Venus Protocol is an algorithmic money market and synthetic stablecoin protocol initially built on the BNB Chain and now operating across multiple EVM-compatible chains.^{[4] [5]}

Introduction

Protocol Overview

Launched in 2020, Venus Protocol is a decentralized finance (DeFi) protocol that enables users to lend, borrow, and mint stablecoins. It combines the functionalities of two established DeFi models: the algorithmic money markets developed by Compound and the stablecoin minting facility introduced by Maker. This integration simplifies the user experience by providing core DeFi capabilities within a single application.^[5] The protocol is designed to be a user-friendly cryptocurrency asset lending and borrowing platform, enabling users to directly borrow against collateral at high speed with low transaction fees.^[1]

The latest iteration of Venus Protocol builds upon its initial success with a focus on three key areas: risk management, decentralization, and user experience. By enhancing these aspects, Venus continues to push the boundaries of decentralized finance.^[5] The protocol is governed by its community of XVS token holders, who can vote on proposals to shape the future of the platform, including adding new collateral types, changing parameters, and organizing product improvements.^[1]

History

The project was developed by the Swipe project team and launched on the Binance Launchpool on September 29, 2020. This launch allowed users to farm the native governance token, XVS, by staking various assets, including Binance Coin (BNB), Binance USD (BUSD), and Swipe (SXP) tokens. A total of 20% of the total XVS supply was allocated to the Binance Launchpool for this initial farming phase.

Core Functionality

Algorithmic Money Markets

The primary function of Venus is to operate as a decentralized money market. Users can supply various cryptocurrencies to the protocol to earn a variable Annual Percentage Yield (APY). These supplied assets form a liquidity pool from which other users can borrow.^[2]

Borrowing on the platform is over-collateralized, meaning users must supply assets of a higher value than the amount they wish to borrow. For instance, users can borrow assets whose value is 75% or lower than that of the assets they have supplied. This mechanism secures the loans and protects the protocol and its liquidity providers from defaults.^[3] Since the protocol is decentralized, users do not need to pass credit checks and are not restricted by their geographic location or credit score. They can source liquidity at any time by posting sufficient collateral.^[2]

VAI Stablecoin Minting

In addition to lending and borrowing, Venus allows users to mint VAI, the protocol's native synthetic stablecoin, which is pegged to the value of 1 USD. Users can mint VAI on-demand by using the vTokens from their supplied collateral. For example, by posting collateral to the Venus smart contract, users can mint VAI tokens. VAI is a synthetic BEP-20 token asset.^[1]

Key Features and Innovations

Isolated Pools

To enhance risk management, Venus introduced Isolated Pools. These are separate lending markets for specific assets, which operate independently from the main Core Pool. This structure allows the protocol to list less liquid or higher-risk assets without exposing the entire protocol to the risks associated with them. Each isolated pool has its own specific risk parameters, such as collateral factors and interest rate models, which are managed by the Venus governance community.^[6]

Venus Prime

Venus Prime is a rewards program designed to incentivize loyalty and long-term participation in the protocol. Users who stake XVS in the governance vault and also lend or borrow assets on Venus become eligible for boosted rewards. This feature aims to reward dedicated users with superior yields, strengthening the relationship between governance participation and protocol usage.^{[4] [7]}

Peg Stability Module (PSM)

To ensure the VAI stablecoin maintains its peg to the US dollar, Venus has implemented a Peg Stability Module (PSM). This module allows users to swap VAI for other stablecoins like USDT or USDC at a 1:1 ratio with low fees. The PSM helps to stabilize the VAI price by absorbing market fluctuations and providing an efficient arbitrage mechanism.^[8]

Omnichain Functionality

Venus is built on EVM-compatible chains, which allows for fast, secure, and low-cost transactions. This omnichain approach is a key part of its strategy to expand beyond its origins on the BNB Chain, making the protocol accessible to a wider user base across different blockchain ecosystems.^[4]

Governance

Venus is a community-driven decentralized protocol. The governance process is managed by the holders of the XVS token.^[4]

XVS Token

The XVS token is a BEP-20 token that serves as the native governance token of the Venus Protocol. Token holders have the power to control the protocol by voting on various proposals. This includes decisions on adjusting interest rates, adding new assets as collateral, and directing protocol improvements. Users can acquire XVS by providing liquidity, borrowing from the protocol, or minting VAI, in addition to purchasing it from exchanges.^[1]

Venus Improvement Proposals (VIPs)

Changes to the protocol are proposed and executed through Venus Improvement Proposals (VIPs). Any community member who meets the minimum XVS holding requirement can create a proposal. These proposals are then voted on by the entire community of XVS holders. If a proposal passes, it is queued in a Timelock contract and executed automatically after a delay, ensuring transparency and security in the governance process.^[9] The protocol has executed hundreds of VIPs since its inception.^[4]

Security

Venus places a high priority on the security of user assets. The protocol employs a multi-faceted approach to risk management and security to protect against potential threats.^[4]

Price Oracles

To prevent market manipulation attacks, the Venus Protocol utilizes price feed oracles to provide accurate and tamper-proof pricing data for all assets on the platform. The protocol's Resilient Price Oracle aggregates prices from multiple trusted sources, including Chainlink, to ensure data integrity. This system allows the protocol to access reliable price feeds at a lower cost and with greater efficiency, reducing the overall risk footprint of the system.^[10]

Audits and Bug Bounties

The protocol's smart contracts have undergone numerous security audits from reputable firms. As of June 2021, the security firm Certik ranked Venus as having the 3rd highest security score on BNB Chain. The protocol has been audited by firms including Quantstamp, Code4rena, Pessimistic, Fairyproof, Hacken, and HashEx.^[4]

To further enhance security, Venus runs a bug bounty program that encourages developers and security researchers to identify and report vulnerabilities in the code. This proactive approach helps to identify and mitigate potential risks before they can be exploited.^[4]

September 2025 Exploit

On September 2, 2025, Venus Protocol experienced a significant security breach, resulting in the loss of approximately $27 million worth of assets.

The attack was attributed to a suspected contract compromise. According to on-chain analysts, the exploit involved updating the protocol’s Core Pool Comptroller contract to a malicious address. This new address was then used to drain various tokens from the protocol, including vUSDC and vETH. At the time of the incident, security teams began tracking the stolen funds, which remained in the attacker's contract without being swapped.^[11]

See also

• BakerySwap (BAKE)