- News about VEGA and what has been achieved
Just now·8 min read
Last month, we announced Vega token airdrops on Foxstarter, starting at 00:00 UTC on October 2. Vega is building a derivation layer for Web3. Vega is designed as an equity proof bridge for all major blockchains, offering an open and highly flexible layer of derivatives protocol expansion with all the complexity of investment banking software. This week, we sat down with the Vega team to discuss what they’re building, the use cases, the recent appeal of our target customers, and their broader ideas for crypto derivatives
1. First of all, what is Vega and what does it solve?
Vega is a custom blockchain optimized for trading and provides a derivative extension layer for Web3 applications. It provides investment banking-grade trading software for the entire blockchain ecosystem by bridge to multiple tier 1 networks, starting with Ethereum.
Currently, encrypted assets are used almost exclusively for speculation, directly or through financial engineering in the "DeFi" protocol to finance and generate revenue directly or indirectly from projects and systems in the encryption space. We believe that in the future, most financial activities and the commercial and legal enforcement surrounding it will take place in the chain. To achieve this, several issues of the current generation of decentralized financial agreements must be addressed, including early operation, low capital efficiency and high costs. Several new or increased risks need to be addressed that are unique to the protocols and blockchains they establish.
Vega solves all of these problems and creates the next generation of derivatives and trading layers for a decentralized future. In doing so, Vega made it possible for the first time to move a large number of real-world transactions into the chain.
2. Can you describe your target customer? What types of projects and use cases are best built on Vega?
Vega is a technical layer that provides high-performance financial and transactional pronums for a variety of decentralized transactions. It allows you to create products and markets that are as complex as traditional central solutions on the chain. This means that Vega is fully open to anyone and forms part of a core infrastructure that will create a new global and decentralized financial system, as well as other important technologies such as Bitcoin, Ethereum, IPFS, and more.
Vega can attract builders, market creators and traders in three key areas:
1. Transfer existing centralized markets in cryptocurrencies and other asset classes to chains where other decentralized alternatives are not possible or economically feasible.
2. Build better, fairer, and more capital efficient versions of existing decentralized products and markets that are still integrated with other DeFi protocols and use the same encrypted assets, such as Ethereum-based ERC20.
3. Create and launch new products and markets, leverage Vega's uncompromising trading and product capabilities, and stimulate users to guide complex liquidity models in new markets.
Types of traders who may be interested in using Vega include professional market makers, individuals and businesses, and market speculators who wish to hedge their day-to-day risks. Vega exposes many of the tools currently available only to privileged professionals and gives everyone the opportunity to use complex financial products to their advantage.
3. What are the most important factors for derivatives traders in assessing the mode and location of their trades?
Traders take many different factors into account when deciding to trade. These depend on why they trade (whether they hedge against commercial risk, speculative macroeconomics, day trading, market making, etc.) and the current state and maturity of the market as a whole.
For example, sometimes it is not possible to trade exactly what the trader wants, so they may look for an "agent" - one or more markets that are as close as possible to the trade they want to trade. In addition, some traders need to trade in large sizes, in which case the depth of the order book and other factors affecting slippage are important to them. Then there are the costs, measured by spreads, capital efficiency/leverage (how much collateral is required to trade) and transaction-related costs and other costs, with low spreads, high efficiency and low fees desirable. Other factors, such as the type and complexity of available products, equity and MEV-related considerations, market protection or availability of "circuit breakers," supported order types, compliance/regulatory considerations, are also beginning to play a role. Vega is designed to provide a foundational layer that addresses all of these factors in a competitive manner compared to most traditional and centralized transactions.
The most common of these characteristics are undoubtedly low transaction costs and spreads, a fair trading environment (i.e. no one can get preferential treatment), deep liquidity and effective prices. Vega Blockchain is optimized for all of these areas through its customized equity certification design and complex economic incentives. We expect this to make it the best environment to trade derivatives on a decentralized network.
4. How is your agreement designed to make it so attractive to professional traders and liquidity providers?
Unlike a central trading venue, which is essentially a rent seeker that provides the infrastructure to connect traders and liquidity providers (LPs), Vega does not charge any fees for the use of its software. Vega software is free, will be open source, and implements a decentralized network in which authenticators compete with each other to provide competitive terms. We expect competition between validators to minimize the operating costs of Vega software, thereby increasing the profitability of the LP and reducing trader fees.
In addition, the absence of a centralised exchange or entity to collect fees and revenue from transactions on Vega has instead flowed to communities that create value by creating markets and providing liquidity. The unique model built into the agreement to reward market creators and LPs for having a similar share of the market means that they are treated as owner-operators by the agreement, are required to make decisions (through governance agreements) to keep the market functioning well, and thus receive a significant portion of the cost income in the market. This new decentralized operating model, sometimes referred to as the "ownership economy", better adjusts incentives and distributes risks and rewards than existing highly centralized, slow-moving and elitist financial infrastructure.
5. As a decentralized bridge to the financial and trading world, Vega leverages the characteristics and capabilities of the decentralized paradigm and traditional financial systems. How do you move incentives from rent-seeking exchange owners to liquidity providers?
The Vega agreement does not leave room for rent-seekers. From certifiers to market creators and even ordinary traders, each participant is part of an economical, market-driven system that fairly prices market access based on the cost of providing services and the principles of supply and demand. Fees charged are allocated to those who provide value to the network and are always influenced by open and fair market forces to prevent incumbents from overcharging or guarding.
As a result, anyone in the ecosystem can create markets and provide liquidity services in a completely equitable manner. This can happen quickly in hours and days instead of months and years, and at the lowest cost. Those who get rewards do so because they are adding value and are incapable of preventing others from competing. The real result will be a shift in the economy of market operations from infrastructure providers (exchanges) to market creators and liquidity providers that support ecosystems. This will create a virtuous circle, reducing costs, encouraging innovation and attracting liquidity.
6. How does Vega open up new markets and new traffic? Can the market on Vega be derivative of any underlying asset or benchmark?
The market on Vega is created by a governance vote and is conducted by token holders. Therefore, there are no restrictions on the markets that can be created. The highly flexible market and forecaster framework allows the creation of markets on any underlying security that has access to settlement data, including indices, asset baskets or other markets, and industry indicators. These underlying securities may be related to encryption and web3 space, or they may come from traditional industries and markets.
On the alpha main website, Vega implements cash-based futures, followed by other common products such as renewal contracts and options. In the long run, users can design, code and launch markets on any complex derivative, supported by a wide range of risk models and pronums, as well as a set of liquidity types and price determination methods.
In addition to simply tracking the spot market, there are many interesting examples of derivatives, such as weather derivatives that help farmers who need to hedge their risk, or markets that predict sporting events and election results. The possibilities are limitless, and the right to self-determination will be in the hands of network stakeholders who will determine the markets they wish to create and trade in.
7. What are the intrinsic value and use cases of Vega's native token VEGA?
Vega blockchain implements delegated entitlement certificates to protect the network. VEGA tokens protect the network by pledge. Mortgage tokens are required to run nodes, and token holders play a critical role in determining an active set of authenticators by entrusting tokens. In exchange for delegated interests, the certifier is required to allocate a portion of the transaction fees they earn to the token holder.
In addition, VEGA tokens are used to control network functionality and the creation of new markets through governance voting. For example, token holders will vote on whether to create a new TSLA/USDC market after reviewing the proposed market details and forecaster specifications. Token holders can also propose and vote on additional governance proposals to guide network development and set key parameters, such as the amount of fees paid to node operators or the level of liquidity coverage required for market operations.
8. What trends are you most interested in in crypto derivatives and, more broadly, DeFi?
We are pleased that DeFI has matured and is beginning to work with "real-world" use cases other than encryption. The rise of complex quantitative analysis of DeFi protocol risk, efficiency, etc. by individuals and companies in this area is particularly exciting, as is the increased focus on capital efficiency and addressing issues such as MEV. These things are critical to DeFi's future success, and we are excited to contribute to them and help move the community forward, such as our research into MEVs and the design of the Fair Agreement Wendy.
To learn about Vega, we recommend trying the Test Network (https://foxstarter.io/#/main?=&rZsS7HZ8) which is open to everyone, and we hold weekly Fairground Jam Twitch/Zoom meetings where community members can join the team to learn new about Fairground, provide feedback, and get support. We also have monthly community conference calls, weekly educational meetings, and an upcoming community management program. For enthusiastic builders, we have a range of prizes to apply for (and open channels to recommend new ones) and sponsor several hackathons. To learn about all of Vega’s official sources of information and how to participate, see our link.
- Date of publication:
- Thu, 11/25/2021 - 20:35
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