VBP-11 Proposal to deprecate Vega chain

🗳️ Governance Proposals Batch Proposals
1

Hi all,

This is the governance proposal that will enact the changes first proposed in rhe project team’s recent blog post. This proposal is a vote to retire the Vega chain, and for the project to no longer officially support a chain or token.

These specific governance actions in this proposal would have the effect of suspending trading, redistributing the on-chain treasury to stakers, and providing guaranteed USDT incentives to validators to ensure the network stays operational for at least two months to allow users to withdraw funds from the DEX.

After that, it would be up to validators whether they continue to run nodes or not, but as there would be no trading and no rewards, it is expected that the alpha mainnet chain would stop.

This will not impact the functionality of the token or the protocol. At any time, community members could create a new chain using the VEGA token as its base. However, it is assumed that this is unlikely to happen. In any case, if this proposal passes, the Vega project makes no commitment to support any future VEGA powered chain, financially or otherwise.

Proposal Summary

A recent blog post outlined a new strategic direction for the Vega project over the coming months. The governance proposal described here executes on that strategy, with the ultimate decision resting in the hands of the Vega community.

It covers the following key areas:

  • Network parameter changes to enable other parts of the proposal
  • Effectively closing down the current network by suspending all current markets and rewards
  • Gradually reducing the number of validators on the network and funding a series of rewards to incentivise the validators to assist with a controlled rampdown of the network
  • Transferring any remaining balances in the insurance pools to a wallet to be used to partially fund the special incentives described above
  • Transferring the remaining balance of the on-chain treasury to the global staking pool to reward loyal community members for their support

These actions will all be included in a single batch proposal so the community can vote on the entire proposal as a package and effectively signal their support (or rejection) of the plan outlined in the linked blog post. Each proposal will be scheduled to enact at the appropriate time to support the phased ramp down of the network.

One additional proposal will be needed after the market suspension to finally settle the markets, because this can only be submitted once the markets are suspended and the closing price at the time is known.

The transactions to fund validator rewards will be made by the project team from a wallet they control (4b41…9537) for three reasons:

  • The insurance pools will not cover the full amount of these rewards, so the project has provided additional capital to ensure an orderly shutdown
  • To provide flexibility if anything changes in terms of the values in the insurance pools
  • Because the first payment has already been made on announcement of these changes so could not wait for a governance vote

Below we will provide some further details on each of the areas above as well as a full breakdown of the proposal including the JSON to be submitted.

Proposal Detail

Network parameter changes

These small changes will be enacted first to enable later parts of the proposal to proceed quickly and smoothly. They do things like reduce the time certain actions will take to complete and lift limits to ensure all remaining funds can be distributed quickly to users.

Reduction of the successor window length

This means that the balances of the market specific insurance pools will be moved into the global insurance pool 1 hour after the markets are terminated, therefore making those funds available to fund rewards for stakers sooner than the current 3 days.

Increases to limits

These increase the max transfer amount, max payout per epoch, and max payout per participant. This is to allow the full balance of the on-chain treasury to be transferred into the global staking reward pool in one go and ensure that the full balance can be paid out in staking rewards immediately. Without these changes the rewards would take many days to be paid out.

Closing markets & rewards

To fully close the markets and return margin to users keys for withdrawal, the markets first need to be suspended in this proposal. After suspension, when a closing price is known, an addtitional proposal will be needed to close and settle the market. This ensures that the settlement happens at the correct price and cannot be exploited.

After markets close, margin held for open positions will be returned by the protocol to users’ keys, and funds from the insurance pools will move to the global pool where it will be users to support the validator incentives. With no more markets there is no requirement for the rewards operating on chain to continue so these will also be ended.

Reducing the validator set

To ensure that no user funds are stuck on the network, this proposal will redirect funds accumulated in market insurance pools (along with some additional funds made available for this purpose by the project) to fund validator rewards that will keep the network operational for a period of approximately 2 months for withdrawals.

This will provide time for any users with funds (including VEGA tokens) on the network to withdraw them. These incentives will be paid in USDT to ensure that validators are not impacted by any token price volatility. The proposal also includes a controlled ramp down of the validator set size, again, to mitigate against the risks should any validators wish to leave before the end of the period.

The incentives and phased ramp down are described in more detail below. Validators have so far indicated that they will support this proposal and intend to maintain their nodes as required through this period:

  • Day 1: $10,000 of rewards for 7 days, providing all 16 current validators approx $89 a day to continue supporting the network
  • Day 8: $8,000 of rewards for 7 days, providing approx $88 a day to a reduced set of 13 validators
  • Day 15: $5,500 of rewards for 7 days, providing approx $87 a day to 9 validators
  • Day 22: £18,500 of rewards for 37 days, providing approx $100 a day to 5 validators

After this time it should be expected that unless another arrangement is made by the community to continue the network, one or more validators may shut down their nodes at any time and the network will likely lose consensus and stop. When and if this occurs, users will no longer be able to withdraw any funds they have left on the network.

Transferring insurance pools to a wallet

The proposal above requires approx $42k of rewards in total. It is proposed that most of this comes from the insurance pools on the network which currently hold approximately $28k, with the remaining $14k being funded by the Vega project. To provide some flexibility to respond to any changes in insuracne pool balances between the proposal and the phases, as well as to any new information that may arise from the validators, it is proposed to move all insurance pool balances to a project operated wallet. Transfers will be set up to fund reward pools directly from this wallet in line with the plan above.

The wallet and associate transactons, including the fundign from the project team and the reward transfer(s) can be seen at: https://explorer.vega.xyz/parties/4b4146623d12c312b25e1f78f8cb0598c8d027923229dc3e620a2459fd439537

Transferring on-chain treasury to stalking rewards

There are currently over 600k VEGA in the network treasury which were funded by the CAF. Rather than leave these on the network it is proposed to move them to the global staking reward pool so that long term supporters of the network are rewarded as part of this process. The network parameter changes already outlined mean this can be done in a single payment, after which users staking VEGA will receive their share of these tokens as rewards.

Proposal Contents

Main proposal

The main batch proposal will be submitted on the 31st August and voting will run for a week, closing at the end of day on the 6th September. It will include:

Enacting on 6th Sept

  • Suspend of ALL markets (17 proposals)
  • Cancel all active rewards from network treasury
  • Reduce Tendermint number & multisig signers to 13
  • Update network parameter successorLaunchWindowLength to 1h
  • Update network parameter governance.proposal.transfer.maxAmount to 1,000,000
  • Update the network parameter reward.staking.delegation.maxPayoutPerEpoch to 1m
  • Update the network parameter reward.staking.delegation.maxPayoutPerParticipant to 1m

Enacting on 7th Sept

  • Governance transfer to send the full balance of the CAF to the global staking reward pool

Enacting on 12th Sept

  • Governance transfer to send remaining USDT Arb global insurance pool (should be approx 9k USDT) to Vega project wallet
  • Governance transfer to send remaining USDT ETH global insurance pool (should be approx 19k USDT) to Vega project wallet

Enacting on 13th Sept

  • Reduction of tendermint number & multisig signers to 9

Enacting on 20th Sept

  • Reduction of tendermint number & multisig signers to 5

Settlement proposal

A second batch proposal will be required to settle all the markets once final prices can be sourced from oracle data. This will ensure fair settlement for all users.

Enacting on 7thSept

  • Terminate and settle all markets with the price as at suspension date

END

The proposal JSON will be posted in a new message below this one.

Please keep this thread to discussion of the specific details in this governance proposal. If you’d like to discuss the broad directional changes, etc. please create separate threads for those topics.

2

Here’s the formatted proposal JSON:

{
  "batchProposalSubmission": {
    "rationale": {
      "title": "VBP-11 - Proposal to deprecate Vega chain",
      "description": "This is the governance proposal that will enact the changes first proposed in rhe project team's recent blog post. This proposal is a vote to retire the Vega chain, and for the project to no longer officially support a chain or token.\n\nThese specific governance actions in this proposal would have the effect of suspending trading, redistributing the on-chain treasury to stakers, and providing guaranteed USDT incentives to validators to ensure the network stays operational for at least two months to allow users to withdraw funds from the DEX.\n\nAfter that, it would be up to validators whether they continue to run nodes or not, but as there would be no trading and no VEGA issuance for rewards from this point, it is expected that the alpha mainnet chain would stop.\n\nThis will not impact the functionality of the token or the protocol. At any time, community members could create a new chain using the VEGA token as its base. However, it is assumed that this is unlikely to happen. In any case, if this proposal passes, the Vega project does not expect to support any future VEGA powered chain, financially or otherwise."
    },
    "terms": {
      "closingTimestamp": "1725620400",
      "changes": [
        {
          "enactmentTimestamp": "1725620400",
          "updateNetworkParameter": {
            "changes": {
              "key": "reward.staking.delegation.maxPayoutPerParticipant",
              "value": "10000000000000000000000000"
            }
          }
        },
        {
          "enactmentTimestamp": "1725620400",
          "updateNetworkParameter": {
            "changes": {
              "key": "market.liquidity.successorLaunchWindowLength",
              "value": "1h"
            }
          }
        },
        {
          "enactmentTimestamp": "1725620400",
          "updateNetworkParameter": {
            "changes": {
              "key": "governance.proposal.transfer.maxAmount",
              "value": "1000000000000000000000000"
            }
          }
        },
        {
          "enactmentTimestamp": "1725620400",
          "updateMarketState": {
            "changes": {
              "marketId": "47cc031443bce971b55debcc5e4c943fa0008477cc70317fcca6ad001dc48451",
              "updateType": "MARKET_STATE_UPDATE_TYPE_SUSPEND"
            }
          }
        },
        {
          "enactmentTimestamp": "1725620400",
          "updateMarketState": {
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            }
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              "amount": "10000000000000000000000000",
              "destination": "0000000000000000000000000000000000000000000000000000000000000000",
              "destinationType": "ACCOUNT_TYPE_GLOBAL_REWARD",
              "transferType": "GOVERNANCE_TRANSFER_TYPE_BEST_EFFORT",
              "fractionOfBalance": "1",
              "oneOff": {}
            }
          }
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              "amount": "100000000000000000000000",
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              "amount": "200000000000000000000000",
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            }
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              "value": "5"
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          }
        }
      ]
    }
  }
}
3

For anyone who’s following along, we have run into some technical limitations while trying to get this proposal up.

We submitting the proposal but it was rejected because of some validation.

When making change to the tendermint set, it’s validating against the number of multisig signers. This is normally all very well, and it’s an important validation, but because it happens on submission of the proposal rather than enactment, the validation makes it unable for the proposal to include the validator ramp down.

This issue exists because the system was never particularly design with such a ramp down in mind, and so this sort of scenario wasn’t part of the explicit requirements and testing.

The core team are looking into the options available, including the possibilty of a patch release to move the validation to be on enactment rather than on submission.

We’ll provide more updates when we know more.

5

Update: proposal 1/2 live

It has been necessary to split this into two proposals.

The first effectively shuts down all operations on chain and is the proposal that will determine the project’s future direction as outlined in the blog post and in the introduction above.

The second will become after a small patch release has been deployed to the network that will enable the gradual reduction in the validator set to be implemented safely.

This assumes validators accept and deploy this patch. It not we will look at alternatives, but the patch will enable the ramp down to be done in the most orderly way.

These proposals are now submitted on chain:

Please remember to vote before voting closes on 6th September 2024.

6

Update II: proposal not enacted and resubmitted

Result of first governance vote

Following from the post above, you may have noticed that this proposal did not succeed. While the votes were overwhelmingly in favour of the orderly shutdown, the total number of votes did not meet the participation threshold at the end of the voting period.

Result of governance vote
Result of governance vote1094×446 27.6 KB

Around 24 hours before the vote closed, the proposal was expected to pass. However, a large fraction of the tokens that had voted were unstaked before the vote closed, leaving the proposal short of the 2.5% of VEGA supply that needed to vote for the proposal to succeed.

What happens now?

Given that the on-chain support was ~98% in favour of the proposal, and the vast majority of conversations we’ve had with token holders have also been supporting, the project has resubmitted the proposal to run it again.

Please note that had the outcome been a clear vote against the proposal, there would not be a re-run. In that case we would be consultingwith the community on the next steps for the chain and how things move forward, given that we do not have the resources to continue as we have been. However we believe the community has expressed sufficient support to justify a re-run.

Some dates in the proposal have been changed, and the two parts described above have been recombined, given that the network patch was successfully deployed earlier in the week.

Resubmitted proposal

You can see the new proposal submission transaction on Block Explorer

You can vote on the resubmitted proposal using the Governance dapp

Voting on the proposal closes at 10:00 BST (09:00 UTC) on Tuesday, 10th September. Please remember to keep your tokens staked until the vote closes to ensure your vote is counted.

7

After careful consideration, Greenfield Capital is voting in favor of the proposal to initiate an orderly shutdown of the Vega chain. Our decision is based on the following key factors:

Without further funding and incentives, validators will gradually lose motivation to continue running the network, making an eventual shutdown inevitable. By initiating an orderly process now, we can prevent user funds from being stranded and ensure a controlled transition. It is better to proactively organize an orderly shutdown than to risk user funds being stuck on the bridge at an unknown future point.

However, we recognize the potential of the underlying technology stack developed by the Vega team. As such, Greenfield Capital is keen to collaborate with the Nebula team, building a new retail-focused decentralized exchange, based on the Vega tech stack.

It makes sense to launch a new token with the goal of incentivizing a go-to-market-oriented founding team, along with a community of traders and market makers, to drive the adoption and growth of the Nebula platform. We appreciate the Vega founders’ commitment to receive Nebula tokens at equal footing at the same dilution as all other Vega token holders without any additional allocation and their plan to continue building and supporting the open-source technology stack with the remaining funding, albeit a down-sized team.

By voting in favor of the orderly shutdown of the Vega chain and exploring support for the Nebula project, we hope to responsibly manage the transition while unlocking the potential of the underlying technology in a new, revitalized ecosystem.

1 Like
8

This proposal has passed successfully this morning with over 5% of VEGA voting.

  • All markets were suspended by the protocol

  • The project team will now focus on building and maintaining the protocol software

  • The project team will support the close down of the current chain

  • There will be additional governance proposals for the final shutdown and settlement