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GAINS Associates

Vega — Telegram AMA — November 12

On Thursday, November 12, we had the pleasure to welcome to our Telegram chat:

Barney Mannerings, Founder & CEO

We asked him questions about the development of Vega

Some sentences have been slightly edited for readability but the meaning has been conserved.

Summary

Vega is a protocol for creating and trading margined financial products on a fully decentralized network.
The network, secured with proof-of-stake, will facilitate fully automated, end-to-end margin trading and execution of complex financial products. Anyone will be able to build decentralized markets using the protocol.

Vega’s built-in liquidity incentives match traders and market makers across any financial product, to solve the problem of attracting and allocating market-making resources, especially for long-tail markets. Vega will connect to major blockchains for collateral, which can be in any digital asset including Bitcoin, ERC20 tokens, and stable coins, so participants will be able to choose from a range of collateral options.

Any participant will be able to easily create and launch markets, pseudonymously, by using a toolkit of product features and economic primitives from which all cash flows and settlement instructions can be easily specified. It is Vega’s mission to build tools that guarantee the freedom to trade and make that freedom accessible to anyone on earth.

Vega is aiming at the fundamental problems we see with the current centralized financial system and creating a parallel financial system that fixes those problems. Vega is writing rules for rewards and incentives that balance the system, keep it fair, and help it to grow. This protocol must be open and will eventually be free and open-source software governed by the community so that it can develop and evolve with the needs of its users.

Introduction

Q — Ayeley from GAINS: Please introduce yourself. What did you do before crypto and did you have any other previous venture in crypto?

A — Barney from Vega: Before crypto I spent much of my career working in the financial services industry, designing and building trading and risk management software for major investment banks and financial institutions (matching engines, etc). I am a computer scientist as well, and since the university has been interested in cryptography and privacy. I first heard about bitcoin in 2010 and started working with it more seriously in 2013.

I also got involved with Ethereum before it launched, and have been thinking about the decentralization of finance for over 5 years now.

Other than a few small investments and a bit of mining, plus writing a lot of code, I didn’t do any serious venture in crypto before Vega, but I did have a previous startup in the micropayments area and we were looking seriously at crypto.

About Vega

Q — Ayeley from GAINS: What is the Vega Protocol about in a few simple sentences?

A — Barney from Vega: Yeah, I saw such a big opportunity, traditional markets are so inefficient and closed, slow to innovate but they’re HUGE and we had the perfect mix of skills and experience to give it a really good shot

Vega is a custom blockchain that is optimized for trading and provides the derivatives scaling layer for Web3 applications. It delivers investment banking grade software for the entire blockchain ecosystem by bridging to multiple layer-one networks, beginning with Ethereum.

Right now, crypto-assets are almost exclusively used for speculation and to facilitate passive income through financial engineering in “DeFi” protocols. We believe in a future where most financial activity and the commercial and legal execution around it happens on-chain. To get there it is essential to solving several problems with the current generation of decentralized financial protocols, including front-running, low capital efficiency, and high fees.

It’s also necessary to address several types of new or increased risks that are endemic to the protocols and blockchains they’re built on.

Vega addresses all these problems and creates a next-generation derivative and trading layer for the decentralized future. In doing so, Vega makes it possible to move a significant amount of real-world trading volume on-chain for the very first time.

There aren’t many good options for DeFi derivatives right now. Most of the derivatives that exist in DeFi are overcollateralized, which means that traders need to put up more than the notional value of their position in collateral (margin). That’s the opposite of normal centralized derivatives markets where only a small fraction of the position’s value is needed as margin.

This means that Defi derivatives suffer from very low capital efficiency, i.e. a lot of money is needed to trade compared to alternatives. Blockchains like Ethereum also suffer from problems with high fees and front running (MEV).

Vega aims to solve that by bridging to Ethereum and other blockchains (so it is fully integrated with the DeFi ecosystem) and providing a high-performance derivatives layer that solves these problems and enables derivatives trading that’s on a par with centralized exchanges.

Just like Uniswap and others have done for spot markets (they’re now often bigger than the centralized alternatives), the next generation of DeFi derivatives like Vega will allow derivatives on-chain to overtake centralized solutions, and eventually move into real-world derivatives use cases outside of the usual crypto markets.

Q — Ayeley from GAINS: Let’s break it down a little bit. Am I right to say Vega is the Uniswap for derivatives?

A — Barney from Vega: You could think of it a bit like that, yeah, in that anyone will be able to propose and create derivatives products and markets, and supply liquidity to them, Because we use our own chain and network we’re not limited to inefficient AMM liquidity and so Vega has a full on-chain order book with limit, market, and pegged orders and a novel liquidity protocol. In the future, these will be hybrid order books that also allow you to supply liquidity to a curve as well as the order book.

Q — Twitter user @MmgvsTodos: Vega protocol has an interesting concept but I would like to know how you will connect with the major blockchains? What level of interoperability will the Vega protocol have? Will digital assets like bitcoin or stablecoins from various blockchains be able to be used in the protocol?

A — Barney from Vega: This is a great question! There are a few parts to this. Firstly, Vega has always been designed around bridges. In the same way that you don’t need Uniswap specific assets to use Uniswap, you don’t need Vega specific assets to use Vega. The difference is that because we’re a separate network — which is necessary for performance, features, capital efficiency, preventing front running / MEV, etc. — that means bridges to other chains.

The main difference here is that with a bridge you have to wait longer when using a network like Ethereum to add assets to Vega while the network gets enough confirmations, otherwise it works as something like Uniswap, you connect Metamask or Frame or whatever and add assets then withdraw when you’re done. We have designs for a few other chains and we’re particularly keen to add Terra, Polkadot, Cosmos/IBC, and of course Bitcoin support, and have been talking actively and working with some of these already.

Finally, in the future, we will have V2 of our bride protocol that supports two-way bridges so contracts on other chains can be deeply integrated with Vega and even control Vega positions or use Vega as an oracle. That’s a little way off yet but will be super exciting!

Q — Twitter user ksalom95: I read that Vega developed its own independent network, but that in turn, it did not have a native token, but that its tokens were part of the ERC20 network, but really why to develop that token in another chain instead of its own?’

A — Barney from Vega: There’s not actually much of a good reason to have a native token that is stuck on a single blockchain — it’s a hindrance to people getting hold of it, buying/selling it, and storing it in their favorite wallet. The $VEGA token can do anything a native token can do thanks to the Ethereum bridge but gets a ton more utility and functionality, as well as being able to import some security from Ethereum (basically, even if the Vega network got exploited, no one could steal your tokens, even if they’re staked, unless they also took over the Ethereum mainnet!)

Q — Twitter user ksalom95: One of the problems with derivatives on Dex, is that the fees are considerably high, but now that it will be decentralized and focused on ETH it will be even more, Therefore, how will Vega reduce these gas rates so that operations are more attractive than even in CEX derivatives?

A — Barney from Vega: Regarding fees, one of the great things about Vega is that it has a totally different fee model than something like Ethereum. You will need to pay Ethereum gas to deposit or withdraw assets to/from Vega (though we are thinking about L2 support to help with that) but once your assets are in Vega you don’t need to worry about gas at all! It’s free to place orders and you pay if they trade as liquidity takes, price/liquidity makers and LPs don’t pay at all and receive a rebate. So once you place assets on Vega you’ll be able to trade anything you want (and we will add spot markets too) with fees that are similar to CEXes.

Q — Telegram user Ana Manzano: The ETH network is the one that has the best Dex products, and also, this was the pioneer in decentralization, but really for what reason did it choose the ETH network that will require high gas rates, instead of the BSC or Solana network that will be much faster, safer and with lower gas rates?

A — Barney from Vega: ETH is where the vast majority of the value in token assets is, so it is the obvious choice for a derivatives protocol because of all the stable coin innovation as well as oracles etc. but it is too slow and inefficient for decent derivatives and gas prices are high. Either that gets fixed or we will use L2s to reduce costs but also remember that when trading on Vega you don’t have to pay Ethereum gas fees at all, so you can deposit ERC20s and then have cheap trading, so in that way it helps. Solana is too early to tell but we might bridge there, and BSC… no thanks…

I don’t trust Finance and don’t consider it a decentralized chain or think Binance are really friends of Defi… if they prove me wrong we’ll bridge there but not bow. As I mentioned above we’re excited about a bunch of other chains too and we definitely won’t be limited to Ethereum, that will be the first of a few chains you can use Vega with 🙂

Q — Telegram user Amina Peter: How will Vega protocol select honest Validators who will be loyal to your system? Will there be a limit to the amount worth of collateral one can deposit in the system and how balances will be recovered? Finally, is the Vega token connected with Vegaswap?

A — Barney from Vega: Initially there will be limits, yeah, until the system is proven secure and decentralized to more validators. You can read about the validator selection here. We have absolutely nothing to do with Vegaswap.

Q — Telegram user R. Alberto: We have all realized that the DeFi market is constantly evolving and products with adaptability or adaptation are always required. How is the adaptation of your services to the growth or constant evolution of the market and the needs of fans of cryptocurrencies?

A — Barney from Vega: We are focused not so much just on the crypto Defi market today but how to make crypto and Defi useful for real-world users

Q — Telegram user Patrick: Decentralizing the derivatives world is a difficult and complex task so can you explain how you will manage to standardize and automate every step of the trading lifecycle? Will users with Vega be able to trade derivatives securely on margin and without the need for custody?

A — Barney from Vega: I recommend our whitepaper. The answer would be a bit too long for Telegram! We have more papers here too.

Q — Telegram user Ismail Olabanji: In some other DeFi projects that have the decentralized governance feature, I’ve noticed that there is usually some level of “governance proposal spam” and most times, this is unhealthy for the growth of the project. On Vega protocol, are these plans in place to curb proposal spams?

A — Barney from Vega: Hopefully! We’ll have a parameter (that is itself controlled by governance) to require a certain number of tokens to make a proposal, and some other spam protection features, but we’ll see how they work and can iterate them if needed.

Token

Q — Ayeley from GAINS: What role does the $VEGA token play in the Vega Protocol ecosystem?

A — Barney from Vega: The Vega blockchain implements delegated proof-of-stake to secure the network. VEGA tokens secure the network through staking. Tokens are required to be staked in order to operate a node, and token holders play a crucial role in determining the active validator set by delegating their tokens. In exchange for delegating stake, the validators are required to distribute a portion of the trading fees that they earn to token holders.

Additionally, the VEGA token is used to control the network functionality and creation of new markets through governance voting. For example, token holders would vote on whether to create a new TSLA/USDC market after reviewing the proposed market’s details and oracle specifications.

Token holders are also able to propose and vote on additional governance proposals that direct the development of the network and set key parameters, such as the number of fees paid to node operators or the level of liquidity coverage required for a market to operate.

Q — Telegram user Am4 SF: Besides activating the validator set does the staker get benefit by staking VEGA? Would you tell me how the scheme works?

A — Barney from Vega: Stakers get rewards in $VEGA tokens and from fees, once trading begins on the network, amounts will be variable, determined by the protocol, but once live this will be here with the other token and governance tools.

Partnerships

Q — Ayeley from GAINS: You make mention here of partnerships from institutions during your fundraising rounds. Do you have some exciting partnerships with other crypto projects that will support you in delivering investment banking-grade software for the entire blockchain ecosystem?

A — Barney from Vega: We’re working on a few things! There are lots of ways that partnerships will enrich the Vega ecosystem, for example — Vega integration with other wallet software — Bridges to new chains so that assets other than Ethereum ERC20s can be traded — Stablecoins — Oracles — Other Defi integrations I haven’t got any specific names to announce yet, but watch our socials for updates 🙂 Some of these will take longer than others but the first partnerships will launch around the time the first trading starts on the network in Q1 next year. The network itself should launch within the next week or two by the way.

Funding

Q — Ayeley from GAINS: Cool. Did you raise funds so far? If so, how did you handle them?

A — Barney from Vega: We’ve done several raises. Initially, we got a small amount from friends and family, we did a seed round led by Pantera Capital that closed in 2019 and followed by a strategic round led by Arrington Capital and Cumberland, we also got investment from Coinbase Ventures. You can see more of our backers here.

Then this summer we did a sale on Coins List and added over 21,000 awesome new community members. We’ve taken care to raise in a way that not only prioritizes success and achieving our vision and mission over the long term, but also enables the growth of a vibrant community and ecosystem, of which professional users of trading and Defi are an important part in addition to the wider crypto ecosystem itself.

Business Development

Q — Ayeley from GAINS: Cool. With respect to your roadmap, what should we expect in the next weeks and months?

A — Barney from Vega: Since the token launched and we had the governance vote to bootstrap the validator set, we’ve been working hard to fully test the software so they can launch the network. This took a little longer than planned because we wanted to make some changes to the staking UX based on user feedback from our testnet, and also to improve the key management for node operators so they can securely rotate keys more easily. All that’s done and tested now so the network should launch really soon — look out for our validators announcing this, which we’ll re-share on our socials.

This means shortly you’ll be able to stake tokens and participate in governance in the first network, which is called the Restricted Mainnet because although it’s a mainnet bridged to Ethereum with staking rewards and governance, its purpose is to get everything up and running and bootstrap the network, get block production settled in on the chain, etc. and it’ll initially not be possible to trade on it.

A couple of months after that, we expect trading restrictions to be removed. This requires governance action from the token holders and validators as well as the team, so it’s the whole community working together to decide when the network is ready to launch trading. After that, we have a HUGE year of improvements, new features, and upgrades planned, and throughout this time the protocol will be providing incentives for liquidity, trading, market creators, etc.

Q — Telegram user Corrie_Dorf: Aside from Telegram and Discord, I saw you have a special discussion room for VEGAs’ supporters. How do you maximize the use of this forum in the community?

A — Barney from Vega: The forum will be an important part of our community. It’s already a great place for longer-form discussions on research and the protocol and will also be a home for governance discussions etc.

Barney, thanks for coming into our community, and taking the time to answer our questions. Anything else you’d like to say? Where can we follow you to stay updated? — Ayeley Commodore-Mensah from GAINS

Thanks, it was great to be here!

You can follow Vega on Twitter or Telegram. Look out for exciting news and updates soon about the mainnet launch and more! — Barney from Vega

GAINS Associates is the World’s First Decentralized VC, allowing anyone that holds $GAINS to invest in the crypto unicorns of tomorrow. With over 3 years of experience and several ultra-high return deals, we are removing the barriers of entry to investing and changing the world, one deal at a time.

GAINS stands for Group Action Is Never Small, embodying the collaborative spirit that is the essence of blockchain and decentralization.

In addition, GAINS provides daily news, articles, video interviews as well as fun & educational events.

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