VeChain’s core bet: predictable enterprise fees, funded by a two-token split

VeChainThor positions itself as an enterprise-focused L1 where the cost to use the chain is intentionally separated from the asset that represents network stake and governance. VeChain describes this explicitly as a “Two-Token Model,” splitting VET (utility) from VTHO (gas) to keep fees predictable and adjustable during market volatility.

That separation matters for tokenomics because it decouples user demand (transactions consume VTHO) from stake demand (VET is the unit used for validator collateral, delegation, and governance participation). VeChain’s own documentation frames VTHO as the “cost” token and emphasizes that it is generated from VET over time under the economic model.

Mechanically, the design is less “one token captures all value” and more “VET underwrites the system, VTHO meters usage.” That is a coherent enterprise story. It also creates regulatory tension because it can look like a yield-bearing asset if holding or staking VET reliably produces VTHO that can be sold.

VET supply: fixed ceiling, legacy sale-era allocation, and today’s on-chain reality

In the original VeChainThor development plan, the post-split total supply is stated as 86,712,634,466 VET.

Today, the on-chain circulating supply reported by VeChainStats is 85,985,041,177 VET. CoinGecko also reflects 85,985,041,177 as circulating and total supply, and lists 86,712,634,466 as max supply.

VeChain’s early token accounting also records an ERC-20 era refund and burn of 132,837,366.56 ERC-20 VET, leaving 867,126,344.66 ERC-20 VET before the later 1:100 split to native VET.

One practical nuance: in a March 12, 2025 circulation schedule note, a historical misclassification of 5B VET earmarked for X Node rewards is described, and the circulating figure is stated as updated to 85,985,041,177 VET, aligned with total supply.

Legacy allocation (as presented in the v1.0 development plan) is percentage-based and rooted in the ERC-20 sale era.

From a modeling standpoint, the key takeaway is simple: VET behaves like a capped base asset with no “ongoing emissions” story. Most of the moving parts sit in VTHO.

VTHO issuance: from passive “holding yield” to staking-linked rewards (VIP-254)

Historically, VeChain’s economic model makes an explicit promise: holding VET generates VTHO automatically. The baseline parameterization describes a block cadence of one block every 10 seconds and sets the generation speed as 5×10^-8 VTHO per VET per block, which implies 4.32 VTHO per 10,000 VET per day.

The same v1.0 plan later expresses the base rate directly as 0.000432 VTHO per day per 1 VET held (and uses this value in examples and pool calculations). VeChain’s official write-up also describes the base generation rate as mandated at 0.000432 VTHO per VET per day.

That “passive accrual” is exactly where the tokenomics becomes compliance-sensitive. The v1.0 whitepaper openly frames its valuation model as borrowing from a share price model and characterizes VTHO as a utility “accrued by holding” VET, with a discount rate “related to the rate of return by holding” VET. That is unusually close to finance language for a public L1 token design.

VeChain’s 2025-2026 arc moves away from passive yield. In its Hayabusa Devnet announcement, VeChain states that VIP-254 ends the static VTHO generation rate of 0.000432 VTHO per VET per day and replaces it with a dynamic mechanism tied to staking.

The MiCAR-oriented VTHO paper makes the new intent very explicit: VTHO generation is “no longer static” and only Validators and Delegators that contribute to securing the network are entitled to receive new VTHO.

On the client side, VeChain’s Thor release notes for Hayabusa frame the same change in protocol terms: VIP-254 replaces static VTHO generation with staking-based block rewards, and VTHO issuance “will stop” at the hardfork block heights, then “reactivate as block rewards” after transition from PoA to DPoS.

Key date anchor points are given in those release notes: a testnet hardfork on November 4, 2025 and a mainnet hardfork on December 2, 2025.

From a regulatory pragmatist lens, this shift is rational. It reduces the “everyone earns yield just by holding” optics. It also introduces a different set of questions because staking rewards look like a programmatic return tied to network participation, which can still be scrutinized depending on jurisdiction, marketing, and how governance and validators are controlled.

Fees, burns, and fiscal flows: what gets destroyed, what gets paid out

VTHO is the unit used to pay for gas and smart contract execution on VeChainThor.

Historically under PoA-era economics, VeChain’s whitepaper v2.0 describes a simple split on consumption: in each block, 30% of the VTHO consumed by transactions is paid to the block-producing Authority Masternode and 70% is burned.

The more recent MiCAR VTHO paper describes a more aggressively deflationary posture: for every transaction, 100% of VTHO used as gas fees is burned. The same section also notes that users may pay extra VTHO as a “tip” to Validators to prioritize transactions.

Operationally, that “burn gas / pay tips” framing matches what the validator documentation states today: Validators receive a share of block rewards and 100% of transaction priority fees from blocks they produce. So the clean mental model is:

Network usage burns VTHO (deflation pressure), while optional priority fees and protocol block rewards are what pay validators and delegators.

VeChain also built in fee delegation early. In the v1.0 payment model, the transaction fee can be paid by the sender, the recipient, or a smart contract sponsor through a defined charging sequence. This matters for adoption because it lets enterprises abstract gas away from end users. It also matters for value capture because it enables a “platform operator pays the gas” business model where the operator sources VTHO at scale.

One caution for analysts: VeChain’s developer FAQ currently states “30% of transaction fees are burned.” This conflicts with both the whitepaper v2.0 (70% burned) and the MiCAR papers (100% gas fees burned). The most compliance-relevant point is not which number is “nicer.” It is that documentation drift increases uncertainty around current parameterization, which reduces confidence when you try to underwrite long-horizon fee and burn models.

Governance and parameter control: efficiency first, decentralization later

VeChain’s original governance model is foundation-centric by design. The v1.0 plan describes the VeChain Foundation as responsible for establishing a Steering Committee with seven seats.

Voting authority in that same model is explicitly weighted and identity-aware. The v1.0 document specifies minimum VET thresholds and assigns aggregate weights across groups such as VET holders (with and without KYC), smart contract owners, and authority masternode holders, and states that the weights can be adjusted by the Steering Committee.

Whitepaper v2.0 reinforces the “governable parameters” stance by listing “fundamental subjects” that require all-stakeholder voting, including modification to the generation velocity of VTHO via holding VET and fundamental consensus changes.

Under the PoA framing, validator access is permissioned. Whitepaper v2.0 states there are 101 active Authority Masternodes, each requiring identity verification and at least 25,000,000 VET collateral, and it notes that the whitelist is managed by an on-chain Authority contract that requires multi-signature authorization of Steering Committee members to modify.

Then comes the Renaissance-era transition. VeChain’s docs note that the legacy Economic/X-Node rewards program entered sunset mode on June 24, 2025, with rewards benefits ceasing on July 1, 2025, as StarGate NFTs replace the older node program.

In the StarGate validator model, becoming a validator requires staking a minimum of 25,000,000 VET and choosing a validation period of 7, 15, or 30 days. Validators earn block rewards and priority fees, and once they have delegators, the block reward is split 30% to validator / 70% to delegators.

Compliance trade-off: VeChain’s governance posture is unusually explicit about coordination, KYC, and parameter control. That can lower operational risk for enterprises. It can also increase “managerial efforts” salience in securities-style analyses, because holders may rationally rely on the foundation and steering committee to tune fees and issuance to keep the system economically viable. The v1.0 whitepaper is direct that the Foundation would adjust the minimum VTHO price per gas and, if needed, adjust VTHO generation velocity.

Risk analysis (ranked)

Dominant risk: regulatory classification risk driven by “yield-like” mechanics and explicit managerial discretion.

VeChain’s tokenomics has always walked close to the line that regulators care about: does buying and holding the token reasonably look like buying an asset that passively generates a return, where the return depends on the ongoing optimization work of an identifiable group.

The historical design creates that impression in three stacked layers:

First, VET was explicitly designed so that “whoever holds VET will be given VTHO for free,” and VTHO can be transferred and traded. That is economically similar to a protocol-native rebate or yield stream, even if VeChain frames it as “utility.”

Second, the whitepaper v1.0 uses valuation language drawn from equity analysis, calling out a “share price model,” a discount rate “related to the rate of return by holding” VET, and treating VTHO as a utility “accrued by holding” VET. That is not marketing fluff. It is design intent presented in finance terms. If you are trying to minimize legal exposure, you normally avoid anchoring your token’s value to return-like framing.

Third, VeChain also describes macro-control levers. The Foundation would adjust the minimum VTHO per gas to stabilize transaction costs, and adjust VTHO generation velocity if needed. Even when those actions are gated by governance, the presence of explicit “control knobs” can strengthen the argument that token outcomes depend on coordinated policy decisions rather than purely emergent market behavior.

The post-Hayabusa shift reduces one specific pressure point by ending passive VTHO generation and tying issuance to staking participation. For comparison, the staking reward model in Cosmos highlights how issuance mechanics can be framed around validator participation rather than passive holding.

Where this becomes measurable is not in abstract legal debate. It shows up in exchange listings, access constraints by jurisdiction, enforcement actions, and whether the ecosystem must contort distribution and communications to avoid “yield product” labeling. The more VeChain emphasizes “more rewarding” tokenomics as a primary narrative, the more it should expect compliance scrutiny.

Two second-order effects matter for tokenholders. One is that compliance risk tends to cluster around the most liquid asset, which is VET. The other is that a compliance-driven design pivot can break tokenholder expectations overnight. VeChain has already demonstrated willingness to evolve issuance rules through VIPs.

That is good product governance. It is also parameter instability from an investor’s perspective.

Top 3 risks

  1. Regulatory reclassification or distribution constraints. Trigger: a regulator treats VET’s reward pathways (historical passive accrual or current staking rewards) as an investment-like return stream. Mechanism: exchange delistings or geo-fencing, restrictions on “earn” style UX, or mandated disclosures and intermediated distribution. Who bears it: VET holders and ecosystem apps reliant on liquid VET markets. Measurable indicators: exchange support changes in key jurisdictions, sudden KYC gating for staking interfaces, legal-risk disclosures in official papers tightening over time.

  2. Governance centralization and policy discretion. Trigger: stakeholder confidence drops because key economic parameters or validator set control is perceived as too steerable by a small group. Mechanism: governance premium compresses as markets discount “credible neutrality,” and builders hesitate if fee policy can be re-tuned unpredictably. Who bears it: long-duration holders and app teams whose unit economics depend on stable gas assumptions. Measurable indicators: governance participation rates, frequency and magnitude of parameter-related VIPs, documentation inconsistencies on fee burn mechanics.

  3. Value-capture leakage between VET and VTHO. Trigger: network usage grows, but the economics primarily cheapen VTHO rather than increasing durable demand for VET, or staking participation concentrates rewards among a small validator/delegator set. Mechanism: fee delegation and enterprise sourcing can make VTHO procurement efficient without meaningfully increasing secondary market pressure on VET, while VTHO burns may be offset by issuance depending on the staking curve. Who bears it: VET holders expecting network adoption to translate into VET appreciation. Measurable indicators: VTHO burn rates versus issuance, staking concentration, and the share of fees coming from base fee burn versus priority fees.

If you are building something structurally similar, get clear on the boundary between “utility rebate” and “yield,” and write it down as mechanics, not vibes. This is where tokenomics consulting and disciplined token economy design earn their keep, because small drafting choices can create large legal exposure later. For more examples and frameworks, browse our research reports.



This article is part of our Tokenomics Deep Dive series.