Governance allows the Vega network to arrive at on-chain decisions, where tokenholders can create proposals that other tokenholders can vote to approve or reject.
Vega supports on-chain proposals for creating markets and assets, and changing network parameters, markets and assets. Vega also supports freeform proposals for community suggestions that will not be enacted on-chain.
Taking part in governance by voting, or by proposing additions/changes with community support, is a way for tokenholders and community members to contribute to improve the network, and to add value for other network participants.
Try out proposing markets using Fairground, Vega's testnet.
Lifecycle of a governance proposal
Proposing an addition or change to the network requires community support. It's worth considering what it contributes to the network, and if it would have enough support to pass a governance vote. You'll have a better chance of positively contributing to the network if you confirm there is support off-chain before submitting a proposal.
1. Sense checking proposal idea (off-chain)
Before submitting a proposal, it's recommended that you share an outline of your proposed action informally in a new topic on the community forum Governance Proposals section, with a "sense-check" tag. You can find out if there is sufficient interest in making a change.
Proposals can be submitted for creating a new market, amending an existing market, changing network parameters, adding an external asset to Vega and making a freeform proposal (for changes that will not change network behaviour).
2. Formalising proposal (off-chain)
Once the proposal details are refined, share the detailed proposal in the same topic you created for your sense check, and change the tag to "formalise".
Including as much detail as possible gives other community members the opportunity to fully understand your proposal. Include the rationale for the proposal (and IPFS hash for more details), the specifics of the proposed addition/change, and the data (JSON or similar) that would be submitted on-chain. Invite debate and discussion to amend the proposal until it reaches a final state, ready to submit.
When formalising the proposal, it is worth ensuring that any fields that are dependent on a range set by network parameters are correctly defined. See the network parameters and their values on the Vega block explorer.
3. Submitting proposal and telling the community (on-chain and off-chain)
Tokenholders can submit a governance proposal to the network using the command line or via a script.
The Vega public key of the proposer must have enough VEGA staked to submit a proposal. For a 'market parameter change' proposal, the proposer must also have enough equity-like share in the market from their liquidity commitment, which is defined in the network parameter 👀governance.proposal.updateMarket.minProposerEquityLikeShare: 0.05.
Proposals are first checked by the wallet, then verified by the nodes before entering into the voting period you set. A proposal must have all of the relevant information, in the correct format, and in some cases within the accepted range - otherwise it will be rejected immediately.
A proposal is immutable once entered.
Read the proposals guides to see what information needs to be in a proposal, and how to submit them using the command line.
Validating a proposal
- The governance proposal is checked and then accepted by the wallet as a transaction.
- The validator nodes then check and validate the proposal. This is when the proposal data that defines the minimum duration, minimum time to enactment, minimum participation rate, and required majority are evaluated against the network's requirements, defined in network parameters, which are different depending the type of proposal.
- If not specified on the proposal, the required participation rate and majority for success are defined and copied to the proposal. You can find them under the network parameters, and they are specific to each proposal type.
- If the above conditions are not met, the proposal will be rejected and will not be available for a vote. You'll need to fix and re-submit the proposal.
VEGA tokenholders can vote for or against any active proposals, as long as the tokens they want to vote with are associated with their key. It's not necessary to nominate validators, but the tokens must be associated to the Vega key used for voting.
- The number of tokens associated with the voting key determines how much weight the vote has (and for 'market parameter change' proposals, liquidity providers' market share is also taken into account).
- Each Vega public key with a non-zero token balance gets one vote, and the key votes with the full weight of all the tokens that key has staked.
- Tokens used for voting are not locked or transferred: they can be used for staking as well as for voting on any/all active proposals.
- While the voting period is open, a public key can vote multiple times, but only the most recent vote will count at the proposal's close.
- The Vega key used for voting will need to have more than 0 tokens when a vote is submitted, as well as when votes are counted at the proposal's closing date/time, otherwise the vote is disregarded.
How the outcome is calculated
- The network compares the weight of all valid votes cast as a percentage of the total weight that could vote, to the minimum participation requirement -
participation_rate = SUM (weightings of ALL valid votes cast) / max total weighting possible
- The network compares the weight of all 'for' votes, as a percentage of the weight of all votes cast, to the required majority -
for_rate = SUM (weightings of votes cast for) / SUM (weightings of all votes cast)
- If the minimum for both is reached, the proposal is enacted. If at least one is not reached, the proposal fails.
For proposals to change market parameters, there are additional requirements. The market's liquidity providers can vote with their equity like share without requiring tokenholder participation. However, if tokenholders vote and participation and majority requirements for this vote are met, then the tokenholders' votes can overrule the liquidity providers' votes.
The network will also calculate:
- The LP participation rate, which is the sum of the equity like share of all LPs who cast a vote -
LP participation rate = SUM (equity like share of all LPs who cast a vote)
- The rate of 'for' votes cast by liquidity providers, calculated as the sum of all who voted 'for', divided by the LP participation rate -
LP for rate = SUM (all who voted for) / LP participation rate
Vote on active proposals on the Vega token dApp.
5. Enacting changes
If a proposal receives enough token weight in favour within the enactment period, the change/addition is accepted (except for a freeform proposal), and will be enacted on the enactment date defined in the proposal.
Note the enactment date must be at least the minimum enactment period for the proposal type/subtype (specified by a network parameter for each proposal type) after voting closes. See the network parameters and their values on the Vega block explorer.
Thresholds set by network parameters
Governance requires that certain parameters need to be within a defined range, but offer some flexibility.
When validating a governance proposal, the values chosen in the proposal will be checked to ensure they fit within the thresholds defined by the network parameters.
Each type of governance proposal can have different thresholds, though they fit into broader categories. Those categories include:
minProposerBalance: minimum amount of VEGA that a proposer needs to have associated with their Vega key to have the proposal accepted for a tokenholder vote
minClose: minimum amount of time before a proposal can be closed for voting
maxClose: maximum amount of time a proposal can be open for voting
minEnactment: minimum time allowed between vote closing and the proposal's change being enacted on the network
maxEnactment: maximum time allowed between vote closing and the proposal's change being enacted on the network
requiredParticipation: minimum number of tokens that must vote for a proposal to pass
requiredMajority: minimum majority that a proposal's 'yes' votes must reach for it to be enacted
minimum levels are themselves network parameters, and therefore can be changed through governance.
Consider a network parameter that specifies the proportion of fees that goes to validators (👀transfer.fee.factor: 0.001), with change thresholds:
- 👀Minimum length of voting period: 72h
- 👀Maximum length of voting period: 1440h
- 👀Minimum time to enactment: 72h
- 👀Maximum time to enactment: 1440h
- 👀Required participation: 25%
- 👀Required majority: 66%
- 👀Proposer must have: 20000 tokens
A proposal to change the 👀transfer.fee.factor, would need to pass all of the thresholds listed above.
Network parameter governance
There are certain parameters within Vega that influence the behaviour of the system and can be changed by on-chain governance. Vega tokenholders can define the optimal network configuration by creating and voting on network parameter proposals.
Network parameters can only be added and removed with Vega core software releases.
A network parameter is defined by:
- Governance update policy
Proposal tutorial: See the steps for submitting a network parameter proposal.
In restricted mainnet, the VEGA token can be used for nominating validators and for voting on governance proposals. In a future version, it will be possible to deposit and withdraw assets used for trading.
VEGA tokens can only be withdrawn if they are not staked.
When a participant decides they want to remove their assets from the Vega network, they'll need to submit a withdrawal request via a Vega app or the API.
This request, if valid, will put through Vega consensus, wherein the validators will sign a multi-signature withdrawal order bundle, and assign an expiry. If the withdrawal is not completed by the participant before the expiry, the tokens are returned to their collateral account.
To move the assets into the participant's Ethereum wallet, they need to submit the bundle to the ERC20 bridge. The bridge validates the bundle and then releases the funds to the Ethereum wallet.
Once a successful withdrawal transaction has occurred, the ERC20 bridge will emit an
Asset_Withdrawn event, and confirms to the Vega network that the withdrawal has been completed.
Withdrawing staked (unlocked) VEGA
VEGA (an ERC20 token) used for staking is associated with a Vega key. To withdraw unlocked tokens and withdraw them, they must be dissociated first.
Rewards accrued through staking are not associated automatically. To stake those tokens or transfer them, they need to be withdrawn from the Vega key that the rewards are credited to, and sent to an Ethereum wallet.
Track and withdraw staking rewards on the Vega token withdrawals page.
See VEGA token for more details about the VEGA token.
Transfer assets to keys or accounts
Transfers can be used to move assets from one Vega key to another, or from a Vega key to a specific account, such as a reward pool used for the on-chain network treasury.
Anyone with a Vega public key and assets (such as the VEGA token) can set up a transfer. Those transfers can only be done from a general account the party has control of, using their own funds.
Each transfer incurs a fee. The fee is paid to the validators who run the network. The amount of the fee is set with the network parameter 👀transfer.fee.factor: 0.001,, which defines the proportion of each transfer that's taken as a fee. The fee's subtracted immediately on execution, and is taken on top of the transfer amount.
Transfers can be set up to happen only once, or can happen repeatedly.
Set up transfers with your Vega wallet using the command line. Find out how in the transfers guide.
- Each party has a max number of transfers per epoch that they can send, set by the network parameter 👀spam.protection.maxUserTransfersPerEpoch: 20.
- A minimum transfer amount is controlled by the 👀transfer.minTransferQuantumMultiple: 0.1, which is dependent on the quantum (smallest possible amount) specified for the asset. To calculate the smallest a transfer can be, multiply the 👀transfer.minTransferQuantumMultiple by the asset's quantum.
A one-off transfer can happen immediately (as soon as it is validated), or be set to happen at a specific time. When you set a delay, the transfer funds are removed from your account immediately and stored in a pool, and then distributed to the destination account once the time you chose is reached.
A party can also setup recurring transfers that will happen at the end of each epoch, and before the next one starts.
A recurring transfer transaction needs to contain the following:
- How much is available to transfer
- The starting epoch for the transfer
- Optionally, the end epoch when the transfers should stop. If it's not specified, the transfer run until cancelled
- The percentage of the full amount to pay each epoch, which is defined using the factor - a decimal
- The amount paid at the end of each epoch is calculated using the following formula:
amount = start amount x factor ^ (current epoch - start epoch)
- The amount paid at the end of each epoch is calculated using the following formula:
Cancel or amend transfers
It's possible to cancel a recurring transfer, but not to amend. If you want to change your transfer, you'll need to cancel the existing transfer and submit a new one.
If the asset used to fund a recurring transfer is depleted, either because the funds have run out or it's less than the 👀transfer.minTransferQuantumMultiple: 0.1
x quantum, then the transfer is cancelled automatically. You'll have to set up a new transfer if you want to keep funding the key/account.
Recurring transfer limits
While a party (public key) can have multiple transfers set up to move assets to different accounts, each party can only have one recurring transfer between two given accounts at the same time. For example, a party can transfer from their general account to Public key A and Public key B, but they cannot set up two recurring transfers of different amounts both going to Public key B.
On-chain network treasury
In restricted mainnet, rewards for nominating a validator will be distributed from the on-chain network treasury, in the form of VEGA tokens.
The on-chain network treasury is a set of accounts that are funded by parties, deposits, or by direct transfers to allocate funds for rewards, grants, and other initiatives.