This Algorithmic Money Market System Might Be A Faster, Lower-Cost Way For Users To Lend, Borrow And Generate Yield On Their Crypto By Rachael Green, Benzinga
New York, NY
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September 02, 2022 08:00 AM Eastern Daylight Time
BNB Chain is fast, low-cost and more widely used worldwide, with daily transaction volumes exceeding 2.866 million, more than double Ethereum’s 1.025 million. This is reportedly what allows Venus Protocol to offer faster, lower-cost transactions to people around the globe, possibly opening the door to DeFi to the next billion users.
Venus is a lending and borrowing platform built on the Binance Smart Chain. Its goal is to enable “simple and powerful community-driven finance for the entire globe” by offering what it reports is a faster, lower-cost alternative to Ethereum-based money markets like Compound or Maker. It’s also adding new features that give users more ways to generate yield and participate in emerging decentralized finance markets.
Following are a few of the things users can do on the Venus Protocol platform.
What Users Can Do In The Venus Protocol’s Lending And Credit System
When users supply cryptocurrencies to Venus, they can use those assets in three ways:
Use the assets as collateral for a loan to borrow over 20 different cryptocurrencies.
Supply liquidity to the Venus Protocol, earning an annual percentage yield (APY) in return.
Mint VAI synthetic stablecoin
Here Is A Quick Overview Of How Each Of Those Works For Users
XVS Token
Users can buy $XVS and generate yield by staking it in the Venus Protocol XVS vault to earn staking rewards. The XVS vault APR is set to a different daily emission speed each quarter depending on the previous quarter’s protocol income and the amount of XVS Tokens bought back from the market to be shared between stakers. — for example, the latest XVS vault rewards distribution is currently giving users a close to 25% annual percentage rate. The XVS Token is also the Venus Protocol Governance Token which is used to vote on the DAO’s Governance Proposals. (Venus Improvement Proposals)
Taking Out A Loan
Borrowers can borrow any of the supported cryptocurrencies or digital assets and stablecoins in exchange for pledging collateral. Borrowers are limited to borrowing a maximum ranging from 40% to f 80%, depending on the risk assessment for each asset and of the value of the collateral they’ve pledged. Going forward, the platform hopes to add under-collateralized loan capabilities.
Venus Protocol reports that with no credit check and fast origination, borrowers can get the funding they need as soon as they need it — and with no monthly payment obligations and the ability to use the appreciation in the value of their collateral toward their loan balance, borrowers can make payments at any time.
Earning Interest By Supplying Liquidity
The variable APY earned for providing liquidity gives users another way to increase their yields without the risks associated with trading crypto. The protocol works on an algorithmic basis, meaning interest rates are set automatically based on the demand in a specific market. When demand is high in, say Bitcoin, the rates go up for that asset.
While rates are variable, interest rates are based on the fluctuating demand for different currencies and rewards distributions can mean substantial yield — especially for those who stake the native Venus Governance token (XVS).
Venus Protocol Is Built On BNB Smart Chain
Decentralized financial platforms built on blockchains might be redefining the structure of money markets by removing the need for a central authority or third-party decision maker. This is lowering the barriers for borrowers and opens the door for more people to become lenders.
However, many of the existing decentralized money markets are built on Ethereum, a costly and slow blockchain that comes with its own barriers to access in the form of high fees, and slow transactions — Ethereum takes 13 seconds to create a block compared to BNB chain’s three seconds — and lack of high market cap assets like Litecoin or XRP.
Venus Protocol (“Venus”) is an algorithmic-based money market system designed to bring a complete decentralized finance-based lending and credit system onto Binance Smart Chain. Venus enables users to utilize their cryptocurrencies by supplying collateral to the network that may be borrowed by pledging over-collateralized cryptocurrencies. This creates a secure lending environment where the lender receives a compounded interest rate annually (APY) paid per block, while the borrower pays interest on the cryptocurrency borrowed. These interest rates are set by the protocol in a curve yield, where the rates are automated based on the demand of the specific market, such as Bitcoin. The difference of Venus from other money market protocols is the ability to use the collateral supplied to the market not only to borrow other assets but also to mint synthetic stablecoins with over-collateralized positions that protect the protocol. These synthetic stablecoins are not backed by a basket of fiat currencies but by a basket of cryptocurrencies. Venus utilizes the Binance Smart chain for fast, low-cost transactions while accessing a deep network of wrapped tokens and liquidity
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