Venus Protocol Weekly Update W40/2021 & Shortfall Recovery Report

Dear Venus Community,

The core work of Venus is progressing very well. In addition, we have also made progress in some new areas. We look forward to telling you soon after all the details are confirmed.

Progress

DEV Team:

  1. The team fixed most of the issues with the new XVS vault contract code. The changes are on internal review and expected to be sent to audit early next week.Everything is going according to plan.

  2. The DefireX proposal has passed successfully: the funds have been released to the DefireX team, and the initial implementation of vTokens has been restored.

  3. The work to support governance contract upgrade in the UI has started, the backend and contract changes are on review; the testing on testnet is already done. We need this to upgrade the current governance guardian to multisig and to support the new governor bravo in the future.

  4. The work on VRT to XVS conversion contract and VAI stability fee is in progress.

VAI

Due to the support of some of Venus Protocol’s new partners such as Dinosaur Eggs, VAI trading volume and owner addresses have grown at a surprisingly fast pace in the past week, and it has formed some sufficient liquidity pools with many other tokens.

We have also noticed the recent price fluctuations of VAI. The current price of VAI is slightly higher than 1$. This is due to the rapid increase in demand for VAI. We are paying attention to this situation, but we believe that after the stability fee function is launched, the volatility and off-peg of VAI will be further resolved.

Venus NFTs

Arker: The Legend of Ohm will soon launch its GameFi application and Venus NFT Holders will be able to use their NFTs as a pet in the battlefield, giving them

custom pets with different traits, as well as different bonuses to their heroes. The value of the venus NFTs will be decided in-game and there won’t be any additional minting of Venus pets so the pets will be unique and tradeable inside the marketplace.

All the transactions on The legend of Ohm happen in BSC smart contracts in a trustless way.

The matches happen off chain to ensure real time capabilities and no fees are incurred for the player. Users will link their wallet using a secure signature and the servers that ensure the offchain battles will read from the NFTs to ensure the ownership. For more informations, do not hesitate to join Arker’s Telegram channel here: Telegram: Contact @ArkerCommunity

Risk parameter

We will further adjust the risk parameters of some assets to improve the security level of the entire system.

Incentive parameter

We started to evaluate new Incentive parameters of Venus. We are considering augmenting XVS distribution rewards to stimulate usage of the platform and stay competitive in the market. We are confident that this will bring more users and additional yield aggregators to Venus and consequently increase TVL and protocol income. This work is in progress.

Business Development & Marketing

VAI

This week we have reached an agreement with a European crypto debit card company. They are currently building a bridge for VAI on the Ethereum Network and VAI will soon be supported for payment on all their debit cards. Venus Protocol will provide VAI liquidity for the BSC-ETH bridge. The cards will initially be made available to users based in the United Kingdom and the European Economic Area and will further expand as adoption grows. Users selecting VAI as their payment currency will receive a 10% cash back on all their purchases. More details soon!

Venus Money Markets

We have reached agreement with new decentralized crypto marketplaces and decentralized finance applications that will soon integrate Venus money markets in their product offerings, seamlessly and transparently making Venus available to all their users directly from their platforms. We expect this will bring greater usage volume of our money markets and boost TVL.

This week, we have also reached a preliminary cooperation intention with an important RWA (Real World Asset) decentralized lending protocol that intends to facilitate the borrowing of crypto assets on Venus by using RWA as collateral. This bridge between traditional CeFi and DeFi will break the geographic boundaries for lender/borrower and allow them to transact in a borderless fashion. More details will be disclosed in the next 2 weeks.

Shortfall Recovery Report (09/2021)

After the May 18th incident, Venus Protocol suffered with 2008 BTC and nearly 6000 ETH shortfall on 2 major accounts. As the protocol’s first priority is to ensure the coverage of all the liquidity providers, it was proposed to use the XVS in the treasury distribution to repay those debts in 9-12 months time.

The repayment is done via the “bailout” function in the protocol. The basic idea is to:

  1. Sell XVS into the shortfall assets, which are BTC and ETH;
  2. Add BTC and ETH as collaterals into the shortfall accounts;
  3. The collaterals will be liquidated to repay the debts as the protocol usually does.

Venus Protocol has agreed to a deal with Binance Institutional Trading Desk (the Desk) to handle the liquidation of these XVS. The Desk has promised to return most of the liquidation incentive to Venus and only charge 0.5% fees, which includes all the trading service and other fees charged by 3rd party service providers.

In order to ensure the incentive of liquidation will be kept and returned, the Desk worked with nodereal.io to use the “Bundled Transactions”. So far the work has been proven to be working smoothly in most cases.

The Venus Team learned from the Desk that they have also been trying to figure out the best pace to liquidate such a large amount of XVS with managed and minimal impact to XVS price. The first month’s average execution price is much better than Volume Weighted Average Price (VWAP) in the same period. However, the liquidation speed is slower than the plan. We’ve already asked the Desk to accelerate the liquidation with a trade-off between price performance and time.

Another highlight is about the XVS/BTC price. Although XVS stays stable against BUSD, BTC price has risen sharply in recent days. XVS/BTC has dropped, so has XVS/ETH.

Problem:

From the current price, there would need to be more than 3.3M XVS used to cover the shortfall.

Solution:

To avoid having to use more XVS than initially planned, Venus will use 15,000,000$ of the project’s collateral fund reserves and previously accumulated Treasury Funds and buyback XVS from the open market to stimulate price action and encourage our community and long time holders and supporters. This will be executed in this quarter (Q4/2021) and hopefully it will make the ends meet. We also expect our upcoming marketing campaigns with MarketAcross and our new partnerships to bring a lot more attention and income to Venus Protocol which will further incentivize XVS holders and help us to quickly cover the shortfall.

Here is the first update and monthly report for September 2021:

Liquidated XVS 123686.584
Accumulated Liquidated XVS percentage 3.75%
Average XVS/BTC price 0.000760083
Average XVS/BTC price vs. VWAP 12.80% better
Repaid BTC 93.825262560
Accumulated Repaid BTC percentage 4.65%
Incentive Returned (in XVS) 13522
Lost incentive to other liquidators that the Desk should cover (in XVS) 190
Fees for the desk (0.5% total - lost incentive) 428.43292
Remaining XVS (total 3.3M) 3176313.416
Projected Total XVS needed 4481133.673
Remained debt BTC 1925.43833
Remained debt ETH 5966.275601
Accumulated bought BTC 94.067495
Accumulated bought ETH 0
Current XVS/BTC price 0.0005176
Current XVS/ETH price 0.007838

Venus key data this week. (Week40)

Venus Metrics Data WoW
Average Total Liquidity 3.8B$ -0.7%
Average Total Borrows 1.1B$ -16.2%
Average Available Liquidity 2.7B$ 7.2%
Average Utilisation 34.2% -15.4%
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