In this post, we’d like to share with you more details about the VEGA token, including how it relates to the Vega protocol, and how it will be launched. It explains what you’ll need the token for if you plan to participate in the Vega network, and why the protocol was designed with a token in the first place.
Why use a token?
Vega is a protocol that runs on a bespoke proof of stake blockchain. Many aspects of the protocol and network will be governed by the community to help it evolve, and to make crucial decisions around things like fee rates, how the protocol manages risk, how and when upgrades are accepted, and much more. This governance requires a way to determine how much voting weight to give each pseudonymous user (public/private key pair) on the network. The delegated proof of stake blockchain also requires a way to decide the validator set and give each validator the right amount of power in the block production process.
Both the validation of blocks and governance of the network need to be done by users with skin in the game. This means that when someone is staking or delegating to the network, or voting on governance decisions, it’s important that they benefit from making good choices and will suffer (economically!) if they do things that harm the success of the network. This means that using another coin or token such as Ether or Bitcoin is out of the question. Using another asset, which is not directly tied to the protocol, would increase the chance of someone acting in a way that is against the best interests of the network.
Therefore, in order to align the interests of the participants that secure and operate the protocol, it makes use of a native token for staking and delegation, and for the operation of the governance protocol. This token is an ERC20 on the Ethereum network, and it interacts with the Vega blockchain via an Ethereum-to-Vega bridge.
Importantly, traders will not require the Vega token to use the protocol to place orders and trade. There are no separate gas fees on Vega for these activities, so for many users, unlike most other DeFi protocols, only the asset(s) being traded are required.
How it works
Using the token
The VEGA token can be staked and delegated even while locked, so every member of the VEGA community can participate from day one of a live network by:
- delegating to a validator of their choice to signal support for that validator;
- proposing and voting on others’ proposals for new markets on Vega;
- proposing and voting on governance changes that will help distribute rewards and incentives from the on-chain treasury, set fee levels, and adjust the behaviour of the network.
Token holders who are staking as a validator or delegating their stake to a validator will be rewarded:
- from the infrastructure fee, which is decided by token holders themselves through the on-chain governance protocol; and
- from the on-chain treasury, which can be funded by the team or anyone else in the Vega ecosystem with any assets supported by Vega, and will be distributed to participants, including stakers/delegators, based on rules set through governance.
This means that token holders will receive fees in multiple assets and additional incentives in VEGA for participating in the network. Initially, when the network is new and growing, it’s likely that there will be a significant “pot” of VEGA to incentivise early usage. In future, as the network matures, it’s expected that the incentives within the system will take over and provide rewards to token holders in a sustainable way. The parameters that decide these amounts will be set by token holders who would be expected to want to optimise between having more rewards on the one hand, and making the protocol cheap and attractive to users on the other.
Token allocation and release schedule
The ERC20 token has a fixed supply of 64,999,723, and has been allocated to the following buckets:
- Seed round: 26.5% (~17M)
- Strategic round: 11% (~7.2M)
- Team (tranche A): 6.5% (~4.2M)
- Team (tranche B): 23% (~15M)
- Coinlist sale: ~9%  (~5M)
- Community bounties and grants: 5% (~3M)
- On-chain incentives: 9% (~6M)
- Project treasury: 10% (~8.5M)
 the final Coinlist sale allocation depends on the amount purchased by community whitelist participants, unsold tokens will be used for community and incentives.
Each allocation is subject to different vesting terms. The terms upon which each allocation unlocks are detailed below.
The vesting terms of the seed round are described below:
Number of tokens: ~17,000,000
Cliff: 15% of tokens unlock 5 months following the CoinList sale
Vesting: The remaining 85% of tokens vest linearly over 18 months
The vesting terms of the strategic round are described below:
Number of tokens: ~6,500,000
Cliff: 15% of tokens unlock 4 months following the CoinList sale
Vesting: The remaining 85% of tokens vest linearly over 18 months
Team (tranche A)
The vesting terms of the team (tranche A) tokens are described below:
Number of tokens: ~4,200,000
Cliff: No cliff, vesting starts 9 months after the CoinList sale
Vesting: 100% of tokens vest linearly over 15 months
Team (tranche B)
The vesting terms of the team (tranche B) tokens are described below:
Number of tokens: ~15,000,000
Cliff: No cliff, vesting starts 12 months after the CoinList sale
Vesting: 100% of tokens vest linearly over 18 months
The details pertaining to Coinlist sale, including token lockups, are available at https://coinlist.co/vega.
Note: the Vega team will never ask you to transfer funds, and the only place to buy tokens for the sale is through CoinList at coinlist.co. If you’re not sure if you’re looking at a legitimate communication, please ask in one of our official channels, listed on LinkTree.
Community bounties and grants
These tokens will be used to incentivise the Vega community to build, use, and create content that benefits the whole ecosystem. The current bounties are listed on our website and Github. Over the coming weeks and months, the team will roll out an incentivised testnet along with a number of additional bounties and opportunities to be rewarded for engaging more deeply with the Vega community. There will also be a grants programme for community members who are interested in being supported by Vega to develop their own proposals that benefit the ecosystem.
When it launches, the Vega network will have an on-chain treasury that allows the protocol and community (via governance) to allocate funds to trade mining, liquidity mining, market creation, and other incentives. The on-chain treasury will be funded in tranches by the project team from this allocation of tokens, and these rewards will be a significant addition to the overall staking and liquidity revenue available, particularly for early users of Vega.
The project will continue to hold a small treasury, which may used in future for additional fundraising or to fund other community focused initiatives that further development of the Vega protocol.
To learn more about Vega, visit our website vega.xyz. We’d love to hear from you, via one of our official channels. See the full list on LinkTree, which also includes links to Fairground, Vega’s testnet, and our published papers.