VIP 5 & 6 XVS Borrow Rewards

VIP 5 and VIP 6 will introduce new speed controls (Venus reward distribution) for the Venus platform.

The community hoped that these speeds could be set individually for both the supply and borrow side of the platform. We have since learnt that this is not the case and supply/borrow must both be equal ie. 50% Supply/ 50% Borrow. This is a technical restraint written in the original code of COMP, from whom we are a fork. This cannot be changed at present.

VIP 5 states that XVS distribution will be increased to 3000 XVS per day. This would mean 1500 for supply and 1500 for borrow. This is great in theory as it represents an approximate 12 x current rewards for XVS suppliers and borrowers.

In previous discussions, the community has expressed concerns that XVS should not be allowed to be borrowed. This is because those shares can then be short sold on the market to create sell pressure and push the price down.

In response to this the team created a borrow cap on XVS of 450k XVS. This was the minimum cap that could be implemented at the time due to this amount being borrowed (as per JL).

The problem the community has with this is that of those being borrowed, approx. 75% are being borrowed by 1 entity. This means that of the 450k borrowed, they will share the 1500 XVS rewards. This creates an APY of over 100% for borrowing XVS.

This can be seen as an exploit rewarding mainly just 1 entity with a disproportionate amount of rewards.

We have 3 options to discuss:

  1. Can these proposals be delayed until we are able to write a V2 code base so that the 50/50 element can be removed and go along with the community consensus?

Pro: Fair distribution of awards
Con: Will probably take a long time, meaning XVS holders lose out on the supply rewards in the meantime.

  1. Can we remove the borrow cap for XVS?

Pro: It means anyone is free to borrow XVS and the awards of fairly distributed
Con: This would allow XVS to be borrowed and short sold

  1. Could we change the interest model to ensure that the interest charged on borrowed XVS is more than the rewards themselves? (This has been done by CZ with BNB on Binance and is charged at 99% APY)

Pro: This would make borrowing XVS very expensive and not worthwhile for anyone trying to take advantage. It also means this interest would be paid to XVS suppliers effectively moving all 3000 rewards to suppliers.
Con: May not be technically possible on an individual asset



Yes, thanks for creating the post. I proposed the last option and I think it is doable;

I’ m not a developer but I research blockchain economics Co3 Project: An Exercise in Futurism | Ape Unit Blog

If we rise the rates the Whale will be forced to give back the coins

This is just the first move, after that i suggest to cap borrowing to 0.

Decentralized governance is VERY risky and we just saw an example, by borrowing one can effectively exploit the protocol, we cannot leave sucha an attack vector to shortsellers.

But let’s focus on outsmarting the whale and achieve:

immediately > than 3000 coins rewards for xvs suppliers (at the Iexpenses of the whale) I want to have fun charging him more than 2500 XVS a day for borrowing 450k Xvs.

However, on the other hand we do can see the issue differently:

if it were the swipe team to borrow such coins I, would be almost fine. After 3 years that would mean allocating 10% to the team, I have seen worse.


I support option 2 as it is simple and fair.

Option 3 is hard to do. Binance is a CEFI which give it a flexibility that’s impossible in defi.

I support option 3 because is a short time solution while on longterm, we can raise proposal to amend the reward when XVS have enough liquidity and market value.

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We need to understand if all options are technically possible and how long will it take to implement them.

I think that option 3 is best right now and option 1 is long term solution.
With option 2 we may get all XVS borrowed due to high APY and you won`t be able to withdraw any (to vote for example) due to lack of liquidity.

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Option 3, it’s a no brainer.

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Option 3 is best if possible, otherwise option 2.

What would be required to implement this?

Thank you

Option 3 seems do able and will fully take care of the problem and community concerns

I’ve also thought of another easy solution
we could create a new duplicate xvs smart contract & set the borrow limit to 0 under this new smart contract and set the old one to give out zero xvs distribution so everyone will eventually move over to the new one.

if this is dowable ,should be done or option 3 is best

yes option 3 is the best option for this expolit by 1 borrower and should be done urgently so that xvs rewards are not expolited and given to single borrower and at current price they are really worth more

I support option 3, and 1 as a goal mid term.

Can we just add the 3000 daily venus reward into a vault. Only those that stake their XVS in the vault get the reward. We can keep the supply/borrow of XVS separate if we wish to with limited XVS reward. Lowering the CF etc as we go.

Option 3 seems like it will be the best overall for the community and stop the big whale gaming the system. Something needs to be implemented immediately!

Why was Vip-6 canceled again?