The Space Race For Open Markets: Vega

Are modern markets open markets? Markets are part of our lives in unimaginable ways yet have never been more mysterious. Today, trading is a game of warring algos and enigmatic finance, addicted to obfuscating collateral and hiding system risk. Crypto promised to get us a step closer to open markets, gifting us perfect and incorruptible collateral as well as the power to verify everything without a ratings agency or bank.

Yet the mysteries of market structure linger, and are in some new ways worse than TradFi. Nobody can contest the pristineness of crypto collateral, but crypto market infrastructure is addicted to its own redlining – from the existential CeFi cascade to HFT’s adversarial cousin, MEV.

Vega is the world’s first open protocol for creating, maintaining and aligning markets. It is a decentralized launchpad for all trading. In some sense, Vega concepts are more than a subset of DeFi – they represent an evolution in the history of markets. If Vega succeeds, it will become a modular galaxy for everything from market creation to risk modeling and incentive alignment. It marries active and passive liquidity, encourages risk model experimentation and ultimately solves the derivatives trilemma.

A true Blue Ocean opportunity, Vega is the multi-verse of markets, dragging humanity out of an adversarial war of all and leading us to a new space race for open liquidity.

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Toward Credibly Neutral Derivatives: Announcing Our Investment Into Vega

Like a prison tattoo, March 12 2020 is branded into every crypto trader’s mind. Nobody can forget the terror of that fated candle. No trader will ever escape the disbelief of watching a derivatives market that developed over years break within minutes.

Crypto desperately needs credibly neutral derivatives. A year from this PTSD-inducing moment of market history and not much has changed. Put aside the fact that we still don’t know what happened on that day the majority of derivatives volume is still executed off-chain in the opaque land of the centralized exchange. 

The market needs decentralized derivatives that can match the centralized experience, a place where traders can take on leverage, move capital efficiently and hedge risk without worrying about something breaking or someone squeezing them behind a curtain.

We are thrilled to announce our investment into Vega Protocol, which we believe will be the most important player in this emerging world of decentralized derivatives. We are excited to co-lead the round with Cumberland DRW, one of our closest trading partners. The round brings together a strong group of trading firms and DeFi investors including ParaFi Capital, Coinbase Ventures, CMT Digital, Signum Capital, DeFi Alliance, CMS Holdings, Three Commas, SevenX Ventures, GSR, ZeePrime Capital and more.

Vega marries the ingenuity of DeFi with the hard-won wisdom of order books. It unites the AMM with the CLOB, breaking the dichotomy between active and passive liquidity. In Vega, market makers are owner-operators, incentivized to seed markets; while passive LPs provide liquidity to their strategies. The team complements this novel economic design with a heavy focus on risk management and capital efficiency, pioneering solutions to challenges like frontrunning, multi-chain collateral and scalability. 

A snapshot of the Vega exchange interface.

We are stoked to get behind a team of world-class entrepreneurs, engineers, academics and traders and will publish more on our investment in the coming months.

Toward the Wild West Net!

TechCrunch: https://techcrunch.com/2021/03/18/vega-raises-5m-to-give-anyone-the-ability-to-launch-a-derivatives-market/
Crunchbase: https://news.crunchbase.com/news/vega-banks-5m-to-create-derivatives-trading-protocol/
The Block: https://www.theblockcrypto.com/linked/98742/defi-derivatives-protocol-vega-5-million-coinbase-ventures-others

Vega Roadmap: https://blog.vega.xyz/announcing-the-vega-2021-roadmap-4c3c0d80efc0
Vega TestNet: https://testnet.vega.trading/

Twitter: https://twitter.com/vegaprotocol
Telegram: https://t.me/vegacommunity
Discord: https://discord.com/invite/ZNEMCYd

Algorand’s First Australian Tour, A Welcome from Arrington XRP Capital

Next week, Algorand is launching its first official Australian tour, where Founder Silvio Micali and Steve Kokinos will host a packed week of events in Sydney and Melbourne.

As Australian partners at the fund, Ninor and I are thrilled to welcome two of crypto’s brightest minds to our very own backyard. 

Silvio and Steve are a dynamic duo to say the least and definitely a pair you don’t want to miss live. As part of the roadshow, Algorand is hosting a big week of events from lectures at Australia’s top universities to a series of meetups and panel discussions with industry leaders from the local scene. 

Arrington XRP Capital will be joining the tour alongside partners Mozaik Capital, Blockchain Australia, Sydney Blockchain Professionals and the Blockchain Centre.

For our Aussie readers, here’s a summary of Silvio and Steve’s week ahead:

September 4 – Melbourne

September 5 – Sydney

September 6 – Sydney

On the 5th, I will moderate a panel discussion between Silvio and Steve, where we will be joined by legal mind Hannah Glass from King & Mallesons and blockchain engineer and Deepyr founder Adrian Guerrera. 

One of the best parts of being a crypto fund manager is the opportunity to not only invest in projects and founders globally, but to make friends and build communities across the world. It’s events like these that make the 24/7, timezone-agnostic chaos of the crypto markets well worth their permanence.

Algorand is one of the most ambitious projects in crypto. The team’s vision for a “borderless economy” aligns very closely with our own guiding principles at Arrington XRP Capital: our team is spread across continents and we invest globally in technologies and teams that are unbounded by the closed walls of a legacy financial system.

Hopefully the first of many. Welcome!

The Monetary Experiment: Algorand

We explore the monetary experiment of Algorand, a new cryptocurrency invented by Turing Award winner Silvio Micali. Arrington XRP Capital will be participating in the Algorand economy by running a relay node and bidding in the Algorand Foundation’s dutch auctions.

Algorand brings together bleeding edge cryptography with a clever economic model that bootstraps Algo currency markets. This is a novel development that ties the token and technology to economic incentives that encourage efficient market pricing.

The Algorand Foundation will distribute 30% of Algos through downside-protected dutch auctions. In this world, auctions are akin to monetary policy catalysts, not only circulating tokens, but guiding price discovery both today and in the future. The clever part of this story is that any purchaser can refund their Algos one year after purchase, giving them up to 90% downside protection. This has wide implications for Algo market dynamics.

Algorand’s monetary experiment marries Silvio Micali’s solution to a three decade challenge in distributed systems with lessons from Foreign Currency (FX) trading, options pricing theory and traditional asset management. As these markets mature, we predict that Algo will behave unlike any other cryptocurrency today. Not a stablecoin; but a cryptocurrency whose economic model motivates financial markets to form rational expectations and seek out self-fulfilling equilibrium.

The downside-protection clause also opens up a new world for institutional investors such as family offices or endowments who have not yet ventured into cryptocurrency because of its drawdowns. The simple question for these investors as well as others who hold cash in their cryptocurrency portfolios is thus: Why hold cash when you can hold downside-protected Algos, gaining cryptocurrency exposure without significant downside risk?

Algorand’s economic experiment is unprecedented. It is where macroeconomics meets cryptocurrency; and we believe that it will have wide-ranging implications for cryptocurrency portfolio management, hedging and broader market dynamics.

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