On September. 28, Binance announced the launch of Venus Protocol, an algorithmic money market platform that allows borrowing of over-collateralized loans, lending, and generation of new synthetic stablecoins, VAI. According to a tweet by Joselito Lizarondo, founder of Swipe Wallet and Venus Protocol, the BSC-based platform is a fork from Compound (COMP) and Maker (MKR).
Venus does not include any VC pre-mined tokens or team allocation funds in a bid to fully decentralize the project. The VAI token is a multi-collateralized stablecoin offering cross-chain collateral with other crypto assets based in the BEP-20 format.
The platform allows over-collateralized lending with 75% or lower of the assets supplied on the Venus Protocol and interest-earning on collateral supplied. Users can also stake their vTokens (e.g., vETH) to mint VAI stablecoin, which is pegged to the dollar at a ratio of 1:1. The statement from Binance reads,
“VAI is minted by the same collateral that is supplied to the protocol. Users can borrow up to 50% of the remaining collateral value they have on the protocol from their vTokens to mint VAI”.
The protocol is, however, governed by its governance token, XVS, which allows users to vote on issues on the platform such as adding collateral assets, initiating product developments, and major changes on Venus. At the start, Swipe wallet’s native token, SXP, will be used for governance “until there’s enough quorum of XVS mined to be sufficiently decentralized,” Lizarondo said.
A total of 20% of the mined XVS tokens will be allocated to the Binance launch pool, 1% to the Binance Chain Ecosystem, and the rest will be distributed to the miners. A total of 30 million XVS governance tokens will be mined by May 2024. Miners will be able to stake their Binance Coin (BNB), Binance USD stablecoin (BUSD), and Swipe’s SXP tokens to receive XVS tokens.
Binance also announced the XVS trading pairs would be listed in its Innovation zone, including the XVS/BTC, XVS/USDT, XVS/BUSD, and XVS/BNB pairs.
In September 2019, BEG reported Binance’s Venus project launch as a government-friendly replacement of Facebook-led stablecoin, Libra. But the Venus Protocol was clear to say that this wasn’t the same as the open project from Binance.
Uniswap made a shrewd move by airdropping millions of tokens and launching its own liquidity pools to reclaim what SushiSwap had taken from it in just over two weeks. It has propelled the platform back to the most dominant DEX as total value locked approached $2 billion while that on rival SushiSwap has dwindled.
Uniswap made it clear that 40% of all UNI tokens would be allocated to the team, investors, and advisors, with just over half of that going to the latter two. The Glassnode report has delved into this and alludes that the protocol falls far short of true decentralization.
Token Allocation and Storage Anomalies
Liesl Eichholz, who penned the report, questioned the distribution of these tokens, which was supposed to take place over four years. However, the public schedule for vesting has not been announced.
She added that it was even more concerning that these tokens currently appear to be fully liquid and are presently held in regular Ethereum addresses with no transfer restrictions.
Why aren’t these vesting tokens under some kind of timelock?
— Liesl Eichholz (@liesleichholz) September 24, 2020
The term ‘vesting’ has been used loosely by Uniswap, and this method of storing the tokens effectively gives the team and investors admin rights over the protocol, the report added.
“The Uniswap team and investors have allocated themselves an immense proportion of the total supply of UNI tokens. The pie chart feels more reminiscent of a 2017-style ICO than a 2020-style fair launch,”
The report continued to criticize Uniswap governance, noting that in order to submit a proposal, at least 1% of the entire UNI supply needs to be possessed, and 4% of the total supply, or 40 million tokens, is required to reach a quorum.
The report stated that only 15 addresses control at least 10 million UNI, four of which are reserved for the governance treasury, and one is the airdrop distributor address. Of the remaining ten addresses, nine of them contain part of the team and investor token allocation.
Assuming the team and investor allocation will not be touched, that leaves one address which currently has enough UNI to submit a governance proposal. That address is owned by Binance, holding around 26 million tokens.
“This means that even though the governance treasury will be unlocked in less than a month, currently only Binance – a centralized exchange in direct competition with Uniswap – has the power to propose uses for these funds.”
The report concluded that community-led governance is essentially impossible for Uniswap for the time being.
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