Yield farm reviews: Venus in 2021

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enus Protocol is one of the largest yield farming platforms.  In simple terms, it allows lenders to offer loans and borrowers to take out loans – we refer to this as a decentralised lending platform.

In this guide:

What is Venus?

Venus can perhaps best be understood as a protocol that works in a similar way to your bank.  Crypto currencies can be deposited to earn interest on those deposits, just as you would deposit money in a bank savings account and earn interest.  A key difference from our bank example is that the Venus protocol never has ownership of your crypto currency deposits.  Instead, users interact with a smart contract rather than a person or company – no central authority has ownership of your funds.

We can summarise the features of Venus as follows:

    • Borrow digital assets without know-your-customer (KYC) or credit checks

    • Enabling rapid minting of stable coins from collateral

    • Earn a return from depositing stable coins and other digital assets as collateral

    • Protocol governed by its own token for fairness and transparency

The Venus protocol operates on Binance Smart Chain.

The Venus benefits

Centralised exchanges that offer lending products typically function on the Ethereum blockchain which brings several issues:

    • Market capitalizations are low

    • Transactions are expensive

    • Transactions are slow

    • User interfaces are often poorly designe

We can think of the Venus protocol as bringing the following benefits:

    • Transactions operate over a high-speed blockchain

    • Transaction fees are vastly reduced

    • Benefits from locked collaterals

The Venus token

In order to operate the Venus protocol as a decentralised autonomous organization (DAO), a native token referred to as the “Venus Token” (XVS) is issued for governing the network.  Venus tokens can be earned by adding liquidity into a pool.

The VAI stablecoin

VAI is Venus protocol’s decentralised native stablecoin that is minted and can be redeemed directly on the Venus platform (and running on the Binance Smart Chain).

Depositing assets

Central to the Venus protocol is earning a return from depositing digital assets – these assets can either be stable coins or crypto currencies.  This liquidity that is provided into a pool is then accessible by borrowers.

It is these liquidity providers that earn from the interest rates charged to borrows.  The interest rates vary and are determined according to the yield curve associated with the tokens market.

Borrowing on Venus

In acting as a borrower on Venus, it is necessary to put forward an asset for lending. The amount of the asset provided as security is required to be over-collateralized.  The ratio of collateral required is set by the community as part of governance voting.  For example, if USDT has a collateral of 75% you would be permitted to borrow up to 75% of the deposited asset.  If the asset value falls below 75%, the assets can be liquidated.

At the point at which you return the borrowed asset, you must repay both the borrowed balance and the interest accumulated.

How Venus works

The Venus protocol makes use of audited smart contracts in order to facilitate borrowing and lending of popular crypto currencies.  The Venus markets operates autonomously 24 hours a day allowing you to borrow or lend within seconds without the permission from the company.

There is no Venus site login – instead, a wallet is required such as Trust Wallet, MetaMask or Binance Chain Wallet.  Users should begin by downloading one of the aforementioned wallets – these are typically browser extensions that can be easily installed.  For the purposes of this guide, the process of using the MetaMask wallet will be described. 

Once the MetaMask browser extension has been downloaded the app should be opened and the ‘Create a wallet’ option selected.  As part of wallet setup, you will be required to note the randomly generated seed phrase.  It is important that you store this seed phrase in a safe location – without the phrase you may lose your wallet and assets forever.

Once the seed phrase is noted, you must add the required chain.  Click “Settings” and then “Add a new network”.  The following details should be entered:

    Network Name: Binance Smart Chain

    New RPC Url: https://bsc-dataseed.binance.org/

    ChainID: 56

    Symbol: BNB

    Block Explorer: https://bscscan.com

Once you click Save, MetaMask should automatically connect to BSC.

Connecting your wallet

Once the wallet has been setup, the next step is to permit the Venus web site to access your wallet.  Note, granting Venus the ability to read your wallet does not give it access to your assets – you still need to give individual permission to perform transactions.

Now that your wallet is connected you will be able to access all parts of the Venus web site.  Click on the ‘Dashboard’ view to access the markets – these being supply and borrow.

Supplying collateral to earn interest

Users with assets that want to earn interest can do so by supplying them to the Venus supply market.  The following steps describe this process:

    • Ensure you are on the ‘Dashboard’ page

    • Click the ‘Supply Market’ tab

    • Browse the rows of markets, each one displaying the asset, APY and your wallet balance

    • To enable the asset your wish to supply, click the corresponding icon.  You will need to agree to a small gas fee (BNB will be required in your wallet).

    • Once the supply agreement transaction has been confirmed, click the asset name to open a window. Confirm the amount that you wish to supply.

Remember that you can withdraw any amount of your supplied assets at any time back to your wallet.

Borrowing assets

As already mention, it is possible to borrow assets from Venus by providing collateral in the form of existing assets that are available in your wallet.  The following steps describe this process:

    • Ensure you are on the ‘Dashboard’ page

    • Click the ‘Borrow Market’ tab

    • Select the asset that you want to borrow (note – you cannot borrow an asset where you are provided the collateral).

    • Enter the amount of the asset you want to borrow submitting the transaction and confirming in your wallet.

Minting VAI stable coins

In addition to participating in the supply or borrow markets, you can also mint Vai a stablecoins from the ‘Dashboard’ page.  Vai tokens are minted from assets that are supplied from your wallets.  This minting also works in the opposite direction allowing you to redeem Vai stablecoins for the original assets.

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