1- Introduction 1
Permissionless innovation is enabled by smart products which allow anyone to create products
and propose new markets. This works in tandem with a decentralised margin system using a suite of risk models based on coherent risk measures [5] to enable the safe trading of arbitrarily complex instruments in an environment with zero expected recovery in the event of default
2- 1.2 Architecture of a public network
The Vega protocol is designed to be implemented in a distributed and decentralised manner on
a network of nodes that may be the same or distinct from trading parties participating in mar-
kets. Nodes will maintain a mirror of the state of their Vega network, and process transactions to
operate markets and their governance. Nodes are included in the infrastructure through a proof-
of-stake mechanism: a certain stake is locked by a node, and as a surety they will operate correctly.
These infrastructure nodes jointly run a byzantine consensus protocol [6], that ensures all honest
parties sequence operations consistently, and thus feed the protocol implementation with actions in the same order across the network. Our reference implementation currently uses4 the Tender-mint distributed smart contracts platform for the consensus and the proof-of-stake protocol
3- 4.1 Acceptable types of collateral
The defining factor for whether a given asset can be used with Vega is the network’s ability to
manage it with certainty. Collateral may be held by a participant in any fungible digital asset for which the following conditions hold true:
i) Vega nodes can digitally verify the participant’s access to the asset;
ii) it can be placed indisputably under the sole control of the network;
iii) it can be irrevocably transferred to any other participant by the network; and
iv) asset balances can be released by the network when required.
In practice, this requires a system that supports sufficiently powerful scripting or smart contracts to operate a deposit address with the ability to pay out funds using a threshold (k-out-of-n) authorisation scheme.
Currently, the only assets that meet all four requirements are blockchain based cryptocurrencies and digital tokens. We envision that the first public implementation would integrate with the Ethereum blockchain, due to its smart contract capabilities and the existence of more than 1500
ERC20 tokens, followed soon after by Bitcoin because of its dominant size.