Venus Protocol Review [2024] | Borrow & Lend Crypto | Pros, Cons

In this review, we will look at Venus.io, a decentralized marketplace for lenders and borrowers with borderless stablecoins. In particular, we will focus on the platform’s key features, such as liquidity, interest rates, and security, among other things.

About Venus

Venus Protocol (Venus) is an algorithmic-based money market system built to introduce comprehensive decentralized finance (DeFi) based lending and a credit system to the Binance Smart Chain (BSC).

Whatsmore, Venus’s decentralized marketplace for lenders and borrowers enables borderless stablecoins with immutable money-market protocol directly on-chain.

The money market and synthetic stablecoin ​platform were developed by Swipe Wallet in 2021. Although it is built exclusively on the Binance Smart Chain, the protocol’s design is based on Compound and MarkerDAO, which are integrated into the Venus platform, delivering both systems’ advantages.

Also, the Venus Protocol features its own native governance token (XVS), which provides community members control over the protocol’s governance. Traders may use the BEP-20-based token to vote on changes such as introducing new collateral kinds, modifying parameters, and coordinating product development.

Users of the platform can take advantage of the following features:

1. Borrow cryptocurrencies and stablecoins with no credit check and with rapid issuance. 

2. Supply cryptocurrencies and stablecoins and earn a flexible annual percentage yield (APY) in exchange for supplying liquidity to the protocol, which is secured by over-collateralized assets. 

3. Use your given collateral to mint stablecoins (VAI) that may be spent at over 60 million places globally using the Swipe platform as well as others. 

4. The protocol is controlled by its own native currency, the Venus Token (XVS), which serves as a governance token and is intended to be a fair launch distribution for the community.

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Why do crypto investors use Venus?

Venus Protocol has entered the space with cryptocurrency traders on the lookout for digital platforms that provide cheaper costs for borrowing and higher interest rates for lending decentralized assets.

Through Venus, users can utilize their cryptocurrency assets by offering over-collateralized cryptocurrencies as collateral to the network, facilitating a secure lending environment in which the lender receives a compounded annual percentage yield (APY) paid per block. In contrast, the borrower pays interest on the crypto borrowed. 

In this case, the protocol establishes these interest rates using a curve yield, where the rates are automated depending on the demand of a given market.

• Among the many distinctions between Venus and other money market protocols is its capacity to utilize deposited collateral not just to borrow other assets but also to mint synthetic stablecoins with over-collateralized positions that safeguard the protocol;

• Instead of conventional fiat currencies, the synthetic stablecoins on Venus are backed by crypto assets;

• Venus makes use of the Binance Smart Chain to conduct rapid, low-cost transactions while also gaining access to a large network of wrapped tokens and liquidity;

• Users may provide digital collateral in exchange for a loan of up to 75% of the entire value of their digital assets;

• Venus has been developed on the Binance Smart Chain, which means that it is not controlled by a central authority and operates in a transparent manner;

• The list of accepted cryptocurrencies is extensive and includes well-known coins such as Venus (XVS), USD Coin, BNB, ETH, ADA, DOGE, and many more prominent cryptocurrencies and stablecoins.

• Venus has also launched VAI, the world’s first decentralized stablecoin, which is backed by crypto assets as well as a list of other stablecoins.

Venus marketplace’s key products

There are four main features of the Venus Protocol, which will be discussed in further depth below:

1. Supplying assets;
2. Borrowing assets;
3. Synthetic Stablecoins;
4. Venus Governance.

1. Supplying assets

Using the platform, you can earn interest on your assets. Funds retained inside the protocol can earn annual percentage yields (APYs) dependent on the yield curve usage of the particular market they are participating in. 

•  A portion of the block earns interest, which may be used as collateral to borrow assets or to mint stablecoins.

• By supplying crypto assets to Venus, users can participate as a lender while still retaining the security of collateral in the protocol.

• Since all user assets are pooled into smart contracts, you may withdraw your supply at any moment as long as the protocol balance is positive.

• Users who provide their cryptocurrency or digital asset to Venus will obtain a vToken, such as vBTC, which is the sole token that may be used to redeem the underlying collateral they have provided.

• Users of the Venus protocol are able to tokenize their assets using the Binance Smart Chain and gain portable vTokens, which they may use to move their assets to cold storage, transfer them to other users, or a variety of other things.

2. Borrow on-demand

Users of the Venus protocol can access instant liquidity by utilizing their vToken collateral to borrow from the Venus Protocol swiftly, without incurring any trading fees or slippage, and all taking place directly on-chain.

Furthermore, Venus provides you with on-demand liquidity that is accessible anywhere in the world. To borrow any of the supported cryptocurrencies, stablecoins, or digital assets from Venus, users must provide protocol-locked collateral.

A useful feature of Venus is that it allows customers to borrow assets without the need to provide credit information, which is beneficial because it provides a fresh start for the decentralized domain. At the same time, the over-collateralized concept serves as an additional layer of enhanced protection rather than a constraint or stumbling block.

Borrowing up to 75% of the collateral value of these assets requires over-collateralization. The protocol sets the collateral ratios, which are then managed by the governance process. You may then borrow against these assets depending on their collateral ratio, which ranges from 40% to 75%. 

Consider the following scenario: if Bitcoin has a collateral value of 75%, this implies you may borrow up to 75% of the value of your Bitcoin. Therefore, If a user supplies the Venus protocol with $100,000 in BTC, they may borrow up to 75% of the amount. 

An event of liquidation may occur if a user’s collateral value falls below 75%, or whatever the collateral ratio percentage of an asset is. 

• No monthly payments are required, and users will be charged a compound interest rate for every block;

• In order for the user to return the collateral, they must pay back their original balance and accrued interest to the protocol; 

• The contract’s yield curve determines market interest rates, while the market usage determines the interest rate for that market.

Liquidations

Liquidation of a user’s collateral may occur if it falls below the criteria necessary for the borrow or stablecoin side of the market. These liquidations are subject to a liquidation charge and must be completed in order to fulfill any outstanding obligations.

Finally, the user is given back any leftover collateral if there was any. When a collateralized position is liquidated, a liquidator may stand to gain financially.

3. Synthetic Stablecoins

The Venus System will allow users to mint VAI (VAI), a synthetic stablecoin pegged to the price of $1 US dollar (USD), using the vTokens from the underlying collateral they already provided to the protocol. 

• It is possible for users to borrow up to half of their remaining collateral value from vTokens in order to mint VAI. 

• The Venus Protocol allows for the creation of synthetic stablecoins via Governance. VAI will be the protocol’s default stablecoin, minted from collateral already committed in Venus. 

• These stablecoins will be devoid of yielding curves that define their interest rates, which are referred to as stability fees in other protocols. The Venus Protocol’s Governance mechanism will establish interest rates.

• Synthetic stablecoins are created by supplying and locking a single cryptocurrency or a basket of cryptocurrencies.

• Users may exchange vUSD for other assets using the Swipe Wallet platform, and it is convertible to all supported assets, including USD, which may be redeemed immediately to a verified user’s bank account.

4. Venus governance

The protocol has been built to allow for community governance at its foundation. Since there are no pre-mines for the Venus team, developers and founders ensure that the protocol will be controlled by individuals who choose to mine Venus Tokens. 

The creation of a proposal requires two things: 

1. The proposer will need 300,000 XVS.
2. The proposal must attain a quorum of at least 600,000 XVS in order for it to be accepted.

The following are examples of the Venus governance features: 

• Adapting variable interest rates to reflect changes in all markets;
• Protocol expansion with the addition of additional cryptocurrencies or stablecoins;
• Delegate protocol reserve allocations distribution plans;
• Voting on protocol upgrades and proposed changes;
• Setting fixed interest rates for synthetic stablecoins. 

Venus Token (XVS)

The Venus Token (XVS) governs the Venus Protocol and is designed to be a “fair launch” cryptocurrency. 

There are two ways to earn XVS, as there are no founders, team, or development allocation:

1. Through the Binance LaunchPool.
2. Providing liquidity to the protocol. 

• A total of 20% supply of 30,000,000 XVS will be dedicated to the Binance LaunchPool project, where users will be able to mine these tokens, with 1% of the total supply of XVS set aside for grants to the Binance Smart Chain ecosystem.

• XVS is distributed by liquidity mining, with 35% going to borrowers, 35% to providers, and 30% to stablecoin minters.

vTokens

When collateral is supplied, the protocol generates pegged assets known as vTokens. These vTokens reflect the unit of the collateral provided and may be utilized as a redemption mechanism. Voting is done by holders of Venus Tokens, who generate and administer vTokens via governance processes.

Venus fees

Venus does not have a set fee structure since the amount of each transaction varies depending on the exchange, demand, and other variables. 

The interest rates charged on lending are determined in a similar manner as they change in response to market conditions and may provide various returns at different points in time.

Is Venus safe?

The governance of the Venus Network is democratic and entirely decentralized, as is the operation of the network itself. As previously stated, the inherent over-collateralization of lending serves as a form of security with each block part of a ledger.

Whatsmore, the BEP-20 standard applies to all Venus Protocol while the Venus itself is licensed and open-source under the MIT License.

Market manipulation attempts are avoided by using price feed oracles, such as those from Chainlink, which offer reliable pricing data that cannot be interfered with.

In September 2021, anonymous attackers attempted to hack Venus and steal 3.7 million XVS funds. However, through the governance guardian, the Venus team was able to prevent this proposal from being implemented, a security mechanism only used in emergencies. Notably, Venus’ security and stability are immediately threatened when an attacker tries to gain control of the protocol by bribery, known as VIP42.

Thus, the Venus team intends to propose a more secure decentralized autonomous organization (DAO) for Venus in the future, and they are looking forward to discussing it with leading DeFi projects and Venus communities. For the time being, Venus will employ its guardian to safeguard its users from any absurd or dangerous VIPs.

Previously, the protocol lost around $77 million without deviation restrictions on oracles due to wild market fluctuations. 

However, since then, the Venus team has been taking steps to provide the best risk management possible, including hiring and establishing an independent risk committee that will conduct an ongoing review of the Protocol, including: 

• Lower collateral factors;
• Multisig Proposals;
• Establish an independent risk committee to do ongoing analysis (Venus Council);
• Block OTC system and improve risk control;
• Community polling;
• Terminate all third-party relationships until review from new management.

Customer Support

The Venus team is responsive on a variety of platforms, and the active community can also assist new users in navigating around the numerous domains.

You can discover more about the protocol and its development team on its networking platforms such as:

• Telegram;
• Github;
• Twitter;
• Medium.

Pros & Cons

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Final thoughts

The Venus Protocol has been created to provide platform users with a decentralized and secure marketplace where they may accept loans, collect interest, and mint synthetic stablecoins. 

Users may deposit a variety of supported cryptocurrencies or digital assets on the platform, which can be used as collateral for loans, provide liquidity and earn an APY. Additionally, the digital platform for trading decentralized digital assets enables quick, safe, and inexpensive transactions.

Venus provides a scalable solution on the money market, producing a community-controlled governance token called XVS. The XVS token is dispersed via a fair-launch process with no founder and team allocations and is supported by a well-funded organization.

All in all, the Venus network’s primary objective is to provide a more secure and healthy marketplace for protocol users. The team’s goal is to create a more dependable platform for transactions such as mining aggregated lending and earning interest, and it is currently one of several protocols that are being developed to address challenges in DeFi.

FAQs about Venus

What is the Venus Protocol?

The Venus Protocol provides a comprehensive algorithmic money market protocol on the Binance Smart Chain for lending and borrowing digital assets. It allows quick, low-cost transactions while giving access to a large network of wrapped tokens and liquidity on the decentralized platform.

What is the Venus token (XVS)?

The Venus Token (XVS), which governs the Venus Protocol, is intended to be a “fair launch” cryptocurrency that is decentralized. Users may purchase the XVS token by either exchanging them on the marketplace or mining them on the platform. XVS may be minted to serve as collateral for borrowing, and it can also be exchanged for other stablecoins.

Is Venus safe?

Due to its underlying architecture, the Venus protocol ensures reliable operation owing to over-collateralized loans and other security verifications from third parties. In addition, the BEP-20 standard applies to all Venus Protocol assets remaining fully decentralized as an immutable money market protocol directly on-chain while being licensed and open-source under the MIT License.

Is Venus scalable?

Since Venus is built on the Binance Smart Chain, it is highly scalable and provides speedy, efficient, and competitive transactions in a secure environment.