Venus Protocol is a decentralized money market protocol for lending and borrowing cryptocurrencies. It provides low-cost, fast transactions and allows users to take out loans with fast issuance and no credit check.

Unlike centralized lenders, such as BlockFi and Celsius —who declared bankruptcy and froze user withdrawals in 2022—users don’t need to sign up with the typical CeFi log-in credentials; Venus Protocol users connect crypto wallets like MetaMask. 

The following guide explores the Venus Protocol in-depth, but if you’re looking for the best alternative centralized crypto lenders, check out these 5 crypto interest accounts that could fill the void left by Celsius.

Venus is the second-largest lending protocol in the BNB Chain —only topped by accounting for roughly 30% of the total market share in terms of total value locked (TVL). 

As of December 2022, the protocol has lent over $450 million in assets, and its TVL has been floating north of $700 million since mid-2022.

Venus Protocol’s standout advertised  features include: 

Disclaimer: Cryptocurrency, and especially DeFi protocols like Venus Protocol are very risky. The following article is not and should not be considered a substitute for investment advice.

Venus was built exclusively for the BNB Chain (formerly known as the Binance Smart Chain (BSC)), therefore its native currency, XVS, uses the BEP-20 standard. 

Venus supports multiple types of cryptocurrencies and stablecoins that can be used as collateral to borrow from the protocol’s pools or earn rewards by becoming a liquidity provider.

Loans are over-collateralized, meaning users who wish to borrow must pledge collateral with a ratio depending on the current governance proposal, but they usually range from 50% to 70%. So, to hypothetically borrow $10,000, you’d need to post $15,000 of collateral, for example.

This collateral is then locked in a Venus Protocol smart contract for a specified period. 

In the Market section, choose an asset, and you’ll be able to see the collateral factor (as well as market liquidity, number of suppliers and borrowers, APY, and more.)

Users can lend assets to Venus to earn yield, which varies on the type of asset.When a user loans cryptocurrencies to Venus, the funds are added to the lending pools. In exchange, depositors receive vTokens (for example, deposited BUSD becomes vBUSD). 

Users can redeem these tokens for the underlying token.

Users can mint VAI, a synthetic stablecoin fixed at 1 USD (price will still fluctuate depending on market demand). This asset can be used for yield farming on other DEXs in the BNB ecosystem. Users can mint VAI using up to 50% of the remaining collateral value from previous vToken deposits. 

The interest rates of VAI have yet to be determined (they are known as stability fees in other lending protocols like MakerDAO), so it depends on Governance and what the new V4 upgrade will bring.

The project was developed by Swipe, a cryptocurrency credit card issuer, officially launch in 2020. The team delegated control to the XVS community holders. Since then, multiple proposals have been submitted and put forward to change, upgrade and improve the Venus protocol. 

Venus was born as a fork of Compound (COMP), a popular crypto lender built on the Ethereum network, and also took some inspiration from MarkerDAO. The protocol is essentially a mix of the two systems and their respective benefits. It was also audited by blockchain security firm CertiK in December 2020.

The team didn’t run a pre-mine for founders or the community. The only way to earn XVS was through the Binance LaunchPool project or by providing liquidity to the protocol during the early days.

In November 2022, the Venus DAO unveiled its V4 upgrade after months of discussions. The upgrade seeks to enhance the network in three key areas: 

XVS is the protocol’s utility token based on the BEP-20 token standard. XVS’s main uses cases are:

The token has a max supply of 29 million tokens and a circulating supply of 12 million (or 41% of the total supply.)

The Venus community runs a simple governance system: delegated and direct on-chain voting, where 1 XVS token = 1 vote. Whenever a protocol proposal is submitted through a Venus Improvement Proposal (VIP (similar to Ethereum’s EIP)), users can vote directly or delegate their voting rights to another user. 

Proposals cost 300,000 XVS, which currently amounts to nearly $1 million. Once proposed, voting is active for three days. To be approved, the proposal must reach a voting quorum of 600,000 XVS. If successful, the proposal is timelocked for two days before implementation. 

Venus Protocol has a TVL of $710 million, currently boasting $1 billion in liquidity as per its website and has borrowed over $450 million since its relatively short time in the industry. 

Despite these numbers, Venus Protocol doesn’t really attract the same attention as platforms like PancakeSwap. Still, the protocol has managed to thrive along with the DeFi ecosystem, and the V4 upgrade brings better tokenomics, more risk management tools such as isolated pools, and an improved governance system to solidify decentralization.

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