PS. just to be clear at the begining. This is just a critical conjecture attempts for learning purposes.
" environment with zero expected recovery in the event of default" isn’t that a big tradeoff for losing a centralized counter party risk manager. Yes they act as gatekeeper and charge more. But in case of default they are the party paying and there is always a gatekeeper. And if we want to hedge default on chain we have to add an attributional cost for protection
My second concern is that the degree of freedom provided by the protocol to create market. It can lead to a plethora of market which is going to hurt the overall individual market liquidity. I just imagine most of the participants are not even into the specification of the instrument but more interested into the dynamics of the trade and returns. Besides the possibility of creating new derivatives. As i can recall from Barney presentation at EthDenver. I do not know if that is the case or it was more a relaxation of the concept of derivation and expressing a mental experimentations. But if it is the case, isn’t it going to v=create the same market condition of chaos that characterized the conventional derivatives market early date -also as mentioned in Vega documentations-
Matched trades. Trading parties managed peer-peer trade. I have to say this is vey well though to be covered by the protocol. because the B2B big deals are all done that way. Having a platform to execute that with all the settlements advantages is the least to say, very attractive. But, there is always a but :D. Is there a possibility to tokenize specifications contracts and associate them with such trades. I mean, say two parties want to use the platform to do a trade of some grains. They agree to settle the trade in Vega. Is it possible to tokenize the contract and all its specification as part of the trade.
Trading modes. I have read and encountered the limit order in the whitepaper and on the Vega github. But are other modes like buy and sell stoploss. Will there be a possibility to write algorithmic logic/conditional trading execution methods?
Relieved to read this the paper "peer-to-peer trading venue has no natural incentives for any individual party to source liquidity. This creates a bootstrapping problem in which low volume
markets are unprofitable for market makers " This is precisely the question i wanted to raise since i read the abstract. There was a lots of mentioning of relying on incentivization for liquidity. the bootstrapping problem is still questionable even if we assume people will deploy liquidity on what is returning most. But initially who is willing to bootstrap for the creation of such environment they are going to share its benefits with other who did not go the cost of creation. This same cost of bootstrapping can also incentivize the LP providers to overweigh another platform with another LP model or already bootstrapped.
I call it The LP bootstrapping cost problem. And i leave it with you.
PS. i would love to refer to the LBP and that they are not the favorable way fro TGE’s