Venus Announces VIP-29 Governance Proposal to Initiate Bailout and Grant Program

Venus protocol announces VIP-29 Governance proposal to initiate bailout and grant program. This is an essential step towards recovering its bad loan from the price exploits and massive liquidation last month.

Reassessment after the Shock

The Venus token crashed hard last month, May 2021. Following a price manipulation, which shot the price of XVS up 100%,  from $76 to a new all-time high (ATH) of $146, the price fell to ~$26 at the time of publishing.  The Venus team detailed in its post mortem how they are working on essential steps to mitigate the impact of the exploitation. BSC.News also covered the aftermath of the incident.

The price manipulation made a massive dent in holders’ confidence and protocol integrity. It left the protocol in bad debt, plus many token holders incurred bad losses. However, the VIP-29 Governance proposal and other steps may do well to restore this bruised confidence once again. The proposal was announced on June 18th via the protocols official Twitter account.

Venus outlined essential recovery steps, including changing management and improved risk strategies moving forward. At this time, the team did not find a specific group that stole money from the protocol. 

VIP-29 Governance Proposal

VIP-29 Governance proposal was drafted to initiate the bailout and grant program. A notable inclusion is that Binance will be a participant in the program. 

The proposal summary reads in part –

“Venus Community suggests to use Venus Grant Program(VGP) and release certain amounts of XVS from Venus Distribution Tokens to externally owned address (EOA), and also introducing a “Bailout” feature to allow users to supply XVS on behalf of a bankrupt address.”

The community expects that ~3.3 million XVS tokens will be allocated to a public address owned by Binance to initiate the bailout. The bailout process will take the following steps:

Over nine months, approximately 3.3 million XVS will be injected into the bankrupted addresses in a close-to-linear proportion using the “bailout” function so that the tokens can be slowly liquidated to repay the borrowed debt.

Binance will compete as a participant in the liquidation events and reuse the liquidation fees in the next round of injection.

XVS residual (if any) will be returned to the Treasury.

Based on the latest security update from Peckshield, a top blockchain audit firm, the company has reported no major issue with the codes. However, it’s important to note that what has happened was a price manipulation that has to do with the collateralization of the protocol and not the codes. 

The Venus team will execute the new features with complete transparency on BSC. The process will also be under scrutiny from the community. The two main features are:

Add function _grantXVS in Comptroller for Grant Program.

Add function mintBehalf in VBep20Delegator for Bailout.

A Recap of the Incident

According to the post mortem, the Venus protocol encountered a large liquidation incident that was caused by market conditions and oracle issues. It is important to note that this was an ecologic issue.

Venus Protocol | Source

As a result, the protocol lost approximately $77 million, of which Liquidators made ~ $20 million profit; Sellers made ~ $55 million profit; Scalpers made ~ $2 million in profit. The protocol has initiated an organizational restructure, including separation of Swipe and Venus resources and teams, and shut down the legacy OTC business.

A total revamp of its risk management procedures, including recruiting and creating an independent risk committee that will do an ongoing assessment of the Venus Protocol. The VIP-29 Governance proposal to initiate the bailout and grant program is one of many steps to restore the protocol integrity and users’ confidence.

About Venus Protocol

Venus Protocol is a decentralized marketplace for lenders and borrowers with borderless stablecoin. Venus is one of the largest algorithmic money market and synthetic stablecoin protocols on Binance Smart Chain.The Binance-backed protocol became famous around the DeFi following their hint of a massive incoming burn by founder Joselito and its Venus Reward Token VRT rewards for XVS token holders.

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