Venus Stars
As announced in November 2022, Venus has been diligently working on the Venus V4 upgrade, a comprehensive update aimed at enhancing the protocol’s implementation within the decentralized finance (DeFi) ecosystem.
This upgrade introduces crucial features that empower users and improve the overall user experience, ranging from advanced governance mechanisms to cutting-edge risk management tools. The V4 upgrade is set to revolutionize the DeFi landscape, and in the following sections, we will explore the details of each update and how they will shape the future of Venus.
Isolated Markets for Increased Token Variety
One of the groundbreaking features introduced in Venus V4 is Isolated Markets. Under the current common collateral pool model, the protocol primarily focuses on the least risky assets. However, Isolated Markets segregates riskier tokens into separate lending pools, safeguarding the common pool from the associated risks. This segregation allows users to choose to participate in isolated lending pools based on their risk profiles, thereby opening up investing opportunities for newer or riskier tokens.
Each isolated lending pool is assigned a risk rating, enabling users to compare the performance and risk associated with different pools. This risk rating system empowers users to make informed decisions about their lending activities and select pools that align with their risk profile. The introduction of Isolated Markets in the V4 proposal not only broadens the range of supported assets within the Venus ecosystem but also introduces opportunities for diversification and improved risk mitigation strategies. The first partners would include Beefy, TRON, Helio Protocol, Ankr, among others in the GameFi, DeFi and Eth ecosystems.
Stable Rate for Improved Borrowing and Lending
The V4 proposal introduces stable rate borrowing to address the need for stability in the lending market, providing users with greater confidence in their borrowing decisions. Stable rates reduce vulnerability to interest rate volatility, enabling borrowers to plan their investments more effectively and understand their repayment obligations clearly.
Stable rates provide greater certainty, especially during volatile market conditions, facilitating better investment forecasting. This enhancement simplifies account health management and ensures a more affordable borrowing and lending experience for users. The feature improves accessibility and creates a stable lending environment within the protocol.
Integration with PancakeSwap for Token Swapping
Venus Protocol has integrated with PancakeSwap, the most used decentralized exchange (DEX) on the BNB Chain, allowing users to swap tokens within the Venus UI without leaving the platform. This integration streamlines the user experience by seamlessly integrating a DEX within a lending protocol, which represents a significant advancement in the DeFi space. Users can conveniently trade their existing tokens and supply them to Venus, making the overall process more efficient.
Additionally, the V4 proposal aims to implement a one-click feature in the future, enabling users to supply, borrow, and swap any available tokens with a single click. This streamlined process further enhances the efficiency and convenience of using Venus Protocol.
Dynamic Risk Management with the Gauntlet
Risk management is a fundamental aspect of Venus Protocol, and the V4 upgrade strives to enhance its capabilities and safeguards. By exploring Isolated Markets, Venus Protocol expands its potential to onboard a wider array of assets sustainably, diversifying the asset base and introducing effective risk mitigation strategies. Stable interest rate borrowing is another innovative feature that enables the protocol to offer stable rate loans across all markets, reducing vulnerability to interest rate volatility and fostering a stable lending environment.
Furthermore, Venus Protocol’s risk management upgrades encompass mechanisms for shortfall coverage and stability fee implementation, ensuring the stability of VAI, the protocol’s stablecoin, and preserving its peg. The introduction of bonds as a primitive and mechanism for refinancing protocol insolvenies adds an extra layer of risk management, enabling the protocol to effectively address potential financial crises. These risk management enhancements fortify the resilience, security, and sustainability of Venus Protocol, contributing to a more robust and reliable decentralized finance ecosystem.
Adjustable Stability Fee for VAI
In the V4 upgrade, a modified form of the Stability Fee for VAI will be introduced. Users will be required to pay interest when minting new VAI, and the interest rate will adjust dynamically based on the market supply. This dynamic approach ensures that the stability of VAI is maintained even in fluctuating market conditions. By adjusting the Stability Fee, the protocol aims to stabilize the value of VAI and create a new source of income for users through the Venus Treasury.
The V4 proposal emphasizes enhanced risk management for VAI, introducing mechanisms for shortfall coverage and the implementation of stability fees. Shortfall coverage ensures that sufficient collateral is available to cover any shortfalls, maintaining the stability of VAI’s peg. Stability fees, on the other hand, incentivize stability and discourage excessive minting or burning of VAI. These risk management upgrades strengthen the resilience and sustainability of VAI as a stablecoin within the Venus ecosystem.
Enhanced Governance with New Cycles and Roles
The V4 proposal introduces new cycles and roles to enhance governance mechanisms and expedite interest rate risk parameter changes. Three Venus Improvement Proposals (VIP) roles are introduced: Normal, Fast Track, and Critical. Each role has its own proposal threshold, timelock, and voting period, which can be configured by the Governance. These VIP roles enable designated individuals to expedite interest rate risk parameter changes, making the governance process more efficient and responsive to market dynamics.
By enhancing governance mechanisms, Venus Protocol aims to create a more efficient and inclusive decision-making process. It empowers users to actively contribute to the governance of the protocol and ensures that important decisions are made in a timely manner, allowing Venus to adapt to market conditions and evolving user needs effectively.
Venus Tokenomics 3.0
Tokenomics 3.0 is introduced in the V4 proposal as a significant upgrade aimed at reinventing the economy of the protocol. Tokenomics 3.0 seeks to incentivize protocol retention, reinvest value, and embed better shortfall defense mechanisms. One key addition in Tokenomics 3.0 is the introduction of Venus Prime Soulbound Tokens (SBTs).
Venus Prime Soulbound Tokens are non-transferable tokens that users can earn by staking their Venus Token (XVS) in the vault for a specified duration, typically 90 days, with a minimum stake requirement. By staking XVS and obtaining SBTs, users gain access to variable boosted yields across selected markets, which are paid out in the borrowed or supplied currency. This incentivizes users to actively participate in the protocol, as they can earn enhanced returns on their staked XVS tokens.
Finally, the V4 upgrade showcases the commitment to continuously innovate and improve the Venus platform. With enhanced governance mechanisms, a refined VAI Stability Fee, advanced risk management tools, DEX integration, stable rate borrowing, and Isolated Markets, Venus empowers users with more control, stability, and trading opportunities. As the project moves forward, it remains dedicated to creating a secure and efficient DeFi ecosystem that caters to the evolving needs of its community.
To closely follow the progress and updates of this exciting proposal V4, Venus Protocol will be by your side through its website, and Dapp. For the latest news and events, you can visit Venus Community. For the latest updates, you can visit our Twitter and our Telegram Announcement Group. We also have a global community on Telegram and Discord.