I’ll ELY5: Why VET will increase in value long term, despite Thor Power price always staying low.

17

I posted this as a response in another [thread,](https://www.reddit.com/r/Vechain/comments/7xk3at/help_me_understand_the_longterm_projected_value/) but this really needs more visibility because I see people always getting confused by this/ can’t wrap their head around it. It’s a wall of text, but I suggest you read it:

This is going to be long, but I’ll try to break it down.

Lets look at this in terms of dollars, and break it down into simple terms. It is severely watered down, but the jist still holds true.

Imagine VET tokens as a ticket printing machine, and they print tickets called Thor Power.

The initial cost of a ticket printer is $3.

Lets say for simplicity that there are only 50 ticket printers (VET) in existence, and one ticket printer can print only two tickets (Thor Power) a year.

Now, lets say there are only 100 tickets in circulation for the 2018 year.

Alright, now, in order to for Louis Vuitton to put an rfid into a handbag and trace it on the blockchain, it takes one ticket. And that ticket currently costs $1 on the market. LV decides they want to trace 50 handbags this year. Well, that will take 50 tickets and cost them 50$. So there will 50 tickets taken off the market and only 50 remain for the year.

Now lets say that Renault wants to also use the VeChain blockchain for tracing their car parts. Well, that also cost’s one ticket per car part. They decide that they want to trace 50 car parts this year, so they buy 50 tickets for $1 each for $50 total.

All is fine and dandy so far because the entire ticket supply was enough to meet the demand, and there is no competition for the tickets, so the price stays at 1$ a ticket. 100/100 tickets were used this year.

Also, it was a good year for the people who own the ticket printers. They invested $3 to buy a ticket printer, and it printed them $2 worth of tickets this year. That’s a good return on investment as now they have a net worth of $5 AND still own a ticket printer.

Now the year is 2019. Both LV and Renault were massively impressed with VeChain’s services, and want to up how many things they want to track this year. LV now wants to track 100 hand bags, Renault wants to track 100 car parts, and Walmart was impressed by LV and Renault, so they want to track stuff too. 100 barbie dolls in fact. Well, to do this, it still costs 1 ticket to track each item on the blockchain. Well, this is a problem. There are only 100 tickets that will be in existence this year at the current ticket printer rate, but there it will take 300 tickets to run everything.

So two things can happen now:

A) Walmart can offer exuberant amounts of money to secure the 100 tickets. They offer $10 a ticket when it only cost $1 a ticket last year. LV and Renault may deem that it’s not worth it to pay $10 a ticket, and they simply pass on using VeChain’s blockchain. This is NOT a good business model (and if Ethereum stays this way, Ethereum will eventually flatline in price)

B) VeChain decides to up the amount of tickets that ticket printers (VET) print per year to meet the demand. They want to keep the price per ticket low, $1 each still. In order to meet the demand of 300 tickets, they decide to have the ticket printers print 6 tickets per year instead of 2. So now this year, there will be 300 tickets, the price of the tickets will stay around $1 still, and everyone wins.

Vechain is modeled around option B.

Well, now, the people that spent $3 on a ticket printer the previous year will get a whopping $6 worth of tickets this year, and a net worth of $9 for this year.

So, someone who doesn’t hold a ticket printer sees this as a money making opportunity. $3 for a ticket printing machine that makes $6 a year? What a deal! So he goes to someone who owns a ticket printing machine and offers them $3. Obviously, they refuse. So he works out a deal with them, and buys the ticket printing machine from them for $20. He thinks, “I spent $20 to get a 30% return on investment, that’s a damn good deal.”

Now extrapolate all this onto a year by year basis and that’s the basic jist of it all. Make sense?

7 COMMENTS

  1. Pretty easy to adjust the transaction cost per transaction to keep it fractions of a cent, or adjust the Thor economy. But yes, they will not allow transaction cost to get out of control. Either transaction costs will be varied, THOR production will increase with demand, or both.
    Either way we still get a similar return on our VET.

  2. I’m a bot, *bleep*, *bloop*. Someone has linked to this thread from another place on reddit:

    – [/r/vechaintrader] [I’ll ELY5: Why VET will increase in value long term, despite Thor Power price always staying low.](https://www.reddit.com/r/VeChainTrader/comments/7xknz6/ill_ely5_why_vet_will_increase_in_value_long_term/)

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  3. I asked this and the conclusion is that we cant explain anything till we get more information on the system. its genuinely pointless to discuss as we know so little. with current information, it does suggest that without speculation driving up the price, VEN should be tied to it’s Thor output.

  4. What about the entities that are using VET the most who have purchased and produce their own THOR by staking? Wouldn’t it be smart for them to purchase just enough to produce the amount of THOR it takes to run their transactions?

    My thought is that there is going to be less circulating supply of VET as big companies will buy up and stake to power their transactions for free. Regular investors will day trade Thor and VET will keep its price stable until they secure new partnerships which will boost the demand for the token and not the coin.

    Basically, what’s the incentive for new partners buying VET over THOR?

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