Vega, a blockchain project that aims to build a decentralized protocol and infrastructure to manage programmable financial markets, launched its testnet yesterday.
Vega and the bridge with DeFi and traditional finance
As the DeFi sector continues to expand, Vega is looking to create a more focused trading platform to help bridge the gap between niche speculation and the creation of a professional market.
Not only that, but current blockchains, in particular Ethereum, are not fast enough to prevent certain vulnerabilities such as front running. As Barega Mannerings, co-founder of Vega said: “Recent events, such as the bZx exploit, highlight some of the challenges of Ethereum architecture and how they influence systems based on it.
We need more sophisticated solutions to securely support the most complex financial products and risk models needed to push decentralized trading to the main markets. We created Vega from scratch focusing on fairness, security and speed, and therefore, as a crucial DeFi infrastructure, Vega offers traders and developers many advantages in this sense.
I like to think of this moment as a sort of "Web 2.0" for DeFi. " The Vega Testnet is the first step in offering users a platform to create, customize and distribute markets in any existing asset class, and run them safely.
Using the Vega protocol supported by Pantera, traders will be able to not have to resort to intermediaries, eliminate the maintenance costs associated with traditional exchanges and condense the frontend and backend services in individual self-regulating systems.
The developers of the platform consider DeFi at the mercy of five critical problems: front running, low liquidity, difficult interfaces, high costs and high latency. These problems, according to Vega, discouraged market makers from moving from centralized exchanges to DeFi protocols.
The DeFi market, according to Defi Pulse, has just under $ 1 billion of blocked crypto assets. This figure constitutes only 0,0002% of the value of the total daily volume of the global derivatives markets. Traditional assets are traded at a rate of trillion dollars a day and often rely on intermediaries and banking entities to facilitate their exchanges.
In addition, traditional markets require significant human capital and cost billions of dollars which are passed on to consumers who trade these products. The derivatives market alone is worth approximately $ 500 trillion in total notional outstanding amounts for contracts.
Intermediaries absorb around 1 to 1,5% (about $ 7,5 trillion) of that value. Vega places the presence of liquidity suppliers on the market thanks to one quotation of the commissions generated by the market itself. In addition, the platform is working to expand this framework for an almost infinite number of potential financial markets and products.