Algorithmic money market DeFi protocol Venus released a new announcement today, revealing zero-interest loans. In a tweet published on November 23, the team revealed that all VAI tokens minting offers 0% APR on launch to support liquidity.
Built on the Binance Smart Chain blockchain network, Venus is a decentralized marketplace for lenders and borrowers using stablecoins and other crypto assets. At the time of writing, the protocol supports Swipe (SXP), USD Coin (USDC), Tether (USDT), Binance USD (BUSD), Binance Coin (BNB), and the native Venus (XVS) token.
Venus enables DeFi users to earn incredible APY rates on the funds that they provide to the protocol. The returns are entirely based on the market demand for the specific asset. As demand increases, so does the APY rate. According to the official website, users earn interest on every block. Moreover, it is possible to use the interest as collateral to borrow assets or mint stablecoins.
Users also have access to instant liquidity as they can use the vToken collateral to borrow from the protocol. Borrowing charges no trading fees and causes no slippage. Venus also notes that the protocol processes both borrowing and lending on-chain.
Now, the project announced that VAI minting will initially host a 0% APR to support liquidity. Simply put, users can mint VAI interest-free by using the collateral that they have already provided. On launch, the team notes that it will support SXP, XVS, BNB, USDT, USDC, and BUSD as collateral.
Will zero-interest loans cause havoc for Venus?
While zero-interest loans sound attractive to most, some in the DeFi community are worried about the offer. One Crypto Twitter community member believes that the zero-interest loan may be dangerous as it generates ‘free money.’ As an example, he suggests that one could borrow VAI, swap it for SXP, and then borrow more VAI while compounding the original SXP collateral returns.
In the comment section, another user complained about the team’s troublesome communication, stating that ‘it is not their strong suit.’
Based on a post from November 6, the Venus protocol is set to launch today at 7 PM UTC. In a separate tweet, the Swipe Wallet CEO and Venus Protocol founder stated that this is an experimental project. Moreover, he added that users should only deposit funds that they are prepared to lose and that DeFi contains numerous potential attack vectors.
The Venus (XVS) token launched on October 6 and has not fared well in the market. Starting to trade at $4, the price action became extremely volatile as trading volume reached up to $105 million. However, the price began to drop down to $2.37 with a significant reduction in volume. In the past 24 hours, XVS dropped by 16.5% and is now trading at $3.41.
Taking a look at the current trading volume, we can conclude that there is not much interest in the token itself. For the past week, it ranged between $5 to $10 million per day. However, there may be more interest in the protocol itself, especially given the zero-rate loan offer. After all, the Venus founder is the CEO of Swipe, one of Binance’s greatest projects.