And VENUS was her name

Authored by: @hetty-rowan


Shocking ...

No, I'm not talking about the song Shocking Blue, (that I know this song says NOTHING about my age), has ever sung, but maybe the lyrics of that song are also appropriate for this coin.

She's got it
Yeah baby she's got it
Well, I'm your Venus
I'm your fire, what's your desire

Now I know very well what my desire is, and I think almost everyone reading along here has that same desire. My desire is to become, be and remain financially independent. So every week I sniff around through the crypto jungle to see what possibilities there are.

Now I don´t want to claim that I always seek out the latest coins. That is not necessary either, because sometimes it is better to invest in a project that has been running for a while and has therefore already shown a certain form of 'shelf life'. This week I took a look at VENUS. Does Venus have it? Is Venus my fire, and can Venus fulfill my desire? Let's take a look!

What is Venus?

This is an algorithmic money market & a synthetic stable coin protocol that had one of the most successful introductions of a DeFi project of 2020.
But Venus (XVS) has also had bad moments. In May 2021, things went completely wrong with a liquidation of almost USD 200 million. This liquidation is believed to have been caused by price manipulation Ouch! Painful! It can go from one of the biggest DeFi successes to one of the biggest liquidations. And what next? Will Venus still be the biggest DeFi projects in 2021 or will this year be the downfall?

What is DeFi?

Ah, so many time we´ve discussed this. But here we go again. DeFi, Decentralized Finance, platforms have been booming since 2020 and Venus (XVS) is a prime example of this. What exactly does DeFi mean? Suppose you have been dreaming of buying a dream house for years. It is logical that you first go to a bank for a mortgage. Or is that so logical? Because what do you need: the bank or the financial products it provides?

The joys but not the burdens

DeFi projects offer you the services of a bank, without the need for the bank. Because all these activities, such as borrowing or investing, can be arranged without a third party via smart contracts in blockchain technology.

As an algorithmic money market, a market for financial resources guided by algorithms, Venus is a good example of a DeFi application.

What is the difference between Venus and other DeFi projects?

2020 was the DeFi year in which several projects were launched with varying degrees of success. The vast majority of these were still built on Ethereum (ETH) in 2020. This is where Venus stands out, as it is built on Binance Smart Chain (BSC)

The users of Venus notice the difference of Binance Smart Chain in the scalability which is many times better. The number of transactions per unit of time can be many times greater via BSC. In addition, and partly because of this, the gas fees, the costs of using the network, are also considerably lower than those of Ethereum.

What are the characteristics of Venus?

Venus differs from other DeFi projects by using BSC as the basis for the protocol. In addition, a decentralized money market in combination with a stablecoin protocol is quite unique. Venus thus offers the financial products of a bank, but in a decentralized system. This means that you have the services of a bank at your disposal, without the need for an institute. With the stablecoin protocol it is possible to mint, or create stablecoins.

How can you grow passive wealth with Venus?

Suppose you have a nice wealth. You can make this even more fun by growing this value as passive capital. Venus offers various options for this, namely:

  • Lending - This stands for the lending of crypto assets. Other users can then use it to trade with. You then bring your assets into the liquidity pool, the lending and lending place, of Venus. As a reward you get a reward, a kind of interest, which can be quite high. For the assets you contribute you get vTokens, they are a kind of proof of what you have contributed and how much. This allows you to free up the assets you have brought in. l
  • Staking - This involves holding tokens and leaving them to not trade. This is beneficial for the stability of the price of the token and the security of the network. For this you will be rewarded with tokens in the form of an APY.
  • Minting - Mining, the creation of stablecoins through verification, is a quite unique opportunity that Venus offers over "normal" money markets. The collateral you contribute can be used for this. These stablecoins can be further distributed and traded via Swipe.

You receive an APY (Annual Percentage Yield) for contributing capital. This is a percentage that you receive annually on the amount you make available as an interest. An APY can sometimes change. At the Venus protocol, the returns are automatically adjusted to the current demand for a currency, for example Bitcoin (BTC).

How does Venus work as a lender?

With the Venus protocol you can also borrow because, for example, you need capital to trade or invest. The advantage of a decentralized lender is that you do not have to meet certain rules or your living conditions are looked at before receiving a credit. You must, however, make a certain investment to serve as collateral for the loan.

For example, you can borrow up to 75% of what you have provided as collateral. This is to prevent you from being liquidated in the event of a price drop or loss.

Venus is therefore interesting as a DeFi application and may offer profitable opportunities. But also be aware of the risks and be well informed before you get started with the possibilities that the DeFi world offers you!

How do you use the Venus DeFi platform?

  • To use the Venus platform you need a Web3 wallet to store your currency or assets and from which you can make transactions. Metamask is the most useful for this. But another Web3 wallet, (this is a wallet suitable for dApps), is also fine.
  • You need Binance coins (BNB) in your wallet to be able to pay gas fees for transactions. Gas fees are the costs you incur for using the Binance Smart Chain network.

When you open the website with the interface, it immediately asks to connect the wallet. When the wallet is connected, you can use the dashboard and the various options that the Venus protocol offers you.

Here you will find the option to contribute value (lending) or borrow yourself (borrow), or you can also mint VAI from this. The information is clearly marked. For example, the supply information states how much APY you receive. The dashboard is experienced as very pleasant by users.

Organization and history

The Venus platform was launched on November 24, 2020. It was Binance's answer to dApps such as AAVE (AAVE) and Compound (COMP) that were built on the Ethereum protocol. The launch was a great success because within 5 hours the DeFi platform had already absorbed so much value that it immediately became the largest liquidity platform on the Binance Smart Chain network. Venus started 2021 as the platform with the largest transaction volume. At that time, USD 24 billion was traded, versus Uniswap, which traded USD 8 billion.

The whole project had the general confidence of crypto investors. The protocol was well put together. The fact that the project was backed by Binance, a trusted name, further enhanced this. Furthermore, it has combined various elements of 2 successful DeFI projects Compound (COMP) and DAI (DAI) in the protocol. Venus was controlled from Swipe, a portfolio company on Binance.

The structure of the team behind Venus will not be publicly available as of November 2020, because it wants to function as a decentralized protocol. As a result, the founders and members of the executive staff are unknown. Joselito Lizarondo is named as founder, he is also CEO of Swipe.

Little else is known about him. The Venus protocol was initially controlled from Swipe. From 2021, the board will largely be with the token holders and the protocol will only be partially controlled from Swipe. After the liquidation in May 2021, Lizarondo has also taken a step back. This was the ultimate plan anyway, but it may have been implemented before to transfer the board completely to the token holders.

Governance with the XVS token

The XVS token gives a say in certain matters in the protocol, such as the percentage of the collateral for loans, or which new tokens or stablecoins may be added to the protocol.

The process of voting on a proposal takes 5 days. First, a proposal is made. In order to make a proposal, you must hold at least 300,000 tokens. These "major shareholders" may also vote on a proposal. They have 3 days to vote. There must be at least 600,000 votes in total and a majority for a proposal to go through. If these conditions are met, the proposal will be implemented after a timelock of 2 days.

roadmap

The roadmap to launch the Venus protocol will be completed in 2020. From 2021, the following plans are on the agenda:

  • Introduction Venus origination fees - These are small fees that are charged on borrowing and lending transactions and are used for governance purposes.
  • Cardano (ADA) is added to the money market
  • Expanding the possibilities of qualified assets as collateral
  • Introduction of XVS delegation voting - Venus becomes a decentralized governance-driven platform with the introduction of XVS delegation voting
  • Launch Venus dex - A Venus decentralized exchange for crypto currency
  • Launch Venus Reward Token (VRT)
  • Creating a market with fixed interest rates - Interest rates in decentralized markets can fluctuate strongly. This can be fun, but of course it can also turn out to be less favorable. Because too much interest rate fluctuations deter, Venus will also create a market where fixed interest rates are used.

What are the tokens and coins of the Venus protocol?

The Venus platform has several tokens that are built from the platform. You already came across them in the story above: the stable coin VAI and governance token XVS. In addition, there is a third token: the Venus Reward Token (VRT). Below we further explain their roles within the Venus ecosystem and in the crypto market.

Venus Reward Token (VRT)

The Venus Reward Token (VRT) was created to serve as a reward for staking and minting. This reward token is introduced to counter inflation of the XVS token. There are currently quite a few tokens in circulation from the XVS, so to create a scarcity and make the governance token more valuable, the Reward token has been created. This is now given as a reward and XVS is equally burned, ie taken out of circulation.

The VRT was launched on May 24, 2021 with a price of 0.008073 USD. All Time High was 0.01632 USD on May 27, 2021 and low was approximately USD 0.0028 on June 20, 2021. VRT is tradable through Gate.io and MXC.COM. More than 21 billion tokens will be available in 2021.

Vai (VAI)

Venus is the first money market with a synthetic stable coin protocol. Vai is the "own" stablecoin being created within the Venus ecosystem. A stablecoin is a coin that is tied to a currency such as the dollar. Because the currency is connected to this, the price remains stable. The special thing about VAI is that it is tied to the price of a basket, a group of cryptocurrencies, instead of a fiat.

The VAI coin is suitable for other purposes within Venus as the governance token XVS. With the VAI you can strike. VAI is traded on various exchanges such as Venus, Binance, Sushiswap.

The VAI token was launched on December 2, 2020 with a price of just over USD 0.98. At the moment all coins are 107,734. 544 in total in circulation. The market cap is USD 9636,994,817 in June 2021. An All Time High was reached on February 7 with USD 1.20. The stablecoin bottomed out on February 20 with USD 0.5791.

What distinguishes Venus as a money market is that you can also mint synthetic stablecoins.

Vai can be minted using the following coins:

  • Swipe (XSP)
  • Binance Coin (BNB)
  • BUSD
  • USDT
  • USDC

Governance token XVS

The token was launched with a so-called Fair Launch. This is a launch where everyone interested in the Venus protocol has an equal opportunity to buy tokens. The founder and development team do not receive preferential treatment here during distribution. XVS is primarily a governance token.

The distribution of tokens at launch:

  • Binance launch pool: 20%
  • Binance smart chain: 1%
  • Ecosystem Mining: 79%

XVS is available from Venus itself but also through the exchanges Binance, Pancakeswap.

Venus has had an eventful period with the XVS token. Literally, because that certainly applies to the volatilitet of the token. October 8, 2020, the token was launched with a price of 2.73. Initially, not much happened for a while, wisely speaking. From February 2021 it started to get interesting. There was an upward trend in the price.

This was not exceptional, given the popularity of DeFi applications. In February, the token climbed to USD 94 before falling again and starting to rise again from April. The elevator actually turned out to be a rocket in May, as the price suddenly skyrocketed to an all-time high of USD 146. The sudden increase of 90% was due to a number of large orders and the enthusiasm about the new VRT token.

However, "Too much is never good" and the tile wisdom "Have haste is rarely good" applied here. Because this spike in the price of XVS allowed people with collateral from XVS to borrow much more cryptocurrency. Because the price collapsed as suddenly as it had risen, the value of the collateral no longer matched the loan value. However, the people continued to hold onto their borrowed value, causing them to default and liquidations followed. The sale of the liquidated tokens yielded even less due to the collapsed price. Within a day, a liquidity loss of $200 million had occurred. The Venus protocol left an irrecoverable debt of USD 95 million.

The situation was very critical and the governance made important decisions to avert the crisis: Lizarondo stepped back from his role as director of Swipe and a risk management committee was established to prevent such situations in the future. Management also assured that there no funds were lost and the protocol worked as it should. The resulting shortfall can be met from the grants fund and tokens.

Although Jozelito Lizarondo neatly explained what had happened (big buys and sales had caused a spike), the word "price manipulation" remained a dark shadow around Venus. Confidence in the protocol has been seriously dented. The trading volume has plummeted from well over USD 10 billion to USD 57 million. The question is how Venus will further recover from this fall and regain the confidence of the crypto investor. If ever ...

Criticism

Venus has received both praise and criticism in a tumultuous first year. The platform was initially referred to as a textbook example of how a DeFi application could work. But the USD 200 million liquidation and the ease with which it could go wrong has brought the platform under a lot of criticism. Rumors of price manipulation also persist. A number of analysts also substantiate this claim. At the same time, they show that if this has not happened at the moment, it could have been done very easily. The protocol's directors have taken the criticism to heart, but confidence in this DeFi project will be gone for a while. Time will tell whether crypto investor confidence can recover.

Conclusion

From DeFi project with the largest transaction volume, Venus became the project with the largest liquidation ever. Venus already has 2 important records to her name. That makes it hard to say what the future holds for Venus as an algorithmic money market and synthetic stablecoin protocol. While Venus still has the potential to become one of the defining DeFi products, it will take time to regain investor confidence.

The history of Venus shows that DeFi projects offer many opportunities to generate passive income. But it also shows that there are the necessary risks if you do not know exactly what is happening with your assets. Knowledge about the market is therefore very important.

And precisely to gain that knowledge, I try to learn the underlying techniques of as many cryptos as possible.

We can conclude from the Venus story that Shocking Blue's song fits this crypto;

  • Purely looking at possibilities and techniques Venus has what it takes to bring people financial independence
  • Venus can be the fire

But right now, I'm not putting my money on Venus although the possibilities are very interesting.


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