Venus Protocol: Building an Efficient and Secure DeFi Ecosystem

Overview

Venus Protocol is one of the leading decentralized finance platforms, built to make borrowing and lending crypto assets simple, secure, and efficient.

Originally launched on BNB Chain in 2020, Venus has since grown into a multichain ecosystem spanning eight networks: BNB Chain, Ethereum, Arbitrum, Optimism, Base, zkSync, opBNB, and Unichain.

With billions of dollars in processed transactions, Venus has become the backbone of DeFi lending on its home chain, BNB Chain.

What Is Venus

At its core, Venus is a decentralized money market. Users can supply their crypto to earn interest, borrow against their holdings to unlock liquidity, and mint VAI, a stablecoin pegged to the US dollar. By operating on EVM-compatible chains, Venus combines low fees with fast finality, making it easier for everyone to participate in DeFi. Governance of the protocol is driven by the community through the XVS token, which gives holders a voice in the future of Venus and access to staking rewards.

Venus's Underlying Technologies and Advantages

Venus is a smart contract-driven crypto asset lending marketplace. Its core architecture comprises a supply market, where users earn interest by depositing assets, and a borrow market, where users collateralize assets to borrow.

The protocol employs a price oracle (e.g., Resilient Price Oracle) to fetch real-time asset prices—ensuring fairness in its liquidation mechanisms. In version V4, Venus introduced Isolated Pools, which allow safer on-boarding of long-tail or low-liquidity assets by isolating risks from the core pool and managing price feeds through a composite of multiple oracles (e.g., Chainlink, and other oracles) to boost risk management. Moreover, the protocol supports stability fees, stable-rate borrowing, and role-based access control, which collectively enhance governance flexibility and operational efficiency.

On the product side, Venus holds significant competitive advantages over other DeFi protocols like Compound: Firstly, built on BNB Chain, it delivers low-cost, high-speed transactions—gas fees are markedly lower than on Ethereum. Secondly, the issuance mechanism of the synthetic stablecoin VAI allows users to mint a USD-pegged asset through over-collateralization (typically exceeding 150%), thereby mitigating the centralized risks inherent in traditional stablecoins. Thirdly, V4’s risk-assessment framework and multi-factor verification strategies (such as avoiding single points of failure) enhance the protocol’s security, evidenced by the fact that it has processed billions of dollars in transactions without any major incidents. Moreover, Venus supports the Prime program, which allows users to earn additional yield by staking specific assets, thereby enhancing user retention. Overall, these advantages make Venus one of the most reliable lending platforms in the BNB ecosystem, suitable for a wide range of users—from beginners to institutional users.

Underlying Features: The Launch of E-Mode

The latest innovation on Venus is the introduction of E-Mode, or Efficiency Mode, a feature that boosts borrowing power for assets that are closely correlated in price. At launch, E-Mode is live for stablecoins featuring their strategic partners, Ethena and Pendle, featuring USDe and sUSDe, along with its corresponding PT asset on Pendle. Because these tokens are all designed to track the US dollar, the protocol can safely allow higher loan-to-value ratios, giving users more borrowing power while reducing the likelihood of liquidation.

This unlocks new opportunities for yield strategies. For example, a user supplying PT-USDe can now borrow USDe with much greater efficiency, making leverage or stablecoin liquidity provision strategies far more effective. E-Mode represents a major step forward in capital efficiency, helping users get more out of their assets while preserving Venus’s strong risk controls.

Venus Tokenomics

Venus Protocol’s core token is XVS, a governance token bound by the BEP-20 standard with a fixed total supply of 30,000,000. Specifically, 79% of the XVS tokens are allocated for liquidity mining as rewards to suppliers, borrowers, and VAI minters. 20% are allocated to Binance Launchpool participants. 1% (300,000 tokens) are reserved for supporting the BNB Chain ecosystem, including development, partnerships, and marketing.

Primarily used for governance and incentives, XVS is designed to capture the protocol’s value as a core asset. Only XVS deposited in the Venus Vault grants full rights, including governance participation and rewards. The specific utilities include:

Governance: XVS holders can propose, vote on, or delegate votes on Venus Improvement Proposals (VIPs) to influence protocol parameters such as interest rate models, collateral factors, new asset listings, fee structures, and upgrades. The V4 upgrade introduced fast-track VIPs and role-based access control to improve governance efficiency.

Staking and Rewards: By staking XVS in the XVS Vault, users can earn base rewards (currently distributed at a rate of 308.7 XVS per day) and receive a share of the protocol's revenue. Additionally, staking is a prerequisite for participation in the Venus Prime program, which offers boosted APYs using protocol revenue, with limits set by market multipliers.

Collateral: XVS can be used as collateral within the protocol to borrow other supported assets.

Fee Discounts and Security: Holders of XVS may enjoy discounts on protocol fees, aligning incentives and contributing to the long-term safety and stability of the protocol.

Value Capture: Vault depositors share in protocol revenue, such as borrow fees and liquidation penalties. In extreme scenarios where the risk fund is insufficient, vault depositors may pay up to 10% of their deposit to cover shortfalls after utilization of the risk fund.

What’s Next

The current launch of E-Mode focuses on stablecoins, but this is only the first phase. Venus plans to expand Efficiency Mode to include BTC and BNB markets, enabling even more efficient borrowing strategies on these flagship assets. Looking further ahead, Venus will continue to grow as a multichain DeFi hub, introducing new assets, expanding risk-isolated markets, and giving XVS holders a greater role in shaping the protocol’s future.

With the launch of E-Mode, Venus is entering a new chapter. Stablecoin markets are live today, and BTC and BNB markets are coming soon — offering users more efficiency, more opportunity, and more ways to make the most of DeFi.