How Venus works

Venus consists of a decentralized system of lending pools. Users deposit assets they want to lend into a liquidity pool and borrowers draw from the pool when they want to take out a loan. Venus borrowers must first supply assets before they can borrow. Given the high volatility of crypto assets, borrowers must post more collateral than the value of the loan, or commonly referred to as overcollateralization. Interest rates on Venus are driven by market supply and demand. To facilitate this activity, Venus issues vTokens to lenders that reflect accruing interest on the underlying token.

How Venus makes money

Venus currently charges a reserve factor that allocates a share of borrowers' fees to the protocol. Each supported asset has a reserve factor that determines how much goes into the reserve.

How you make money on Venus

You earn lending fees on Venus by depositing your idle crypto assets to be used by borrowers looking for leverage. Venus also offers ongoing protocol incentives in its native XVS token to bootstrap demand for certain assets.