The Vega Protocol aims to bring the speed and safety of traditional financial markets to the Wild West of DeFi.
- Vega Protocol's testnet is live.
- It allows users to create their own decentralized markets for derivatives and other financial products.
- The release follows a $5 million seed round led by Pantera Capital and Ripple's Xpring in October 2019.
Vega Protocol's testnet went live this morning. The DeFi protocol is meant to "close the gap between niche crypto speculating and professional market making," according to today's announcement.
Vega, which allows anyone on its network to create a market—say, for hedging the market price of a coronavirus vaccine or trading derivatives on hand sanitizer—avoids the middlemen that suck up an estimated 1 to 1.5 percent of the value of the derivatives market.
But it simultaneously aims to avoid the technical shortcomings that come with using the current iterations of decentralized blockchain-based networks. According to Vega co-founder Barney Mannerings, building a DeFi protocol usually "means you’re working with the slower speeds of Ethereum, and with a blockchain that can’t prevent frontrunning and shares its very limited capacity with thousands of other protocols and Dapps."
Need an example of how this nascent decentralized ecosystem might turn off serious investors? Mannerings pointed to the bZx exploit, in which a rogue trader made off with somewhere north of $350,000. "Traditional financial firms need to trust that a platform is fair,” Mannerings told Decrypt. “They aren’t going to put huge amounts of money into a gamed system where a few inside men can manipulate price, front-run and muscle them out of a good deal...Currently, all DeFi products are built on second-class infrastructures where speed is limited and front-running is incentivized.”
He sees Vega as a way of giving devs the tools needed to help DeFi compete in a financial world where losing a few seconds on transactions can result in millions in losses. "I like to think of it as a kind of ‘Web 2.0’ moment for DeFi,” he said.
Vega is touting its dynamic liquidity pricing feature to attract users to its testnet. "The market creation process allows market proposals to gather market making support and ensures that new markets are only created once they have sufficient liquidity commitments, thus minimizing the risk to the market creator and other traders," the team explained in its announcement.
In addition to improving liquidity issues with other DeFi products, Vega says it will also address high costs, high latency, unwieldy interfaces, and front-running—the practice of trading on non-public information in a way that will alter the future price of an asset.
The testnet release comes five months after raising $5 million in seed funding from Pantera Capital, Ripple's Xpring, and other venture capital firms.
Interested users can sign up at the Vega website.
Image: Vega Protocol Vega Protocol’s testnet is live.