Decentralized finance (DeFi) platforms have significantly changed the financial environment by increasing accessibility and inclusivity. By democratizing financial services and removing traditional banking barriers, DeFi extends opportunities to underserved populations and fosters a more equitable financial ecosystem. One noteworthy platform contributing to this revolutionary trend is Venus (XVS), which leverages blockchain technology to redefine borrowing, lending, and interest-earning on cryptocurrencies.

What is Venus (XVS)?

The Venus Protocol was founded to bridge the divide between traditional financial lending and decentralized protocols, utilizing the Binance Smart Chain to sidestep Ethereum’s speed and cost issues. Launched in 2020 by the Swipe project team, Venus forked from Compound and MakerDAO, offering a money market protocol and stablecoin minting capabilities. Without pre-mines for the team, founders, or developers, control was uniquely given to XVS token holders.

Several ideas have been implemented through community governance, including important platform upgrades. The Venus V2 upgrade, approved on March 30, 2021, and implemented on April 15 of the same year, introduced additional penalties for VAI liquidations, fees on VAI minting, and platform withdrawals, with proceeds added to the Reserves Treasury. An airdrop of Venus Reward Token (VRT) to XVS holders was part of this upgrade.

May 2021 saw a serious incident, resulting in a $77M loss on bad debt due to rapid price fluctuations in XVS. Although no user funds were lost, Venus covered the system shortfall through the Venus Grants Program. Consequently, a management overhaul was announced on May 30, 2021, introducing a New Venus Council, highlighting the project’s continued commitment to community control and innovative evolution.

How Does Venus Work? Money Market Protocol and Stablecoin Minting

A key component of Venus is the Money Market Protocol, which enables users to lend and borrow money against their assets on the blockchain to earn interest. It facilitates a seamless, decentralized lending and borrowing market for cryptocurrency assets. Participants can lend their tokens to earn a yield based on market demand, with interest accrued every block. Alternatively, they can use their tokens as collateral to borrow other tokens, facilitating efficient capital usage. This protocol avoids intermediaries unlike conventional systems, to ensure openness, accessibility, and reduced risk.

The Venus V4 version upgrade came with additional risk management features. It introduced isolated pools, allowing segregated collections of assets with custom risk management configurations. These isolated pools effectively manage risk and diversify lending and borrowing opportunities. Each pool maintains a risk fund, and a percentage of protocol revenue is allocated to this fund to cover insolvencies.

Venus V4 also upgraded its price oracle, making it resilient. It can now fetch prices from multiple feeds, validate them using decentralized sources, and integrate new oracles on the fly.

On Venus Protocol, users can perform coin swaps, enhancing its utility in the DeFi space. It features a large array of pools, including ETH, USDT, BUSD, CAKE, ADA, and TRX, facilitating diverse investment and trading opportunities within the platform. This contributes to its versatile functionality.

By leveraging the blockchain’s capabilities, the Money Market Protocol provides an innovative and secure avenue for financial interactions in the realm of DeFi.

Source: venus.io

Stablecoin minting is another core component of the Venus protocol. This feature allows users to leverage their crypto assets to mint VAI, the protocol’s native stablecoin pegged 1:1 with the U.S. dollar. Users can deposit supported cryptocurrencies into Venus as collateral to mint VAI up to a maximum limit (usually up to 50%) defined by the protocol. This allows users to gain liquidity without selling their digital assets, thereby retaining potential upside price movements. Additionally, the system of over-collateralization minimizes risks associated with price volatility. Importantly, VAI acts as a vital link in the Venus ecosystem, facilitating smooth financial transactions and reinforcing the decentralized nature of the platform.

The upgrade mentioned above also enhanced the mechanism to maintain the VAI peg by introducing a stability fee and modifying the VAI a user can mint. These changes reduced the risk of de-pegging and unwanted liquidations.

This stablecoin minting feature empowers users to effectively monetize their crypto holdings, providing a critical service in the burgeoning DeFi landscape.

Venus App

The Venus App is the primary gateway to the multifaceted decentralized Venus Protocol. At its heart lies the Core Pool, a foundational liquidity source for all transactions. However, for those seeking specialized risk management, the app introduces Isolated Pools. Each pool operates independently, containing its own set of assets with custom risk configurations, ensuring that a failure in one does not ripple across the entire protocol.

Vaults are another standout feature, where users can stake either XVS or VAI tokens, reaping passive income rewards while bolstering the platform’s security. The app does not stop there; it also offers a Swap function for seamless asset exchange, an extensive History log for transparent transaction tracking, and a revamped Governance mechanism. By staking XVS tokens in a dedicated vault, users can vote on Venus Improvement Proposals, shaping the protocol’s future.

Governance

Governance within the Venus Protocol ensures protocol evolution and security through Venus Improvement Proposals (VIPs). Users lock XVS tokens in a vault, securing voting power for these VIPs. The revamped Venus V4 introduces three VIP categories: Normal, Fast-track, and Critical, each with distinct voting and delay periods to cater to varying urgencies. V4 also debuts a Role-based Access Control, ensuring specific actions bypass traditional voting for faster execution. Complementing this, the Fine-grained Pause mechanism provides enhanced precision, enabling guardians to halt specific market actions, a shift from the previous all-encompassing protocol pauses. This holistic upgrade fosters more agile, transparent, and robust protocol governance.

The Venus Community Forum is a hub for thoughtful, civilized public discourse, likened to a communal park. Members are encouraged to contribute constructively, ensuring discussions remain relevant and respectful. While disagreements are natural, it’s imperative to challenge ideas without resorting to personal attacks. Active participation shapes the forum’s tone, with tools like bookmarks and flags enhancing the user experience. If problematic content arises, members are urged to flag rather than engage, allowing moderators to address issues. Civility is paramount; offensive, abusive, or inappropriate content has no place. Proper categorization and original content are expected, ensuring the forum remains organized and authentic. Operated by the community and local staff, the forum emphasizes collective responsibility in maintaining its ethos. All interactions are also subject to the forum’s Terms of Service.

What is the XVS Coin?

XVS is the governance token of Venus Protocol running on the Binance Smart Chain. Its maximum supply is 30 million units, of which 15.4 million (51.5%) are already in circulation (August 2023).

The project’s decentralization ethos was reinforced by the fact that it was launched through a Binance Launchpool with no pre-sale or team allocation. A bit less of a third of its supply was mined by protocol users, while the rest gradually unlocked over four years. XVS holders enjoy voting rights on diverse platform initiatives, from adding new collateral assets to adjusting contract parameters. This governance function enhances community involvement, fostering a truly decentralized platform. Additionally, XVS tokens are integral to the platform’s reward system, distributed to borrowers, suppliers, and VAI minters. Venus Protocol has also planned a Venus Vault product to improve the protocol’s anti-risk ability and distribute staking rewards. Available on multiple exchanges, XVS has emerged as an instrumental asset, linking user benefits, governance, and platform enhancement, thus fostering a robust and adaptable DeFi ecosystem.

Venus Protocol distributes reserve revenue across four segments: Risk Fund (40%), Treasury Reserve (40%), XVS Vault Rewards (10%), and Venus Prime Token Program (10%). Additional revenue sources allocate funds similarly, with the largest share (50%) to the Risk Fund, ensuring financial stability.

Source: venus.io

Is XVS a Good Investment?

Venus Protocol presents a unique offering in the DeFi space, allowing collateral to be used for borrowing and minting stablecoins. However, it’s important to recognize associated risks. For instance, Venus experienced a $77M bad debt loss in May 2021 following a significant liquidation. An abrupt price spike in XVS within three hours triggered substantial borrowing against XVS as collateral. The subsequent price drop initiated liquidations of loans collateralized by XVS. Liquidators selling off seized collateral led to higher slippage, and the final value of liquidated assets fell short of outstanding loans. While no user funds were lost, the system’s negative balance was covered by Venus through the Venus Grants Program.

As with all investments, understanding the associated risks and rewards is crucial.

How to Own XVS?

To own XVS, you can use the services of a centralized crypto exchange. Start by creating a Gate.io account, and get it verified and funded. Then you are ready to go through the steps to buy XVS.

News on Venus

As reported by The Block in June 2023, Venus Protocol was on the brink of liquidating a substantial BNB loan linked to a hacker. The hacker, who had executed a major attack on the BNB Chain, resulting in a loss of around $120 to $150 million in cryptocurrency assets, leveraged stolen BNB to borrow $150 million worth of stablecoins on Venus Protocol. As BNB prices fell, the loan’s health rate neared the liquidation point. The BNB Chain core team, however, planned to take over the loan if it reached liquidation, using funds earmarked for such emergencies, to mitigate market impact.

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