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What is Vega Protocol? Creating Derivatives Markets on Blockchain

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Vega Protocol is a technology designed to help facilitate a blockchain-powered public network for full end-to-end trading and execution of financial products.

In a traditional financial system, financial products and services are dependent on the organizations and individuals who use technological systems to create and execute contracts. This poses a challenge of entry as these technologies vary in sophistication, cost, and effectiveness.

While some organizations have been able to find a way around this issue, some aren’t as lucky, which is why we have some markets that are more manually intensive while others are more technology-intensive. Regardless of this issue, the third party problem still exists, and with it, the presence of censorship and regulations that control the availability of products and the creation of markets. This is the challenge that Vega Protocol is looking to solve by creating a decentralized platform for these financial products where no one individual or organization would pose a substantial risk to a market.

Table of Contents

Background

Vega Protocol is led by Tamlyn Rudolph, who has over 14 years of experience trading in volatile power markets. Rudolph also had interests in the trading and settlement of derivatives. As it turns out, the potential blockchain holds in usurping the system’s around money fascinates her.

Other team members have experience spanning different fields of the crypto space and have achieved considerable success with the level of their outputs in the industry.

What is Vega Protocol?

Vega Protocol is a technology designed to help facilitate a blockchain-powerd public network for full end-to-end trading and execution of financial products. The protocol helps to solve the issue of attracting and allocating market-making resources in a decentralized system.

It functions as a decentralized platform that enables financial products to be available to the general public on a more equal basis. With Vega, access to these markets becomes available to all and the creation of these markets and products would not depend on a central authority or organization.

With its smart product feature, users of the platform are able to create new products and at the same time, propose new markets. The protocol essentially allows for markets to be open and decentralized by fully automating all processes while also providing incentives for trading activities.

The platform also allows for settling financial products between these market participants. To fully achieve this, the protocol uses a set of carefully planned mechanisms of economic rewards and penalties to balance the innovative platform. And at the same time, it helps to protect the market generally and the participants in such markets.

What Is a Market in Vega?

A market in Vega Protocol deals with a tradable instrument that has been set to a particular method of trading. Markets have life cycles and are dependent on instruments, risks, and even governance to determine if they would be proposed, activated, suspended, or closed.

There two types of markets: open and ad-hoc markets. An open market is open to all sufficiently collateralized participants to transact while an Ad-hoc market is created on a needs basis by a participant who needs the market to fulfill a certain trading agreement.

What Is a Market Maker in Vega?

A market maker is a trader on the platform that has chosen to participate in the market-making process by placing a stake on one or more markets available on the protocol. One does this with the intention of being able to receive certain rewards for participating in the process.

A market maker plays a pivotal role in the protocol as they are saddled with providing liquidity for the market, which is why the Vega Protocol has incentivized market-making as they invariably act like owners or operators.

Market maker funds are held at the base currency of the market, and the size of this fund determines the minimum volume that can be deployed to each side of an order book.

There are two types of market makers on this platform. They are:

  • Active market maker

This individual actively participates in managing a price strategy for their marketing volume. 

  • Passive market maker

On the other hand, this individual allows participants to support the market whilst also providing liquidity. Here, this market maker has no need to actively make prices or risk-manage a portfolio of positions.

Insurance pool

All markets would have an insurance pool that can be used as a layer of collateral protection in situations where there is a shortfall or when a distressed trade is being closed out. 

Market insurance pools would not contain any funds immediately after a market is created. At the closure of a market by a governance action, the available insurance pool is then shared among the markets with the same base currency.

Features of Vega

Vega has the following features that sets it apart from its competitors, which are:

  • Liquidity incentive
  • Collateral Options

Liquidity incentive

Vega has a built-in liquidity incentive that matches traders and market makers together across varying financial products.

The liquidity incentive of the market helps the protocol cater to markets with different trading volumes at different points of the market lifecycle. 

The markets achieve this through the facilitation at the protocol level of dynamically priced liquidity, which recognizes that market making is capital intensive and thus aims for a market-driven solution that efficiently balances the need for order book depth on the one hand with a preference for low fees on the other.

Collateral options

Vega Protocol needs to connect to major blockchains in order to use crypto-assets such as Bitcoin, Ethereum, other ERC-20 tokens, and even stablecoins as collateral.

The protocol depends majorly on these collaterals to avoid being closed out. To effectively do this, the collaterals in base currency and other assets are held and managed in a decentralized way by the network.

Collaterals are placed under Vega network’s control.

Market creation

The ease of market creation on the platform makes it easy for any participant to create and launch markets.

The participants on the platforms have a wide range of toolkits of product features and economic primitives to easily carry out cash flows and settlement instructions from the market makers.

Vega’s Decentralized Governance 

The protocol is designed to run without any human intervention. Instead, its operational governance is defined by rules embedded in the platform. This allows for on-chain governance, which is the key function that enables the creation and maintenance of a highly decentralized environment.

It should be noted that the network governance in Vega does not intend to replace all forms of other governance on the public Vega ecosystem, but only on-chain aspect.

Conclusion 

As a protocol that looks to facilitate a decentralized marketplace where every trader can create and execute financial products, Vega could help solve many issues such as attracting market-making resources, enabling a product to be available to the general public.

There is also the issue of regulation and entry barriers that vary based on the sophistication of technology that central bodies used to create these markets. Fortunately, with Vega, all of these challenges are solved.

The protocol has designed different toolkit features that would be used to efficiently build markets and also develop a way to use them in a simple way.

Source: https://www.asiacryptotoday.com/vega-protocol/

Blockchain

Another One: Galaxy Digital and CI GAM to Launch a Bitcoin ETF in Canada Tomorrow

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Yet another Bitcoin ETF is to reach the markets in Canada as the country’s securities regulator has issued “a receipt for the final prospectus” for CI Global Asset Management’s application. Dubbed CI Galaxy Bitcoin ETF (BTCX), it’s expected to launch on the Toronto Stock Exchange (TSX) on March 9th, and Mike Novogratz’ Galaxy Digital Capital Management will act as the sub-advisor. 

  • Founded in 1965, CI Global Asset Management is an asset manager with over $180 billion in AUM as of January 2021. The firm announced the nod of approval received from Canada’s securities regulator necessary to launch its own Bitcoin ETF earlier today. 
  • The statement described BTCX as a tool that could “provide investors with a convenient way to gain exposure to bitcoin through an institutional-quality fund platform.” It will invest directly in the primary cryptocurrency with its holdings priced using the Bloomberg Galaxy Bitcoin Index. 
  • CI GAM will serve as the manager of the ETF, while Galaxy Digital Capital Management, whose founder and CEO is the long-time BTC proponent, Mike Novogratz, will act as “the bitcoin sub-advisor.” Meaning, that GDAM will execute the BTC trading on behalf of the ETF 
  • “We believe the emerging digital asset class presents compelling growth and diversification opportunities. The CI Galaxy Bitcoin ETF offers a simple and secure access point for traditional investors to gain exposure to bitcoin.” – commented Partner and Head of Asset Management at GDAM, Steve Kurz. 

  • Apart from BTCX, the two parties have also filed for launching the “first ETF in the world to invest directly in Ether” – CI Galaxy Ethereum ETF (ETHX). 
  • It’s worth noting that BTCX would not be Canada’s first Bitcoin ETF. CryptoPotato recently reported the first approval for the Purpose Bitcoin ETF, which enjoyed a highly-positive start, accumulating more than $400 million in a few weeks. 
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Source: https://cryptopotato.com/another-one-galaxy-digital-and-ci-gam-to-launch-a-bitcoin-etf-in-canada-tomorrow/

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Blockchain

Ethereum, Monero, FTX Token Price Analysis: 08 March

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Ethereum recaptured a key resistance mark at $1,687, a level that had not been breached since the broader market pullback in late-February. Monero lacked the trading volumes and buying intensity to flip the 38.2% Fibonacci retracement level. Lastly, FTX Token eyed a rise above its overhead resistance but the indicators presented the chances of a short-term reversal.

Ethereum [ETH]

Source: ETH/USD, TradingView

Ethereum retook the $1,680 level from the bears thanks to a surge of 6% in the last 24 hours. Gains in the last eight days amounted to over 30% and underscored ETH’s bounce back from the $1,300 level. The On Balance Volume showed strong buying at two key support levels – one at the $1,300 mark and the other at $1,437 as the price headed northbound on the charts. However, the OBV made steady highs over the past few sessions and even dipped at the time of writing.

The RSI pointed lower from just below the overbought zone and showed weakening bullish strength in the market. This reinforced the idea that a hike in trading volumes could be needed before steering clear of the next test at $1,834.9 and especially if the uptrend were to sustain itself.  In the event of a pullback, the newly flipped resistance at $1,687.65 could act as a crucial line of support.

Monero [XMR]

Source: XMR/USD, TradingView

Low trading volumes and short-bodied candlesticks on Monero’s 4-hour chart showed a dearth of interest in the market but the bulls still held on to the 23.6% Fibonacci retracement level. A breakout above the 38.2% level could depend on stronger cues from the broader market, which would spur buying in the Monero market as well.

The ADX pointed lower and towards the 10-mark, showing a lack of a strong trend. The flow of capital towards the cryptocurrency created some optimism, but the price remained within its channel even as the CMF rose sharply above the half-way mark. The index reversed direction and pointed towards the half-line at the time of writing.

FTX Token [FTT]

Source: FTT/USD, TradingView

The Bollinger Bands on FTX Token expanded at press time and showed rising volatility as the price looked to flip $31.49 resistance. The presence of volatility allowed for large price swings and a break above the upper ceiling looked imminent over the coming sessions. Even though the Stochastic RSI traded in the overbought region, it pointed upwards after retesting the upper line and indicated a delayed stay in its current region.

However, there was also a possibility of a short-term pullback due to saturation in the market. A fall below the press time support level would highlight the next line of defense at $24.67.


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Source: https://ambcrypto.com/ethereum-monero-ftx-token-price-analysis-08-march

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Norwegian energy firm Aker’s three-pronged approach to Bitcoin

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Energy company Aker ASA, which is based in Oslo, Norway has established a dedicated firm to invest in the Bitcoin ecosystem and related projects. Dubbed ‘Seetee AS,’ this new venture has a capitalization of $58 million and will invest Aker’s liquid assets in the digital currency. 

Øyvind Eriksen, President and CEO of Aker stated that Seetee’s launch will help the Aker Group gain industrial opportunities “that will be unlocked by Bitcoin and blockchain technology.” He further said in a statement: 

These technologies [such as Bitcoin and blockchain] have the potential to reduce frictions in our day-to-day lives, enhance the security of our digitally-driven economies, and unlock new business models for innovation. 

In a letter to investors, Chairman Kjell Inge Røk­ke revealed Seetee’s three-pronged approach to Bitcoin, which is al­ready run­ning “open-source Bit­coin pay­ment servers.” According to Røk­ke, the oil and gas firm will work alongside Canadian crypto-focused firm Blockstream and other partners.

Aker Group expects See­tee to set-up min­ing op­er­a­tions even though the local government no longer offers electricity subsidies to miners. However, the group’s  am­bi­tion is to be “a valu­able part­ner in new re­new­able projects:”

See­tee will es­tab­lish min­ing op­er­a­tions that trans­fer strand­ed or in­ter­mit­tent elec­tric­i­ty with­out sta­ble de­mand lo­cal­ly—wind, so­lar, hy­dro pow­er— to eco­nom­ic as­sets that can be used any­where. Bit­coin is, in our eyes, a load-bal­anc­ing eco­nom­ic bat­tery, and bat­ter­ies are es­sen­tial to the en­er­gy tran­si­tion re­quired to reach the tar­gets of the Paris Agreement. 

Finally, Aker is keen on mi­cro­pay­ments and how it could en­able the firm to avoid users’ per­son­al data be­ing mon­e­tized. Røk­ke further said: 

I’m fas­ci­nat­ed by the prospect of bitcoin Light­ning wal­lets that may en­able in­stant cred­it via mi­cro­pay­ments with­out the need to of­fer per­son­al in­for­ma­tion that my coun­ter­part can mon­e­tise with­out ap­proval or com­pen­sa­tion.

The Chairman also was bullish on Bitcoin and expects the asset to trade for “millions of dollars.” He believed that peo­ple who “know the most about Bit­coin” be­lieve its fu­ture suc­cess is “near­ly in­evitable.”


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Source: https://ambcrypto.com/norwegian-energy-firm-akers-three-pronged-approach-to-bitcoin

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