the potential of strategy based on the phases we envisioned for
our VechainThor blockchain. We have always been blockchain technology. Having already achieved
committed to supporting ecosystem participants the first stage of technical development, we were
who are striving to solve real world economic preparing to move from a blockchain driven by
problems by enabling the creation of new business business needs to a more holistic direction that
models and value chains. Today, we want to go one also considered governing entities and regulators.
step further by promoting economic gains alongside This was the first time we introduced our concept
sustainable value. Through its energy efficiency, of a new and improved Proof-of-Authority (PoA).
new Proof of Authority mechanism, accessibility, Generally, PoA is a consensus algorithm that requires
and openness, VechainThor has become the ideal nodes to be authorised before they can participate
platform to jumpstart sustainability initiatives. in the blockchain. Once authorised, all nodes have
Additionally, enterprises and people without an equal opportunity to create new blocks and earn
cryptocurrencies may also seamlessly use the rewards, without the need to spend vast resources
platform in pursuit of these initiatives through fee competing against each other. This ensures that
delegation and multi-task transactions. richer nodes do not have an unfair advantage
To briefly recap, in Whitepaper 1.0, we discussed over other nodes in the system. Additionally, PoA is
the key features for the next generation of public efficient in terms of network bandwidth usage, as it
blockchain to enable continual and rapid innovation quickly selects block producers, allowing more time
and onboard businesses and companies. At the for transmitting transaction data.
time, the focus was on “translating” real-world
49
Despite its many advantages over other consensus To address the data security (finality), high
mechanisms, such as increased security and throughput, and scalability challenges discussed
efficiency, the PoA 1.0 consensus algorithm has above, the vechain blockchain development team,
some limitations. For instance, it lacks an algorithm- in collaboration with researchers and partners
based method to deter a node from manipulating within our vechain community, invested significant
the system. Although PoA ensures that any traced resources in the design and implementation of PoA
misbehaviour can be used as evidence against 2.0, a protocol-level upgrade to introduce finality
the node later, it still doesn’t have a mechanism as well as additional security mechanisms into
to prevent the misbehaviour from occurring in the VechainThor.
first place. Another limitation is that, like other
Nakamoto consensus algorithms, PoA only provides Instead of replacing the PoA consensus with a
probabilistic assurance to the safety of transactions. completely new one, we have chosen to design and
This means that there is a small probability that an implement a finality instrument, named the Finality
attacker may be able to disrupt the network, and with One Bit (FOB), which should allow us to run dual
this probability increases in situations such as large- modes of consensus, namely, the Nakamoto and
scale network partitioning. This may not be sufficient BFT consensus, at the same time.
to maintain system consistency in extremely
asynchronous situations where a high level of security
is required.

VechainThor provides a sustainable and inclusive infrastructure

VechainThor is one of the most energy efficient Being a public blockchain, VechainThor is highly
blockchains, using just 0.000216 kWh of electricity accessible by nature and provides an open
per transaction (0.04% of other comparable platform for individuals, developers, companies,
blockchains). The 2022 carbon footprint of and other actors to interact and collaborate.
vechain’s core network of 101 authorities’ nodes Open-source tools, blockchain-as-a-service, and
was calculated to be 4.46 t of CO2 emissions turnkey solutions are readily available for builders
peryear. The calculation methodology, developed and developers who want to work together hand-
in collaboration with DNV, is based on Life Cycle in-hand to build the next viral dApp for sustainability.
Assessment as described in ISO 14040 and ISO 14044. Imagine citizens seamlessly accruing carbon credits
through their eco-friendly actions, which they
The unique Proof of Authority 2.0 mechanism are then able to spend on goods and services in
provides data integrity alongside high scalability. an inclusive economy. VechainThor's unique fee
VechainThor relies on just 101 authority nodes delegation technology empowers these citizens to
to validate and sign blocks on the blockchain, participate without directly owning or managing
processing transactions and validating blocks in a crypto, widening the universe of potential users in
fraction of the time and with much lower processing a sustainability ecosystem.
power and energy consumption requirements than
other blockchains.
50
The PoA 2.0 consensus algorithm has been
theorised around two key components as outlined
in proposals VIP-214 and VIP-220: a VRF-based
source of randomness, and a passive block finality
confirmation process. The combination of these
two components offers several advantages for
the blockchain compared to the previous iteration.
First, it guarantees block finality, ensuring that
once a block is added to the blockchain, it cannot
be modified or reversed. Second, it maintains
the usability and robustness of the system
by decoupling finality from the PoA process,
allowing the blockchain to grow even in adverse
environments. Third, it helps reduce the complexity
of the current PoA-based system, minimising
the potential risks caused by unknown design
deficiencies and implementation bugs. Lastly, it
adds minimal extra information — just one bit per
block — for network communication, so as not to
sacrifice system performance to achieve block
finality (for more technical details on VIP-214 &
VIP-220, please visit our website vechain.org).

The PoA 2.0 consensus mechanism is one of the

first in the world to combine the strengths of the two
main consensus types, Byzantine Fault Tolerance
(BFT) and Nakamoto Consensus, while eliminating
the weaknesses of each, solving one of the great
trade-offs in blockchain design — scalability or
data finality. This upgrade makes blockchain more
robust and secure, while maintaining sufficient
scalability from PoA 1.0, meeting strict regulatory
data-protection standards and answering the
call for from real-world clientele for a scalable
and secure platform for the digital-sustainability
revolution.

Note that this blockchain update is especially

crucial to prepare vechain to address global
sustainability challenges, as it reaches an optimum
balance between speed and security. We will
continue to develop more features customised for
the Blockchain Biosphere for Sustainability, and we
envision vechain becoming the best blockchain
for sustainability applications.

51
51
How We Are Building
Thriving Collaborations
Vechain aims to address today’s sustainability
needs by using the untapped potential of
communities. Consequently, we are committed
to enhancing engagement and collaboration
between start-ups, academia, financing partners,
and developer communities.

With these goals in mind, we have been building

momentum to:

• Engage developers, system integrators, and

strategic partners through forums and co-
development opportunities

• Promote research & innovation through

university partnerships, research grants,
and accelerator programs for start-ups

Engaging Developers, System Integrators, and Strategic Partners

At vechain, we recognise that independent The Web3 universe already supports upwards of
developers are the lifeblood of our platform and our 100 dApps, including NFTs, DeFi projects and games.
future ecosystems. Without them, we wouldn’t have And vechain will continue to incentivise developers
the diversity of perspectives and talent required to and groups to build in the community through
become the blockchain solution of choice for so hackathons, bug bounties, grants, and accelerator
many enterprise applications. programs.

Developers who build in the vechain universe have Our investments in people and technology reflect
ready access to a variety of resources for coding, our commitment to developers. We have also worked
testing, and implementation. Whether they are with VechainStats to improve the functionality
using the official Telegram channel for developers of the blockchain explorer and user experience
or accessing FAQs and tutorials or sample code, during exploration of blockchain data. Additionally,
creators enjoy an array of support materials in their we developed Connex so that developers could
journey to improve existing applications or launch easily use vechain’s core unique features. The Web3
new ones. adaptor enables developers familiar with Web3
libraries to build their dApps on VechainThor. The
Among the tools that developers can use to vechain community has built additional tools, such
create, test, and release dApps within the vechain as an Ethereum NFT bridge via xp.network as well
community are a Connex library, a Web3 adapter, as several NFT marketplaces, and wallets. Moreover,
standard openZeppelin smart contract libraries, Vechain.energy is building a fee delegation service.
Web3-as-services, a dApp interface, various wallets We will continue working with the community to
and mobile SDKs, and a testnet. enhance our tech offerings.

52
And these developments and
innovations are just the beginning.

This year, we are on track to hire even more developers

dedicated to improving the VechainThor platform.
Some imminent plans include:

• Our Web3-as-a-service portal VORJ

• A smart contract development

frameworks integration

• Vechain managed and sponsored

DEX/Defi protocols

• An Ethereum token bridge

• DID implementation

• A DNS naming system for vechain

• A DAO development framework.

VORJ to attract new developers

VORJ, our Web3-as-a-service offering, will democratise the Internet and give ownership back to users through
sustainable technologies. We envision VORJ as a Web2-based portal to cater to the most demanding Web3
needs. Here, users can create, mint, and manage VechainThor-based fungible and non-fungible tokens
all in one place. They can also access smart contract templates as well as a smart contract wizard and
deployer to quickly implement and deploy smart contracts. We anticipate a free, rate-limited version of
VORJ will be available to vechain community members by mid-2023. We are already providing an API-only
version for enterprises and community projects.

We also plan to introduce a carbon footprint explorer leverage vechain’s technology across multiple
on VechainStats, launch a community driven, vechain industries. A wide variety of applications have already
managed and sponsored NFT marketplace for been enabled by VechainThor (one example is
sustainability, and release a wallet (browser extension an automotive company’s platform for keeping
and mobile) for ecosystems. vehicles free from forgery). These applications
have demonstrated the business value of
Currently, we are dedicating significant resources vechain’s technology.
to improving developer tools and interconnectivity.
To make development easier, we are working hard Vechain has also built strategic alliances with major
to establish contract development framework tech partners and consulting firms. These partnerships
integration, a contract development IDE, and a smart extend the platform across various use cases, test
contract library, such as OpenZeppelin. Furthermore, modularity, and supercharge adoption. For instance,
we plan to develop oracles to link with real-world data AirTrace has built an innovative, low-code digital
and bridges to link with other leading blockchains. service platform integrated with vechain solutions,
which their clients can use to implement traceability
In addition to building a platform and tools to empower in industrial processes and to ensure secure and
builders, vechain further connects blockchain reliable data and automated reporting.Our long-
technologies and the real world by co-developing term partnerships have yielded a wide range of
applications with enterprise partners and other applications across consumer products healthcare,
tech partners. sustainability, and more. A recent partnership with
a smart fingerprint technology company will
We have a strong track record with established
generate solutions that integrate blockchain with
enterprises, including big box retailers, premier
scanning technologies.
automotive companies and more, allowing us to
53
Typically, we join forces with enterprises and businesses who invest in research and development
of blockchain technologies. Together, we drive quick blockchain and Web3 adoption in the business world
by closing the gap between business needs and technological offerings and progressively testing and
learning through real world use cases.

Promoting Research & Innovation

At vechain, we understand the significance of Likewise, vechain has a partnership with the
continued research and innovation efforts for National University of Singapore. Our latest
collectively enabling Web3 advancement. discussion with the Department of Mechanical and
Energy Engineering at NUS focused on potential use
Through our global grant, veResearch, we aim to cases and collaborations with blockchain protocols
support academic research on blockchain-related for Smart Materials. The research focuses on the
advancements. Since its launch, veResearch has development of innovative intelligent materials for
been a major driving force behind blockchain- a cleaner, sustainable future. It aims to mitigate
related progress, collaborating with leading the challenges of sustainable energy through the
global research bodies and co-developing new creation and application of functional intelligent
technologies with a specific focus on sustainability. materials. Such materials will potentially provide
alternatives in extracting additional energy from
Vechain and the Mathematical Institute at the
the environment, revolutionising energy production
University of Oxford have been working together as
and control processes, battery technology, catalysis
close partners. Recently, we jointly wrote a technical
processes, machine-human interfaces, artificial
paper on blockchain consensus protocols. The paper
organs and tissues, and smart membranes, among
was accepted and published by the Association
other applications.
for Computing Machinery (ACM) in 2021. Ongoing
research activities focus on building mathematical Finally, vechain’s partnership with the Crypto-Fintech
models for tokenomics and incentivisation, with the Lab at the Hong Kong University of Science and
purpose of making ecosystem compensation more Technology (HKUST) has also advanced thinking on
balanced and sustainable. Broadly speaking, each Web3 and blockchain technologies. This work has
contributor in an ecosystem brings a different skillset helped to improve education about the subjects.
to the ecosystem, yet they also receive different It has also incubated innovative student projects
benefits in return. Such compensations may impact for vechain’s ecosystem and has helped them to
the scale and quality of actors who participate to identify and conduct research on technologies that
our ecosystem, and ultimately to its scale of impact. support Web3.
Studying the dynamics and nuances of these
incentives or compensations is instrumental in the
successful growth of ecosystems and therefore of
our contribution to sustainability goals.

54 54
 Across the board, the research led and supported
by vechain has helped unlock the potential of Web3
and accelerate enterprise adoption by speeding
up the development of technological enablers,
including blockchain consensus, token economics,
cryptocurrency market predictions, smart contract
security, blockchain-based ecosystem design and
more. We see a direct line between advances in
research and innovation and new, practical uses of
Web3 and blockchain technologies in the pursuit of
a more sustainable society.

Technology Roadmap
Our technology development serves a central
mission: becoming the platform of choice
for sustainability. The way we choose which
technological features to develop and how to
customise and prioritise them over time is based on
this mission.

In Q1 2023, we are laser focused on improving support

for developers. We are adding libraries, developers’
frameworks, Web3 connectors, Web3-as-a-service
infrastructure, and a browser extension wallet.
These tools will make it easier for developers to work
with our technology platform and build exciting new
ecosystem solutions on top of it.

Our goal is to empower developers and make their

How we build technology to jobs easier. We believe this precious community
support our sustainability can deliver more and more robust and feature-rich
mission: an example applications, which are crucial for future growth.
By providing developers with the right tools and
NFT-related technologies will be developed resources, we can foster innovation and creativity.
incrementally — enabling different The developers working on our platform today
features along the way — to target specific are building the future; the more developers who
sustainability needs. Firstly, we aim to participate, the greater the sustainability impact we
leverage this technology to create digital can make.
product passports, linking an NFT to a single
physical product to showcase different Our second phase, in Q2 2023, will focus on
product characteristics (for instance, proof of improving engagement and the experience for
the emissions generated by manufacturing end users. We will be releasing a mobile version of
it). The NFT will also link the product to carbon our new wallet and standing up a user portal. This
credits purchased to offset the previously portal will be a resource for both businesses and the
mentioned emissions. Then, we will go a step broader community, enabling them to interact with
further by transforming physical products vechain’s offerings and applications.
into phygital ones, enabling the showcasing The third phase will encompass both Q3 and Q4 of
of product features in digital environments 2023. This phase will focus on the interoperability of
(e.g., in the metaverse). VechainThor with other blockchains as well as the
addition of foundation backed DeFi protocols and
NFT marketplaces. These advances will enhance
the experience for developers and create more
opportunities for users.

55 55
Finally, in 2024 we will continue to make further interoperability enhancements and also focus on
integration with Web2 systems. We will provide frameworks and wizards to help the community build
DAOs focused on sustainability.

Overall, this technology roadmap will help us achieve our goal of becoming the platform of choice for
sustainability ecosystems and encouraging mass adoption. Additionally, by continuously gathering
feedback from users and considering their needs, the infrastructure tools can be refined and adapted to
meet the changing demands of the market. This approach ensures that the development process remains
dynamic and responsive, leading to continued growth and success.

In Figure 12, we have outlined a technology roadmap of the tools and capabilities we will focus on in the
upcoming phases of our journey.

Figure 13 – Vechain tech roadmap 2023

H1 2023 H2 2023 Q1 2024

01. • Carbon footprint • Explorer v2 (users balance) • Explorer v3 (user

Sustainable explorer offsetting) and
Infrastructure (VechainStats) • Implementation of other integration into
reduction actions sustainability
• AN network offsetting (e.g., AN specs) ecosystems

• Carbon footprint • Other network

model (other layers) sustainability actions

02. • DEX/DeFi • DID • Decentralised

Technology file storage
features • Wallet browser extension • DNS (vechain naming
system) - community • Layer2 (e.g., Rollup,
• Ethereum Token Bridge zkRollup)
• Asset lending platform –
• NFT Marketplace community • Smart contract security
(community dev) analysis tools
• Multichain Generic
• Node API extension data bridge • Algorithmic Token
for jsonrpc backed stable coins –
• Oracles community
• Development tools:
Contract Dev framework • Web3 aaS (e.g., Node/Thor- • DAO governance
integration (e.g. truffle, api services, tokens as a wizards
hard-hat), service, custody solution
interation, etc.) • DAO operating system
• Libraries (e.g.,
Openzeppelin), Contract
dev IDE (e.g., Remix)

03. • Product NFT Passport • Product NFT for metaverse • DAO ecosystem smart
Sustainable (digital assets & phygital) contract library
ecosystems • SupplyMe Inventory
Management protocol • Credits and tokenization for • Ecosystem as a service
applications
sustainability and metaverse
• Product NFT with credits
• Smart city ecosystems
• Wallet for ecosystems

• NFT Marketplace

• Platform for ecosystems

56
08
Vechain Governance
It is our belief that the scalability issues associated Here at vechain, we want to not just talk the talk, but
with blockchain adoption are not only related to also walk the walk, which is why our final focus will
technical limitations, but also to governance- be on governance and operations best practices
related consensus concerns. Vechain plans to to support and enable our partners, sponsors,
improve its governance model to enable rapid developers, and users. We believe that having a well-
innovation and development while also complying defined, efficient, and effective internal governance
with regulators, meeting the needs of our users, and decision-making process at vechain will set an
community, and fast-growing enterprises, and example for the DAOs and governance structures
serving sustainability needs. that will arise in ecosystems within the Biosphere.
Indeed, by meeting the expected standards and
Unconventional governance models, including performance guidelines we have set for ourselves, we
DAOs and the experimental voting mechanisms will help demonstrate to the world just how dedicated
their structures enable, are already being adopted we are to the Biosphere and its long-term viability.
in various fields and are constantly updated as
part of a natural evolution of the technology. Vechain is not just building a sustainable platform,
By implementing DAO principles, our goal is to but also a public blockchain that is actively
progressively decentralise platforms, reducing the developing and implementing applications that
need for intermediation and making ecosystems promote sustainability and generate tangible
more efficient. economic value. As we continue to work on the
various projects, tools, and technologies in the
In whitepaper 2.0 we argued that for blockchain developmental pipeline, we aim to bridge the
solutions to reach mass adoption, the governance gap between Web3 and the real economy.
model must be efficient, cost-effective, transparent,
and also balance the views of all blockchain The Steering Committee’s election process helps to
stakeholders. Vechain is more than just a blockchain promote member diversity, enabling us to benefit
platform, and the governance structure of our from their varied perspectives and expertise. The
organisation is being carefully designed to be most recent election was carried out in February
adaptable and efficient, with oversight provided by 2023; all nodeholders were granted voting rights
the Steering Committee, which is elected publicly and were encouraged to actively participate
by nodeholders. and help shape the future of our organisation.
The establishment of a Steering Committee
Most importantly, our approach is based on constitutes the first step towards decentralisation.
nonstop improvement and iteration as technology Moving forward, the decision-making process will
advances and ecosystems mature. We will continue devolve from the committee to become ever more
to evolve our governance model to better align with distributed between Biosphere participants.
our sustainability and Web3 aspirations, including
exploring new governance guidelines such as a
DAO infrastructure. We will share progress updates
on an ongoing basis.
57
The ongoing changes are not limited to the 3. Community engagement: The vechain
Steering Committee. Since the publication of community has always been a crucial part
whitepaper 2.0, vechain has been enhancing its of our development, and we are expanding
team and driving collaboration with our partners the engagement team to build new
and the community at large. With the objective to communities centred around sustainability. In
evolve as a sustainable organisation, we focus on our understanding of Web3’s potential, every
four key areas: individual counts and becomes a builder. Over
the years, we have witnessed the power of the
1. Tech development: We have expanded our community through the infrastructure and
teams to support the blockchain upgrade tools we provide, and we plan on continuing to
(e.g., the PoA 2.0 update) and build platform build momentum for and with our supportive
infrastructure (e.g., implementing the tech community.
roadmap). Our technology roadmap aims
at transforming vechain into the best 4. Internal governance: Our People, Finance and
layer 1 option for sustainability, through the Legal functions have also been expanded to
development of specific features that simplify better support the growing team in vechain.
enterprise and user adoption. We select and We continue to be one of the most open
prioritise our initiatives with the goal of inspiring and transparent public blockchains, and we
more developers to build infrastructure tools release our financial report quarterly. We also
and services with us. As a result, our tech continue to closely monitor the development
development is continuously shaped by our of blockchain policies and other relevant
community’s input. regulations, such as data protection codes,
and make sure that vechain is fully compliant
2. Business development: We built up dedicated with them. Staying true to our ambitions in the
teams to closely monitor sustainability trends field of sustainability, we will take the necessary
and the evolution of new technologies. These measures to carry out sustainable practices
teams support sustainability transitions and the and uphold our values internally. Evolving
development of new sustainability initiatives by towards sustainable governance is imperative
enterprises and developers and help us steadily to our mission.
upgrade our strategy and support our mission.
Additionally, we regularly engage with advisors, Moving forward, the organisation will continue to
consultants and system integrators to illustrate evolve to serve a nascent global sustainability
how vechain’s infrastructure (VechainThor) and community; we will take inspiration from the best
governance can inspire and support them practices of DAOs to build organisational structures
in building solutions to address their clients’ customised specifically for vechain. More details will
sustainability needs. follow soon.

58
09
What’s Next for vechain?
We set on our journey in 2015 with a mission to pioneer real-world blockchain applications across the globe.
In our first years, we strengthened our nascent technological offering with the aid of an ever-growing
community of developers and partners. We soon turned our attention to the widespread obstacles — such
as difficulty in sharing information safely or a lack of trust and auditability in transactions — which hindered
collaboration and value creation potential across several industries.

Indeed, even in an era of increasing consumer engagement, we still saw a struggle on the part of both
enterprises and organisations to catalyse the potential power of communities. Over the years, we
engaged major companies and public organisations in a discussion on how Web3 solutions could help
resolve these collaboration pain points and foster value creation. As discussed at length already in this
document, in the year 2023 no Web3 system would be complete without accounting for a broader
meaning of value and what people working together in complex ecosystems can accomplish for
society, humanity, and our planet.

This embrace of Web3 enabled sustainability is not a reinvention of vechain, but rather the natural next
step in our journey. We’ve been building up to this moment for a long time, improving our governance
model, developing and refining infrastructure, tools, use cases, and applications, and demonstrating our
ongoing efforts to leverage vechain’s technologies for good. We know the vision of a more sustainable
world, collaboratively built by communities and enabled by Web3 and blockchain is a grand one. It’s not
something that can be achieved overnight. Yet, vechain has concrete plans to reach critical scale, power
breakthrough achievements, and making this future real.

Creating a successful ecosystem won’t happen without an active push and deep investment in terms
of time, energy, and resources. First and foremost, we will need more strategic technology partners to
build out the Biosphere’s platform infrastructure. In the past we have connected with innovation leaders
in complementary technologies to, for example, co-create blockchain-guaranteed tagging and tracing
solutions for consumer or luxury items. Going forward, it is critical that we leverage the great work of our
developers to add features to a blockchain that must have the inherent capability to interoperate with
technologies such as IoT, 5G, 6G, edge computing or AI/ML.

We are actively seeking out technology partners who will combine their capabilities with ours for varied
sustainability missions, such as: tracking the lifecycle of an EV battery via NFT, tagging biogas and green
hydrogen to certify their origin, and sharing a person’s biometric information on a secure blockchain to
create a globally recognised humanitarian passport. All of these sustainability-minded use cases have
Web3 technology in common, but they also require very different data collection and tagging technologies.
Ensuring the flexibility of VechainThor, our layer 1 blockchain, and the collaboration of the correct partners
is crucial for each ecosystem.
59
Tech partners and developers are clearly not the only collaborators we need to strengthen our Biosphere
technological layer. Ultimately, our vision will be confirmed by real world applications and successes. To
put this vision into action, we’ll need key opinion leaders — users and enterprises who attract attention for
their sustainability efforts — and key strategic partners to all come together as enthusiastic supporters and
promoters. We have been growing our network of partners since vechain’s early days, but now we must put
even more focus on it. We must secure lighthouse enterprise partnerships to quickly generate awareness
and build recognition, requirements for the mainstream adoption of our vision so far.

The primary benefits of these lighthouse enterprise partnerships are:

• Giving valuable feedback on the platform infrastructure or how an ecosystem is set up and operated

• Providing strategic collaborations which can help vechain grow and scale the Biosphere or a specific
ecosystem

• Serving as influential testimonials for the Blockchain Biosphere for Sustainability or its ecosystems

Launching and establishing the first ecosystems and progressively building the Blockchain Biosphere
for Sustainability must be a priority in the near future. We will require engagement and participation
from all players in the ecosystems to support the development of the minimum viable product and
pilot project. We’ve already been the platform provider helping companies create pilot applications
for blockchain in the real world. Now, conceptualising the Biosphere, we want to coordinate and
enable something even grander. We must identify players who can fit into the roles required for each
sustainability ecosystem to operate and understand the correct incentives for all stakeholders to
participate. Our differentiated underlying technologies and a portfolio of real-world applications
(co-developed through enterprise partnerships) will springboard vechain to become an enabler
of Web3 and empower people and communities to drive positive change.

Attracting companies, investors, governments, and the general public into the Biosphere will require a
focus on educating the market about our enhanced concept of value which incorporates environmental
and societal value. From the very beginning, our vision has incorporated an element of outreach to our
audience, including tech partners, enterprises, and regulators. We are used to opening paths in unexplored
fields, and we understand that with awareness of the use of Web3 to support sustainability still low, we
have yet another uphill climb. But with the right combination of marketing and communications — such as
case studies, webinars, blog posts, social media campaigns, marketing partnerships, or even additional
whitepapers — we can galvanise the first wave of Web3 owners who understand that blockchain-enabled
protocols are crucial to empowering collective action to solve sustainability issues.

Our goal is to both introduce a new definition of the concept of value and demonstrate that blockchain can
enable and support many sustainability opportunities and ecosystems.

We are eager to embark with our partners on the next phase of creating the premier destination for Web3
sustainability solutions.

60
10
Conclusion
Web3 technology can provide the critical infrastructure needed to multiply individual impacts and
unleash our collective sustainable potential. With Web3, we can collaborate to solve some of the biggest
sustainability issues of our time – from climate change and emissions to food insecurity and unethical
labour practices.

Vechain proposes the development of a Biosphere of interconnected ecosystems that will allow individuals,
enterprises, and governments to all play an active and collaborative role in overcoming specific obstacles,
whether that’s allowing consumers to resell unwanted articles of clothing or fashion accessories rather
than throwing them away or developing systems to promote recycling of EV batteries.

Those ecosystems will provide the foundation for developing collaborative systems of action that
incentivise communities of people to commit to and achieve key sustainability goals. This interconnected
network, powered by blockchain, will give individuals the tools to seamlessly participate in any ecosystem
— or even grow their own.

The promise of Web3 technology is its ability to distribute power among the many instead of concentrating
it among the few. With ecosystem governance under the direction of the community — enabled by DAOs
— inclusive decision-making will become the global norm instead of the occasional exception.

Through our promotion of continuous research and innovation, in partnership with academic institutions,
developers, and strategic partners, vechain will work to advance Web3 and blockchain technology to
power practical and efficient solutions for real-world challenges. With new governance and economic
models that will allow for smooth and scalable adoption of blockchain and its integration with other key
technologies such as IoT and AI, we envision mainstream embrace of our Biosphere model. This will lead
to a new era of building communities of action globally and establishing accountability for individuals,
governments, and enterprises as they seek to build a more sustainable world.

A sustainable future for all is just ahead, and vechain aims to leverage blockchain for our better world.

61
Appendix
Appendix 1: Sustainability needs
according to SASB
The five dimensions identified are based on the Sustainability
Accounting Standards Board’s (SASB) taxonomy:

Environment: impacts on the environment, either through the use of non-renewable, natural
resources as inputs to the factors of production (e.g., water, minerals, ecosystems, and biodiversity) or
through harmful releases into the environment (such as air, land, and water), which may negatively
affect natural resources.

Social conditions: the perceived role of business in society, or the expectation that a business
will contribute to society in return for a social license to operate. This addresses the management
of relationships with key outside parties, such as customers, local communities, the public, and
the government. It includes issues related to human rights, protection of vulnerable groups, local
economic development, access to and quality of products and services, affordability, responsible
business practices in marketing, and customer privacy.

Labour conditions: the management of a company’s human resources (employees and

individual contractors). It includes issues such as employee engagement, diversity, and incentives
and compensation, as well as the attraction and retention of employees in highly competitive or
constrained markets for specific talent, skills, or education. It also addresses working conditions and
the management of labour relations in industries that rely on economies of scale and compete on
the price of products and services, and in industries with legacy pension liabilities. Finally, it includes
the management of the health and safety of employees and the ability to create a culture of safety
in companies operating in dangerous working environments.

Business model and innovation: the integration of environmental, human, and social issues in
a company’s value-creation process, including resource recovery and other innovations in the
production process, as well as in product innovation, including efficiency and responsibility in the
design, use phase, and disposal of products. It also includes management of environmental and
social impacts on tangible and financial assets — either a company’s own or those that it manages
as the fiduciary for others.

Leadership and governance: the management of issues that are inherent to the business model
or common practice in one industry and that are in potential conflict with the interests of broader
stakeholder groups (e.g., government, community, customers, and employees). This includes
regulatory compliance, and regulatory and political influence. It also includes risk management,
safety management, conflicts of interest, anti-competitive behaviour, and corruption and bribery.

62
Appendix 2:
What is a materiality map?
Firms use Materiality Maps to disclose the sustainability needs they consider most
relevant based on two dimensions:

1. Relevance of the need to long-term business success

2. Importance of the need to stakeholders like investors, governments,

and consumers

Figure 14 – Materiality Maps

63
Appendix 3: How was the
sustainability Topic Matrix built?
We built the Sustainability Topic Matrix through the following process:
1. A comparable group of relevant companies was selected for each sector.

2. The material sustainability needs were identified for each company, based on
firms’ Materiality Maps, and then aligned terminology to our taxonomy based on
SASB definitions.

3. A consolidated Materiality Map was built for each sector as an average of materiality
maps from individual firms within a sector.

4. The consolidated Materiality Maps from all sectors were integrated into an overall
Sustainability Topics Matrix showing one sector per line and one sustainability need
per column.

The matrix also reflects interviews with multiple industry and Climate & Sustainability
experts, which helped us consider the future evolution of sustainability needs to ensure
comparability across different
industry sectors.

64
Glossary of Terms
3DP – 3D printing OR 3D printer dApps - Decentralised application –
decentralised applications built on top of
Agile – A philosophy of software development blockchain using smart contracts.
characterised by early and continuous iteration
and delivery of software. DeFi – Decentralised finance – a type of
financial system that is built atop decentralised
AI – Artificial intelligence – the ability of a networks such as blockchain and is designed to
computer or machine to conduct tasks that be open and accessible to anyone.
typically require human intelligence, like
learning, problem solving, decision-making, Ecosystem – A structure enabling a set of
and language comprehension partners to actively cooperate by pursuing
a common objective and creating common
API – Application programming interface – value using tokens to exchange value across
a set of rules and protocols that lay out how participants.
two software systems should interact and
communicate with each other Externality – An economics term for a
consequence of a transaction that is experienced
AR – Augmented reality – the enhancement of by a third party and not reflected in the market
the real world with digital information and data, price of the good or service being exchanged.
such as visual and audio content.
Fiat– Currency issued by a government, backed
EV – Electric Vehicle by the faith and credit of the government, and
not by a commodity such as gold or silver.
Big Data – The management of extremely large
datasets that are often difficult to process using GHG – Greenhouse gas – a type of gas that traps
traditional software and database technology. heat in the Earth’s atmosphere and contributes
to the greenhouse effect and climate change.
Bridge – Aoftware that allows users to exchange
digital assets from one blockchain to another IDE – Integrated development environment – a
without using a centralised exchange. software application that provides a range of
tools and features to help developers write, edit,
Carbon footprint – A measure of the total
and debug code.
greenhouse gas (GHG) emissions caused by a
person, company, organisation, event, good, or Information asymmetry – A situation where
service. one party in a transaction has more information
or better information than the other party,
CNC – Aomputer numerical control – a
leading to imbalances of power and market
technology that uses computers to control the
inefficiencies.
operation of 3D printers.
IoT – Internet of Things – the interconnected
DAO – Aecentralised autonomous organisation
network of physical devices and objects that
– a type of organisation that is controlled by
are equipped with sensors, software, and
members, transparent, and not influenced by
network connectivity, allowing them to collect
a central government.
and exchange data.
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Layer 1 blockchain – The base infrastructure SDK – Software development kit – a set of tools
of blockchain. and resources that allow developers to create
software applications for a specific platform.
Materiality – The high demand and significance
for a sustainability solution Service bureau – Business that owns and
operates 3D printers and 3D prints parts.
ML – Machine learning – a class of artificial
intelligence that allows computers to learn Smart contract – A decentralised application
and improve their performance without being built on top of blockchain, which will
explicitly programmed. automatically enforce contract parameters:
If event A happens, then transaction B is
NFT – Non-fungible token – an asset or commodity executed.
which is not interchangeable; NFTs are designed to
be special or unique. Sustainability topics matrix – A matrix that
maps materiality for sustainability topics
NGO – Non-governmental organisation – an across various industry sectors to organise
organisation that is formed and operates and prioritise sustainability needs.
independently of any government and whose
objective is typically to address a social or Testing centre – A business that validates 3D
political issue. printed parts for quality assurance; could be
same as service bureau.
OEM – Original equipment manufacturer.
Token – A unit of value of a blockchain-based
Phygital – The integration of the physical and the ecosystem that enables different actors to
digital world, referring to how technology is used interact with one other, carry-out transactions,
to blur the line between the physical and digital or transfer value; each fungible token, or
and creating hybrid experiences. fraction of a token, is equivalent to the next.
Platform infrastructure – The foundation of Tokenomics – The application of economic
the Biosphere encompassing the technology principles and game theory to design the
platform as well as the operating and support tokens on a blockchain to ensure desired
capabilities layers. incentives and behaviours from users and
that tokens are effective and efficient.
PoA – Proof of Authority – a consensus model
with a small number of pre-approved verifiers. It VechainStats – Blockchain network analytics
consumes very little energy. for the VechainThor blockchain.
PoW – Proof of work – a consensus model, used VechainThor – Vechain Foundation's blockchain
by blockchains such as Bitcoin, designed to solve technology.
the problem of “double spending” and ensure
that all transactions are valid. Mining computers VET – Native vechain token.
randomly guess numbers to solve a cryptographic
puzzle, where the winner receives a significant VIP – Vechain Improvement Proposal. It is a
block reward. In Bitcoin, it takes an average of 10 design document providing information or
minutes for miners to find the winning answer. describing a new feature. VIPs contain ideas
from developers and communities to improve
SASB – Sustainability Accounting Standards the VechainThor blockchain.
Board – a non-profit organisation that develops
and maintains financial reporting sustainability VR – Virtual reality – the computer-created
standards for publicly listed enterprises in the simulation of a 3D environment that can be
United States. interacted with in a seemingly real way by a
user with specialized equipment.
SC@E – Supply Chain at the Edge.
VTHO – Native vechain token used to pay for
SDGs – Sustainable development goals – transaction gas fees.
a set of 17 global goals adopted by the United
Nations in 2015 as part of the 2030 Agenda Wallet – A software application that allows
for Sustainable Development, which involve a users to send and receive digital currencies
universal call to action to end poverty, protect and assets by storing private and public keys
the environment, and ensure people have and interacting with various blockchains.
the opportunity to live peaceful, healthy, and
prosperous lives.
66
Table of Figures
Figure 01 - Vechain timeline 6

Figure 02 - Core ideas for vechain today 8

Figure 03 - Journey from Web 1.0 to Web 3.0 9

Figure 04 - Vechain aspiration journey 10

Figure 05 - Sustainability Topics Matrix 13

Figure 06 - Collaboration systems 15

Figure 07 - Obstacles to Collective Sustainability Action 17

Figure 08 - The Blockchain Biosphere for sustainability 20

Figure 09 - Purposes and Roles in an Ecosystem 24

Figure 10 - A new concept of value 27

Figure 11 - Consumer Sentiment 34

Figure 12 - Leveraging battery 2nd life usability 36

Figure 13 - Vechain tech roadmap 2023 56

Figure 14 - Materiality Maps 63

67
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69
Credits
Vechain

Marina Fortunato Jay Zhang

Project Manager CFO

Sunny Lu Peter Zhou

Founder Chief Scientist

Antonio Senatore
CTO

DNV contributors

Federica Guelfi Gabriele Manno

Circular Economy Head of Digital
Project Manager Assurance Platforms

Friendly contributors - Luca Crisciotti, Renato Grottola

Boston Consulting Group

Lamberto Biscarini Edwardo L. Sackey

Senior Managing Managing Director
Director & Partner & Partner

Guy Gilliland
Federico Colombara
Senior Managing
Partner & Associate Director
Director & Partner

Marco Tonegutti Qingyuan Lin

Senior Managing Principal
Director & Partner

Thomas Baker Antonio Sangiovanni

Managing Director Project Leader
& Partner

The authors thank BCG collegues Gaia Dell'Eugenio, Anne Deng, Giulia Gargiulo, Jonathan Greene, Jan Joho,
Liana Lei, Mimi Li, Laura Morano and Elisabetta Sagretti for their contributions to this whitepaper.

Furthermore, we would like to express our gratitude to all the enterprises and individuals who have
collaborated with us and participated in the discussions that have inspired the drafting of this whitepaper.

For any information on this Whitepaper or vechain, please write to info@vechain.org

70
Disclaimer
The Boston Consulting Group (BCG) was engaged and paid by Vechain Foundation San Marino S.r.l. (vechain) to undertake an
extensive analysis of vechain’s global business and to make recommendations to vechain on a sustainability strategy and
communication plan as part of a Strategic Partnership. The Whitepaper to whichthis Disclaimer is attached is the product of that
extensive analysis by BCG. The Whitepaper was prepared by BCGfor the purpose of publication, and the content included herein
stems from vechain’s engagement of and payments to BCG to help prepare and write the Whitepaper.

BCG helped prepare and wrote the Whitepaper in good faith based on information and materials available before its initial
publication. BCG did not independently verify any of the information or materials that was provided by vechain or any third parties
and reproduced in the Whitepaper. Changes in the underlying data or operating assumptions will clearly impact the analyses
and conclusions of the Whitepaper. BCG does not guarantee or make any representation or warranty with respect to the accuracy,
reliability or completeness of the third-party information and materials underlying BCG's analyses in the Whitepaper or with
respect to the Whitepaper's usefulness in achieving any purpose. Readers of the Whitepaper are responsible for assessing the
relevance and accuracy of its content. BCG included in the Whitepaper data from various sources and assumptions provided to
BCG from other sources. BCG has not independently verified the data and assumptions from those third-party sources. Changes
in the underlying data or operating assumptions in the Whitepaper will clearly impact its analyses and conclusions.

BCG and vechain disclaim any liability for any loss, damage, cost, or expense incurred or arising by reason of any person using
or relying on the information in the Whitepaper. To the fullest extent permitted by law, neither BCG nor vechain shall have any
liability whatsoever to any person in connection with the Whitepaper, and any person using the Whitepaper hereby waives any
rights and claims it may have at any time against BCG and vechain with regard to the Whitepaper. To the fullest extent permitted
by law, receipt and review of the Whitepaper including this Disclaimer shall be deemed agreement with and consideration for
this Disclaimer.

The Whitepaper is based primary on qualitative and quantitative research executed by BCG. Neither BCG nor vechain provides
legal, accounting, or tax advice. Readers of the Whitepaper are responsible for obtaining independent advice concerning those
matters. That advice may affect the guidance in the Whitepaper. Further, neither BCG nor vechain has attempted to update the
Whitepaper after its initial publication, notwithstanding that such information in the Whitepaper has or might become outdated
or inaccurate. Neither BCG nor vechain provides fairness opinions or valuations of market transactions, and the Whitepaper
must not be relied on or construed as such. Further, any evaluations, projected market information, and conclusions contained in
this document are based upon standard valuation methodologies, are not definitive forecasts, and are not guaranteed for any
purpose by BCG or vechain.

The Whitepaper does not purport to represent the views of the third-party companies mentioned in it. Reference herein to any
specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise, does not ecessarily
constitute or imply its endorsement, recommendation, or favoring by BCG or vechain.

The Whitepaper may not be used or distributed for any purpose without the written consent of vechain.

The V, vechain, VechainThor, VTHO, and VET trademarks are owned or licensed by Vechain Foundation San Marino S.r.l.

71
Thank you