A Closer Look At Vertex Protocol

Mike Harry
Nov 2023
5 min to read
Fact checked

Introduction: Vertex protocol will be launching their anticipated decentralized exchange on Arbitrum at the end of 2022. The goal is ambitious, build a decentralized exchange that can compete with the likes of Binance and Bybit.

eToro USA LLC: Investments are subject to market risk.
Including the possible loss of principal.

What is Vertex Protocol?

Vertex's original mission was announced in late 2021 when the team revealed that they were building a decentralized FX protocol platform on the Terra Blockchain.

Vertex Investment & Investors
Vertex Investment & Investors

The goal was to address the need for multi-currency DeFi applications and on-chain FX trading. This vision attracted an $8.5 million seed investment in April this year led by Hack VC and Dexterity Capital. 

Vertex Exchange Interface

With the collapse of the UST stablecoin earlier this year, the Vertex team was forced to abandon their original plans and rethink their next steps.

Their new mission was to build a decentralized, vertically integrated, cross-margin order book for spot, perps, and yield products.

In other words, to build a decentralized exchange that can match the product offering and user experience of centralized exchanges like Binance and FTX. 

What is Vertex’s value proposition?

Vertex’s lite paper that came out last month is the teams attempt to answer the question of how a decentralized exchange can compete, and win over its centralized counterparts.

Their solution is to create a vertically integrated decentralized order book exchange to ensure efficient price discovery and liquidity.

The team wants to create an advanced risk engine to enable cross-margined spot and derivatives for full utilization of capital across balances and open positions.

Vertex’s goal is to also create a space for lending and borrowing of yield and leverage via an integrated money market, while enhancing the user experience with:

  • Traditional fiat on and off-ramps
  • Bridging solutions
  • Web 2 signup methods with self-custody 
  • Multiple front-ends to accommodate different target groups

The Vertex Tech Stack

Vertex made the decision to leave the Cosmos ecosystem to instead build on Arbitrum, an Ethereum L2 rollup.

The idea is to leverage the 4,500 TPS throughput and low cost offered by Arbitrum with the security and vast liquidity offered by Ethereum.

Arbitrum has at the time of writing accumulated a total value locked (TVL) of over $1 billion.

The 5 biggest dApps on Arbitrum today are GMX, Uniswap, Stargate, Sushi, and Curve. 

Vertex is also building its own software development kit (SDK) to allow for integrations and composability with other dApps in the ecosystem. 

Vertex Roadmap

The goal is for Vertex minimum viable product (MVP) to include spot, perps and money markets for borrow and lending.

Vertex is aiming for their public testnet to be launched by the end of October and mainnet at the end of November. 

Eyeing further ahead, the team is already considering additional products such as: 

  • Spread and Basis trading
  • Integrating AMMs for deeper liquidity
  • Crypto indices
  • Launchpad
  • Prediction markets
  • Binary options  

Vertex Tokenomics

The Vertex protocol will in total have three tokens that interplay with each other. VRTX is the main token, xVRTX will be the liquid staking token and voVRTX will be the protocols voting token. 

  • VRTX can be used to buy assets and pay for fees.
  • Spent VRTX gets converted into voVRTX which goes into staking insurance. 
  • Staked VRTX becomes xVRTX for governance participation and earn shares of protocol revenue 

eToro USA LLC: Investments are subject to market risk.
Including the possible loss of principal.

Mike Harry
Mike is a passionate crypto enthusiast who bought his first Bitcoin in 2016. With a natural curiosity and a love for learning and tinkering, Mike is always trying out new DeFi applications. Mike excels at breaking down difficult concepts into easy-to-read guides for beginners.

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