VeChain CEO, Sunny Lu, was interviewed by Fenbushi Capital for their Distributed Entrepreneurship Column.
Sunny talks partners (DNV, PwC), investors (Fenbushi, Fenchain), and the three ‘historic choices’ that shaped VeChain.
Lu Yang, the founder of VeChain, is one of the earliest people in China who knew Bitcoin. Lu Yang, then CIO of LV’s Greater China Region, learned about Bitcoin in 2013. At that time, Bitcoin experienced a 13-year super sharp drop, from 1000 US dollars to 150 US dollars. Compared with the severe volatility of Bitcoin prices, Lu Yang is more interested in the technology and logic behind it. After research, he deeply felt that the distributed ledger and blockchain technology behind Bitcoin had a bright future, and he also wanted to participate in this industry.
Lu Yang often participates in various meetups in the encryption industry during business trips. At that time, the so-called blockchain entrepreneurship was not a climate.
The idea of many entrepreneurs is to copy the code of Bitcoin, then change the logo, name, block size, and block time, and then new chains and coins are born. Lu Yang’s perception of the industry at that time was: Most people in this industry were in technology, had geek thinking, but lacked product thinking.
Once, when Lu Yang participated in an event organized by IBM in San Francisco, a developer showed him the project, and the only thing that caught his eye was the full screen of code. Most developers just want to write beautiful code, and never think about where to apply it and how to display it.
At that time, Lu Yang’s job as LV CIO was to connect technology and business scenarios, such as digital marketing, to convert traffic into sales. In the era when WeChat came out, this kind of digital cognition was advanced. Years of experience tells Lu Yang that the blockchain industry lacks talents with product thinking, and this happens to be his advantage.
The time came to 2015. Even though the industry had technologies such as colored coins, it was still too primitive and rough to be applied to more complex scenes.
Ethereum, with the innovation of EVM and smart contracts, brought a glimmer of light to the industry. The establishment of VeChain was due to the acquaintance between Lu Yang and Vitalik. At the end of 2015 and early 2016, Lu Yang met Vitalik through Shen Bo, and Vitalik was looking for investment partners in China at that time.
After talking with Vitalik, Lu Yang found that the technical architecture of smart contracts and EVM was groundbreaking. Therefore, VeChain built its own alliance chain based on the structure of Ethereum in the early days of its business, and began to find relevant customers.
Lu Yang’s deep resources in the fashion field have played a role. VeChain’s first customer is the top luxury brand owned by the former boss. The VeChain team combined the NFC chip with the alliance chain platform to provide it with supply chain management and anti-counterfeiting traceability.
As of the end of 2019, the supply chain management of 100% of the brand’s global leather goods has adopted VeChain solutions. VeChain’s preliminary exploration has proved that the blockchain based on Ethereum is feasible, and this long road of exploration has just begun.
Three historic choices
During the alliance chain period, VeChain accumulated customers in fields such as luxury goods, wine importers, and logistics. These cases just make Lu Yang faintly feel that the blockchain will have very powerful applications in the future, but how to use it is still unclear.
There is a saying in the entrepreneurial circle that “strive to be the first to eat crabs”, which roughly encourages entrepreneurs to stay on the forefront of innovation. As everyone knows, in the earliest stage of the development of the industry, when there is no successful model to refer to, such an entrepreneurial journey must be bumpy and lonely. Fortunately, VeChain made every choice very correct.
For the first time, the IoT team was incorporated. At the beginning of his business, Lu Yang found that the chain technology alone was not enough. Other technologies needed to be integrated in the application scenarios, the most important of which was the Internet of Things.
The Vechain is equivalent to a virtual world. How to connect this virtual world with the physical world, the Internet of Things will play a role. At that time, the team looked for many IoT companies and sought cooperation, but they were ignored. It is also attributable to the fact that the Internet of Things companies mainly undertook government projects at that time and did not know much about blockchain technology.
With nowhere to cooperate, Lu Yang made a bold decision-to incorporate an IoT team. Although this decision is quite controversial internally, it now appears to be a wise move. Blockchain and the Internet of Things are a match made in heaven. Coincidentally, Gu Jianliang, the boss of the IoT team, later became VeChain’s CTO-he not only set up the Internet of Things, but also the chain, and later built the ToolChain platform with the team.
The second time, to be an enterprise-friendly blockchain platform. After accumulating certain cases, Lu Yang found that developing a private chain/consortium chain for each company from 0 to 1 was not desirable, which was equivalent to recreating wheels.
The most urgent task is to find a chain that can stably carry the business. To this end, he convened dozens of business executives in Qiandao Lake to seek an ideal blockchain platform. The feedback was that most of the public chains on the market did not meet the requirements. First, the governance structure.
For enterprises, it is difficult to imagine that a software system will not be upgraded for ten years in a decentralized environment. Once the software is upgraded, a group of people will start voting, arguing, and then fork. Second, the economic model.
Ethereum fees fluctuate and are even expensive when the network is congested. Many companies cannot accept that the cost of running a business is unpredictable. Third, compliance . Due to regulatory compliance, companies are temporarily unable to own digital assets.
So how to use digital assets as a means of production and keep accounts? When companies adopt smart contracts to abandon digital assets, what should they do?
VeChainThor Blockchain, as the first blockchain platform with PoA (Authority Consensus) as the underlying consensus , not only adds a fee payment mechanism, a multi-party payment protocol, but even adds the function of setting transaction parameters. Before trading on Ethereum, there may be a situation where the handling fee will be in the water.
However, the Raytheon blockchain can configure a transaction, and if 60 seconds is not established, the handling fee will be refunded. Many technical details of the Raytheon blockchain, including consensus mechanism, governance structure and economic model, are very friendly to enterprises. After more than a year of development, the Raytheon blockchain went live on the mainnet on June 30, 2018.
For the third time, the VeChain ToolChain™ platform was launched. Although the underlying blockchain platform most suitable for enterprise use has been developed, part of the work of building applications on it is still homogeneous.
Enterprises have a demand for blockchain applications, but they will not build their own technical teams, but will rely on existing mature services. As a result, the VeChain team is determined to reduce complexity, and has independently developed the VeChain ToolChain™ platform since 18 years, allowing enterprises to develop applications faster and lower costs. Enterprises can choose different levels of platform services according to their own needs, which is also the origin of SaaS-PaaS-BaaS.
BaaS (Blockchain as a Service) means that companies will choose a certain chain to build applications. When an enterprise wants to forge NFTs, develop certificate deposit contracts, or calculate smart contracts, two situations will occur: first, the needs of the enterprise are at the same time, and only need to call public smart contracts; second, the enterprise has customized needs and needs to develop its own Smart contract.
At this time, VeChain will develop customized smart contracts without the enterprise having to worry about its deployment and maintenance. The feedback to customers in the future is that companies can use smart contracts and even some components (browser, blockchain wallet, etc.) on the blockchain by directly calling the API in their own platform system.
PaaS (Platform as a Service) uses a low-code development environment to build applications . This application is mostly used in multi-party collaboration scenarios. When companies embrace blockchain technology, they will encounter this problem: when business processes change, existing business systems need to be modified.
At this time, enterprises need a platform independent of the existing system, that is, the PaaS layer of VeChain ToolChain™. PaaS can help enterprises conduct multi-party collaboration while protecting data privacy. In this application environment, data from multiple parties can be aggregated and interacted, so that the data can burst into greater value, and the value of data can be reflected in the blockchain in food safety, carbon emission reduction, ocean plastic waste recycling, etc. .
SaaS (Software as a Service) refers to the front end that an enterprise displays to end users. VeChain will provide some templates, companies only need to modify the UI slightly to form a complete digital product.
“Although the market has been changing, we still stick to our own path, empower the real economy and make practical blockchain applications. Our goal is to make enterprise deployment applications easier and faster. We At the same time, I also hope that there will be more and more valuable applications or valuable transactions on this chain. Teacher Shen Bo often said that someone in this industry has to do hard work. Since VeChain does hard work, then bet on this one. That’s it,” Lu Yang said.
Many like-minded partners also joined
When VeChain explored the path of blockchain applications, many like-minded partners also joined in. Fenbushi Capital was initially optimistic about VeChain’s pragmatic spirit, and thus became VeChain’s angel investor.
VeChain was also the first domestically invested project by Fenchain Capital. After that, Det Norske Veritas and PricewaterhouseCoopers gradually recognized VeChain’s business model, recognized Lu Yang and his team, and upgraded from a partner to an investor in the process of cooperation.
On the path of entrepreneurship alone, VeChain finally met comrades who can fight shoulder to shoulder. The relationship between VeChain and investors is a long-term relationship of mutual assistance and common growth. “Det Norske Veritas is the world’s most authoritative TIC (certification inspection and monitoring) industry, and the effect of blockchain application in this regard is the most obvious.
At present, all digital products (My Story™, My Care™ and MyBaby) both use VeChain’s blockchain platform. We have truly achieved go to market together. PwC’s deep industry resources are a supplement to VeChain, which is known for its technology, and truly enhance VeChain. The business development capabilities of the chain. In the future, PwC will also focus on new business of digital solutions, which will be of great help to VeChain.” Lu Yang said.
Thanks to two global partners, VeChain’s business is now spread all over the world. At present, the field where companies use low-code to quickly build blockchain applications is a blue ocean that has not yet been fully developed, and VeChain will also work with its partners to open up new frontiers and expand blockchain technology to more industries.
Although it is difficult to determine which entrepreneurial idea is better, whether it is technology-driven application or application-driven technology. But one thing I can firmly believe is that entrepreneurship is never looking left and right, following the trend, but conforming to your own logic, following your own intuition and sticking to your original aspirations.
Throughout VeChain’s entrepreneurial journey, VeChain is more like an Internet company focusing on making good products. And Lu Yang has firmly established his entrepreneurial direction from the beginning-starting from the application, using blockchain technology to help companies carry out digital transformation and upgrading.
Quantitative changes were transformed into qualitative changes. After accumulating certain cases, Lu Yang began to ponder how to modularize and platform this kind of enterprise services through technical means to deploy applications for enterprises at low cost. This application-promoting technology and technology burst application model proved to be successful. VeChain’s unhurried, down-to-earth style has also attracted many fans, adding wings to the development and growth of the company.