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What is Venus Protocol?

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BNB Chain’s Venus Protocol is an algorithm-based money market system. The platform allows users to lend and borrow crypto in a decentralized and secure manner. Any crypto wallet, such as MetaMask, can connect to the protocol without requiring permission. A native governance token, XVS, that can be staked in the Venus Protocol Vault for rewards, is owned and controlled by the Venus Protocol community.

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A synthetic stablecoin protocol and an algorithmic money market are the two components of the Venus Protocol. Traditionally, the money market has dealt with short-term loans as an essential part of the economy. Decentralized finance (DeFi) lending and borrowing are now available on the BNB chain thanks to Venus. The platform allows collateral suppliers to mint their native synthetic stablecoins (VAI) by overcollateralizing positions.

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Forked from Compound and MakerDAO, Venus Protocol is a distributed ledger protocol. Ethereum-based money market protocol and stablecoin minting protocol, both of which are Ethereum-based. Regardless of which function users use, Venus integrates these functions into one ecosystem, allowing users to use the same collateral.

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A permissionless lending environment is what the Venus Protocol is all about. BNB Chain users can supply collateral to the network using idle crypto. Additionally, users with a greater need for credit can borrow more by pledging overcollateralized crypto. In turn, lenders receive compounded interest rates, and borrowers pay interest on the loans they receive. Lending and borrowing interest rates are set by the protocol using curve yields that vary with utilization. Automated rates are determined based on the specific market’s requirements, such as BNB or ETH. Nevertheless, the protocol’s governance process also sets the minimum and maximum interest rates.

vTokens are used in the Venus Protocol to mint synthetic stablecoins based on collateral provided by users. A user receives vUSDT for supplying USDT, which they can later redeem for the collateral underlying the vToken. Additionally, users can use their vTokens to borrow up to 50% of the collateral value they have on the protocol to mint VAI. Interest rates for stablecoins are determined differently from those for loans and borrowings, according to the Venus Protocol. The protocol’s governance process can lower and raise the minting interest rates only if they are lowered and raised by the protocol’s governance process.

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