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What Is Vega (VEGA) Token?

UTC by Oluwapelumi Adejumo · 6 min read
What Is Vega (VEGA) Token?
Photo: Vega Protocol Blog

The guide gives a clear picture of Vega Protocol that strives to be one of the core infrastructures of decentralized finance, just like Ethereum. It aims to build tools that guarantee the freedom to trade and make that freedom accessible to anyone on earth.

The growth of decentralized finance (DeFi) has created alternatives for several people outside of the traditional financial markets in recent years. This means that the challenges of high fees, third-party intermediaries, censorships, and more that have plagued the financial markets for years can now it is possible to avoid. Many platforms have jumped on the DeFi trend, offering several financial products and services through blockchain technology. Vega platform with its VEGA token is one of them. The platform is a decentralized bridge linking blockchain to the world of finance and trading.

Background of Vega

Vega is a decentralized protocol that facilitates the execution and trading of financial products. It is a proof of stake network created for fully automated trading on public networks. Anybody can use the protocol to build decentralized markets. However, the implementation of the protocol can only be done in a distributed manner among nodes that form the network’s backbone. Each node joins the network through the Proof of Stake (PoS) mechanism, and to ensure full security, all the nodes operate a byzantine consensus protocol.

Vega blockchain is built on Tendermint, and this makes it possible to trade derivatives on its decentralized network with similar experience and capabilities as centralized exchanges. Besides, the platform is optimized for decentralized trading and can bridge with several layer-one networks, including Ethereum (ETH).

It is a technical layer that enables all types of sophisticated markets and products to be created on-chain. It is a platform for everyone, including developers, traders, and market creators. The platform’s goal is to be one of the core infrastructures of the DeFi system, and its mission is to develop tools that will enable freedom to trade for everyone.

Vega’s Innovative Approach

The platform uses an innovative approach that takes advantage of the dynamic liquidity marketplace to attract and allocate market-making resources. These inbuilt liquidity incentives enable the protocol to match traders and market makers across any financial product. In order to encourage innovation on the platform, Vega has incorporated a feature known as Smart Products. It allows users to create new products and launch new markets.

A comprehensive suite of economic primitives and product features enables the participants to specify all instructions on cash flows and settlements. In order to ensure the safe trading of complex instruments, the platform also operates based on the standards of decentralized risk management.

Vega Market Network

The Vega Network is the foundation on which other components of its framework, such as the markets, participants, governance actions, and products, sit on. Markets on the network connote tradable instruments designed for a particular type of trading. Markets have different types depending on the instrument lifecycle stage and if any actions impact trade. These are proposed, active, suspended, and closed. Generally, markets fall under two categories:

  • Open Markets. They are open for participants with sufficient collateral to trade-in. These are similar to public markets for stocks, forex, etc. Besides, they trade mostly using limit order book, although they also use other modes at times.
  • Ad-hoc or OTC Markets. They are created by a participant for a particular purpose, such as initiating a trade based on prices agreed offline or using the Vega protocol to enable the price discovery process.

Vega’s Collateral Management

Safe trading is an essential part of the Vega network. In order to guarantee this, every trade on a public Vega network is subject to sufficient collateralization. Otherwise, they will be closed out. Therefore, the network holds collateral in all assets using a decentralized system that allows easy management with a simple deposit/withdrawal protocol interfacing between the Vega network and the host chain for the crypto asset. This enables adding assets when necessary. The performance of the host chain will determine the speed of deposit and withdrawal. But after the deposit of the assets on Vega Network, Vega Infrastructures determine the speed of allocation, settlement, release, or transfer.

The criteria for an asset qualifying as collateral is the ability of the Vega network to manage it, and this depends on four criteria. Only blockchain-based cryptocurrencies and digital tokens meet these criteria presently.

Trading and Settlement on Vega

Trading and settlement are fully automated on the Vega network in order to ensure that all transactions from the trading instructions to final settlement are taking place deterministically on every node. This is in line with decentralization requirements to ensure that every participant in the market sees the same result for every action.

There are six trading modes, or methods of generating new trades, available on the Vega network. They are continuous trading, discrete trading, auctions, suspended markets, requests for quotes (RFQ), and matched trades. They are applicable in various conditions and meet the standards of fairness and flexibility while meeting the market’s needs. On the other hand, the settlement market ensures traders’ accounts are accurately credited and debited at specified points in the lifecycle of a trade.

VEGA Token

Vega’s native cryptocurrency is the VEGA token. VEGA is an ERC20 token, which means it is compatible with Ethereum and interacts with the Vega blockchain through an Ethereum-to-Vega bridge. The token serves as a governance token, and holders have voting rights on the platform. A part of the token has already been allocated via the ICO. Though they remain locked, holders can stake and delegate the token once the network is live. This means the token holders can participate in the network by delegating tokens to the validator and proposing and voting on topics such as new markets and the governance of the platform. When holders stake or delegate the token, they will get rewards in form of a percentage of the infrastructure fee and from the on-chain treasury.

The total supply of the Vega tokens is 64,999,723. The allocation takes place in the following way:

  • Seed round: 26.5% (17 million).
  • Strategic round: 11% (7.2 million).
  • Team (tranche A): 6.5% (4.2 million).
  • Team (tranche B): 23% (15 million).
  • Coinlist sale: 9% (6 million).
  • Community bounties and grants: 5% (3 million).
  • On-chain incentives: 9% (6 million).
  • Project treasury: 10% (6.5 million).

Between June 2 and June 3, 2021, Vega ICO took place on CoinList. There, it sold over 4 million tokens worth $59,750,00. The remaining unsold tokens will go for spendings on community and incentives. In other words, Vega will continue to hold a small treasury for future use in additional fundraising or funding other initiatives for further development of the protocol.

Vega ICO

Vega ICO took place on CoinList between June 2 and June 3, 2021. There, Vega sold over 4 million tokens worth $59,750,00. The ICO had three price categories, with tokens going for $5, $10, or $15 depending on some criteria. In particular, $5-tokens have a 12-month lockup with a 12-month release period thereafter, $1,000 maximum. Further, tokens for $10 have a 6-month lockup with a 6-month release period thereafter, $2,500 maximum. Finally, $15-token will be freely trading after a 90-day lockup, $10,000 maximum.

The ICO was a resounding success for Vega protocol.

Conclusion

Vega protocol has a lofty goal of being one of the core infrastructures of decentralized finance, just like Ethereum. It aims to build tools that guarantee the freedom to trade and make that freedom accessible to anyone on earth. Whether it will achieve this or not is still too early to say. Nevertheless, the protocol boasts of several innovative approaches that make it a project worth watching.

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FAQ

What is Vega Protocol?

Vega is a decentralized protocol designed to facilitate the execution and trading of financial products. It is a proof-of-stake network created for fully automated trading on public networks.  

What is Vega aiming to achieve?

Vega aims to become one of the backbones of decentralized finance by offering POS secured blockchain-backed public network that is fully automated to provide DeFi products.

Who founded Vega?

Barney Mannerings and Dave Maclaughlin founded Vega in 2018.

What technology does Vega deploy?

Vega is an Ethereum-based protocol for creating a derivatives trading pool, and a Proof of Stake mechanism secures it. In addition, it deploys technology that allows it to be a fully automated end-to-end public network on the blockchain for financial products.

What makes Vega innovative and unique?

Vega protocol has several innovative features that make it unique. These include its inbuilt liquidity incentives that enable the protocol to match traders and market makers no matter the financial markets and the Smart Products incorporated on the platform to allow users to create new products and launch new markets. It also connects with top blockchains to give participants collateral options such as BTC, ERC20 tokens, stablecoins, etc.

What are the main competitors of Vega?

The competitors of Vega protocol include Skew, BitBay, Algorand.

What is Vega token?

Vega token is an ERC20 token which is a native cryptocurrency for the Vega network.

What are the use cases for Vega token?

The token can be used for staking on the network, which will allow the network participants to participate in the on-chain governance, operating a node, and choosing the active validators. Token holders also get a percentage of the trading fees on the platform.

How much money did Vega ICO raise?

Vega protocol had an ICO on Coinlist between June 2 and 3, 2021. It raised $59,750,00, having sold over 4 million tokens.

How to get involved with Vega?

You can get involved in the project by joining the Discord channel to stay up to date with the latest information about the project. You can also learn more by using Vega Fairground, which is the protocol testnet. There is a weekly Fairground Jam session on Twitch/Zoom that you can also join, and if you are interested in building on the platform, apply for the bounties.

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