With the rapid development of the decentralized finance (DeFi) field, stablecoins have become a key component in DeFi protocols. The Venus protocol provides users with a decentralized stable currency issuance and usage platform through its stable currency VAI. As the governance token of the Venus protocol, the XVS token plays a vital role in the issuance and management of the stable currency VAI. This article will deeply explore the role of XVS tokens in the VAI issuance mechanism and analyze the future development prospects of VAI stablecoins.
What is VAI stablecoin?
VAI is a decentralized stablecoin in the Venus protocol. Its value is pegged to the US dollar and aims to provide users with a stable and decentralized value storage tool. The main uses of VAI include:
As an asset of a trading pair, used for transactions and payments.
Serve as collateral to participate in lending and investment activities.
Provided for use by decentralized applications (DApps) to improve the liquidity of the ecosystem.
Unlike traditional stablecoins such as USDT and USDC, VAI is automatically generated through the smart contract system of the Venus protocol without the participation of any centralized organization, which makes it more decentralized and transparent.
The role of XVS token in VAI stablecoin
XVS token plays an important role in the issuance and management process of VAI. Specifically, XVS token holders can participate in the following decisions through governance rights:
Issuance and supply control of VAI: The Venus protocol allows users to use mortgage assets (such as BTC, ETH, BNB, etc.) to generate VAI. XVS token holders can vote to determine the VAI supply cap for each issuance to ensure VAI market stability. In addition, XVS currency holders can also adjust the risk parameters of collateral to ensure the security of the platform.
Interest rate and liquidity management: XVS currency holders can vote to adjust the interest rate policy of the stable currency VAI to ensure that the interest rate meets market demand and promotes the liquidity of funds. This is crucial for the long-term stable operation of the platform, because the interest rate will directly affect the user's cost of using funds and rate of return.
Risk control and asset management: Since the Venus protocol allows a variety of assets to be used as collateral, XVS token holders need to evaluate the risks of these assets and make corresponding decisions. This includes setting mortgage ratios for different assets, liquidation rules, etc. to avoid large-scale liquidation risks on the platform.
Issuance mechanism of VAI stable currency
VAI is issued by pledging digital assets, which means that users need to use BTC, ETH, BNB and other cryptocurrencies as collateral to generate VAI. The specific process is as follows:
Collateral assets: Users first need to deposit assets into the Venus protocol as collateral to generate VAI. Different assets have different mortgage rates. Generally speaking, assets with larger value fluctuations will have higher mortgage rates, while stable assets will have lower mortgage rates.
Generating VAI: When users stake enough assets, the Venus protocol will allow them to generate VAI. The amount of VAI generated depends on the value of the user's mortgage assets and the mortgage ratio set by the system.
Liquidation risk: If the value of the user's mortgage assets drops to a certain level, the Venus protocol will trigger an automatic liquidation mechanism and force the sale of collateral to recover the loan, thus protecting the stability of the platform.
Application scenarios of VAI stable currency
As a decentralized stable currency, VAI has a wide range of application scenarios:
Decentralized lending: VAI can be used on decentralized lending platforms to provide users with stable lending assets. Compared to other cryptocurrencies, VAI’s stability makes it a more attractive asset for users to borrow and lend.
Cross-border payments and settlements: Since VAI is pegged to the U.S. dollar, its value is relatively stable, so it can be used for cross-border payments and settlements, avoiding risks caused by cryptocurrency market fluctuations.
Trading pair assets: VAI can be used in various trading pairs to become a bridge between crypto assets and stablecoins. Users can trade VAI with other crypto assets on decentralized exchanges (DEX), increasing its liquidity.
Comparison with other stablecoins: VAI vs. USDT vs. DAI
In the stablecoin market, VAI is significantly different from other stablecoins such as USDT and DAI. Here’s how these three stablecoins compare:
degree of decentralization
Both VAI and DAI are decentralized stablecoins, while USDT is issued by the centralized company Tether, which makes USDT somewhat controversial in terms of transparency and risk control. VAI relies on the Venus protocol's smart contracts for management and issuance, without the intervention of a centralized organization.
Collateral type: VAI can use a variety of crypto assets as collateral, while DAI mainly relies on assets in Ethereum and its ecosystem. USDT is not backed by collateral, and its value is maintained by Tether's pledged U.S. dollar reserves, which has also raised questions about the transparency of its reserves.
Usage and Liquidity: USDT has the highest market liquidity and is widely used in major exchanges and payment scenarios. DAI is widely used in the DeFi field, especially in the lending and staking fields. As the native stablecoin of the Venus protocol, VAI is mainly used in the lending market and cross-border payment fields, and is gradually expanding its liquidity and application scenarios.
Challenges and future development of VAI
Although VAI has multiple advantages as a stablecoin, it still faces some challenges. First of all, the stablecoin market is highly competitive, and VAI needs to compete with mature stablecoins such as DAI, USDT, and USDC. Secondly, the value stability of VAI depends on the operation of the Venus protocol, so the security and stability of the platform are crucial to the future of VAI.
However, as DeFi develops further, the demand for decentralized stablecoins will continue to grow. Relying on the technical advantages of the Venus protocol and the governance mechanism of the XVS token, VAI has the potential to become one of the mainstream stablecoins in the market. In the future, the Venus protocol may launch more innovative features to enhance VAI’s application scenarios and market competitiveness.
Conclusion: Synergy of XVS Token and VAI Stablecoin
As the governance token of the Venus protocol, the XVS token not only gives users the right to participate in platform management, but also plays a key role through the issuance and management of VAI. As the DeFi ecosystem expands, the synergy between XVS and VAI will become increasingly important. For users who want to participate in decentralized finance, XVS provides the opportunity to not only participate in governance, but also to earn more through the VAI stablecoin. As the market continues to develop, the prospects for XVS tokens and VAI stablecoins are worth looking forward to.