Do you want to know more about the protocol that seeks to bring DeFi lending and borrowing onto the BNB chain – Venus protocol? Here’s a detailed guide you will find useful in expanding your knowledge.
Apparently, the DeFi space is already fitting for its initial purpose of rivalling the traditional finance system. Since its emergence, DeFi has been welcoming loads of innovations and projects seeking to make the space efficient for users while outshining traditional finance.
Venus is a lending platform on the Binance Smart Chain (BSC). Just like other centralised credit firms that serve the traditional finance system, Venus has rolled out DeFi lending solutions for users.
Venus protocol (XVS) allows borrowers to borrow from a pool of assets without permission. The interest rates on loans are set by the protocol and automated as demanded. There is an option of minting synthetic stablecoins with an overcollateralized position.
Venus Protocol: Platform for Lending & Borrowing Digital Assets
Venus Protocol (XVS) is an algorithm-based money market structure built on the Binance Smart Chain and designed to allow decentralized lending and borrowing. Basically, Venus serves as a digital lending platform and stablecoin protocol based on the BSC. This system allows cryptocurrency holders to utilize their assets for lending services by supplying them as collateral to the network. Holders earn passive income via variable APY featured on the protocol.
The first thing to do to trade on Venus is to have a MetaMask wallet which should then be connected to Binance Smart Chain. However, in order to lend or borrow assets on the Venus platform, there is a necessity for users to have a BNB coin. The BNB coin can be bought on a centralized exchange (for example, Binance) and sent to the MetaMask wallet. Bep-20 (an extension of the ERC token) serves as the standard token on the venus platform and users of Venus are rewarded for data mining. Supplying digital assets and borrowing digital assets are the basic use cases featured on Venus Protocol.
Supplying Digital Assets
Supported cryptocurrency and digital assets can be supplied on the venus platform and used as collateral for loans, liquidity supply and APY earnings. Users can participate as a lender while the security of collateralizing is maintained in the protocol.
Furthermore, there is a vToken reward for users that supply their cryptocurrencies and digital assets such as vBTC, the only acceptable token for redeeming underlying collateral that is supplied.
Users then utilize these tokens to move other assets into cold storage wallets that support Binance Smart Chain.
Borrowing Digital Assets
Venus pledges collateral that will be locked on the protocol if users want to borrow supported cryptocurrencies, stablecoins or digital assets.
These assets will enable up to 75% of the collateral value borrowed. Collateral ratios are controlled via governance. After the supply of an asset, users can borrow based on the collateral ratios of the assets.
Venus Protocol’s Origin
Venus protocol was launched in 2020 to satisfy the need for DeFi protocols. The founder and developer is Joselito Lizarondo, CEO and founder of Swipe, a multi-asset digital wallet and Visa debit card platform designed to let users buy, sell and spend their cryptocurrencies.
The platform was created with the idea of enabling the minting of VAI stablecoins, collateralized loans and collateralized asset supply supported by the protocol.
The team designed the platform in such a way that holders of venus tokens have full control over the network and the Venus token.
With the protocol being hosted on the Binance blockchain, this implies that the venus token XVS is a BEP-20 token. The token is used in network governance where XVS holders can propose changes to the network.
How Does Venus Work?
The Venus protocol allows users to borrow and lend cryptocurrency-based funds. It calculates the loan eligible to users based on deposited collateral. When users deposit multiple cryptocurrencies, they can borrow crypto funds with low fees with no intermediary within the market.
Meanwhile, VAI stablecoins and the XVS token play a major role in the venue lending system, the token is used for governance, giving every holder voting rights and changing proposals. Venus users have permission to deposit any of the 16 cryptocurrencies supported on the protocol as collateral in order to borrow more cryptocurrencies. All participants in this network can earn an APY whose rate is dependent on the general interest in a certain cryptocurrency. This profit made can then be used as collateral for loans. Participants can also mint the network decentralized coins and as well lend their funds.
How to Use Venus?
As a lending DeFi platform, Venus allows users to borrow and lend cryptocurrency. It aims at creating a lending platform that is automated and decentralized, which enables lenders to earn an APY depending on their deposit funds for only supported cryptocurrency.
The protocol can also be used in minting overcollateralized stablecoins. Venus users can mine for liquidity. As mentioned earlier, the first thing to do to trade on Venus is to have a Metamask wallet which should then be connected to a Binance Smart chain (BSC).
The XVS token is the native token of the Venus protocol. XVS is a BEP-20 token that is used to make proposals and vote on changes to the Venus protocol. As such, users who hold XVS are permitted to vote on all kinds of initiatives proposed on the platform. These voting rights range from adding new assets for collateral to changing parameters on the contract.
The token is available for users to buy on supported exchanges. In addition, users can also earn the token via the mining system provided on its ecosystem. The Bep-20 XVS governance token has a total supply of 30,000,000 with over 3 million tokens in circulation. Notably, the protocol has provided 79% of the token’s total supply for ecosystem mining. Meanwhile, the remaining 21% have been distributed via the Binance launch pool.
The token offers multiple utilities for its holders and users of the protocol, some of which include:
- Influences the addition of new cryptocurrencies to the protocol.
- Adjustment of variable interest rates for all markets.
- Voting on protocol development.
Advantages of Venus Protocol
The core advantages of the Venus protocol are the following:
- It permits overcollateralized lending where users can borrow assets worth 75% in value or lower of the assets supplied.
- Interest is earned on supported collateral assets supplied to the protocol.
- It allows borrowers to have access to instant and low-cost loans in stablecoins without their non-stable digital being sold.
- Venus allows fast transactions, making loan-taking effective and efficient.
- Venus users can source liquidity.
Challenges of Venus Protocol
Despite the numerous advantages that the venus protocol has over other lending protocols in the market, the system also has its challenges. Some challenges of the Venus platform are as follows:
- Venus platform does not have a mobile app, either Android or iOS.
- The Venus token (XVS) can not be borrowed from the platform.
- There is a vulnerability of the liquidy modules.
Venus protocol makes a combination of the money market and stablecoin generation in the same protocol. This can be of great benefit to the Web3 ecosystem by unlocking the collateral.
Venus is an important project in the emerging sector of DeFi. Venus protocol has a possibility of becoming one of the most famous lending protocols in the market owing to its obvious potential.