Promoting innovation in the DeFi ecosystem
Venus, Binance Smart Chain’s leading DeFi lending protocol, introduces a grant program to drive innovation within its ecosystem, encouraging DeFi breakthroughs that will lay the groundwork for broader institutional use in a multi-chain environment .
The proposal to launch the grant program aims to use Venus’ treasury of multi-million dollars from XVS to support community grants and protocol development. The Venus Grants program is a well-organized effort to put that money to good use by allowing external development teams and individuals to contribute beneficial features and services to the Venus Protocol.
The funding program supports a wide range of activities, including the development of a base protocol and additional projects based on the creation of alternative interfaces and applications that integrate Venus, development tools, code audits and bounties. Community-focused proposals, such as educational material grants and the organization of events and hackathons, will also be considered.
Brad Harrison, CEO of Venus, said:
We’re especially excited to support apps that rely on Venus’ core smart contracts. Yield aggregators, strategies or even alternative interfaces that help us further decentralize and increase reach to users. If you want to build it, we will support you in any way we can.
The Venus Protocol is an algorithm-based money market system that enables decentralized lending and borrowing. Cryptocurrency owners can use their holdings to provide collateral to the network, thus receiving a variable APY. Borrowers can get fast, low-cost stablecoin loans without liquidating their non-stable digital assets.
To secure the protocol, Venus borrows against crypto assets using market-provided collateral and creates synthetic stablecoins with over-collateralized positions backed by a basket of cryptocurrencies. This creates a safe lending environment by paying lenders a compound annual interest rate per block while borrowers pay interest on the coin they borrow.
Understanding DeFi Loans
The underlying value of crypto assets can go up or down, but they do not earn interest if they sit idle in wallets. Simply owning a coin will not generate any profit. This is where Defi loans come into play. Defi loans allow users to lend their crypto to others in exchange for interest. Banks have historically made extensive use of this service. Anyone can now become a lender in the world of Defi. A lender can lend its assets to others and earn interest on those loans. This can be done through lending pools.
Smart contracts allow users to combine their assets and transfer them to borrowers. The same goes for borrowers since each pool will approach borrowing differently.
When you take out a bank loan, you must have collateral to secure your loan. The automobile, for example, is the collateral for a car loan. The bank will confiscate the car if the user fails to honor the loan. The decentralized system is similar; the main difference is anonymity and does not need tangible assets as collateral. The borrower must provide something of value as the loan amount to obtain a loan. Smart contracts are used to deposit this amount of money with a value at least equal to the loan amount. Collateral comes in different shapes and sizes, and any crypto token can be used to repay a loan. For example, if a user wants to borrow a bitcoin, they must first deposit the price of a bitcoin in DAI.
Additionally, Bitcoin values continue to fluctuate significantly. When the cost of collateral falls below the cost of the loan, legal action may arise. Now comes the question of how to handle this circumstance. It might be easier to explain with an example. Suppose a user requests a loan of 100 DAI. Borrowers must provide a minimum of 150% of the loan amount as collateral with MakerDAO. This immediately implies that the borrower must deposit $150 in ETH as collateral for the loan. A liquidation penalty is applied when the collateral value falls below $150 ETH.
Defi loans can completely transform the financial sector. Payments, trade, investment, insurance, lending and borrowing are all initiatives aimed at decentralizing conventional financial services. Due to its involvement in this fascinating technology, Defi lending has enormous potential to transform the global financial ecosystem.
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