BSC's largest lending platform VENUS encountered a large amount of liquidation, who will cover the bad debt of 100 million US dollars?

According to news on May 19, BSC's largest lending platform VENUS was exposed to a large amount of liquidation, which had extremely bad impact. According to the feedback from the community, there are several large investors who have more than 3 million XVS (Venus platform currency) in their hands. They spent tens of millions of dollars last night in a very short period of time to pull the price of XVS from more than 70 dollars to 144 dollars , and then mortgage XVS at a high price to borrow thousands of BTC and tens of thousands of ETH. Subsequently, the price of XVS collapsed rapidly, and XVS was liquidated, causing more than $100 million in bad debts to the Venus platform.

At 22:00 on May 19th, XVS was suddenly pulled up sharply without warning. By 0:30 on May 19th, the price of XVS hit $144. Since then, within two and a half hours, the price of XVS has basically doubled.

At 3 o'clock in the morning on May 19, Weibo KOL Wang Dayou broke the news that a large Venus merchant mortgaged 2 million XVS at the high price of XVS and lent out 4,100 pies and 9,600 Ether, and is being liquidated continuously. The liquidated xvs thrown into the market may cause a series of declines in currency prices. XVS price halved from highs.

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In this attack, the attacker forged information to pass the verification of the BSC cross-chain bridge, so that the cross-chain bridge sent 2 million BNB to the attacker's address. [2022/10/7 18:41:33]

At 4 a.m. on May 19, an investor nicknamed "Galaxy" broke the news that more than 2 million xvs borrowed from the above-mentioned account were liquidated to only about 1.4 million, and owed a debt of 83 million US dollars to the Venus system.

In addition, there is another account mortgage XVS borrowed 12,986 ETH, 470,000 xvs are waiting to be liquidated, and the debt reaches 15 million US dollars. The amount of bad debts in these two accounts is nearly 100 million US dollars. There are also some other unknown addresses waiting for liquidation, and the number of bad debts is unknown.

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At 8:30 on May 19th, Venus founder Joselito tweeted that the funds in the Venus system are safe, and when some borrowers have insufficient collateral, they will be liquidated by the liquidator, and the profits from the liquidation will be transferred to the treasury. Joselito also cautions against over-borrowing and being mindful of market conditions and volatile swings to ensure your positions don't get liquidated.

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It is reported that with the promotion of community users, the total lock-up volume (TVL) of CoinWind.com has exceeded 1.5 billion US dollars. [2021/4/15 20:22:54]

After the Venus liquidation incident, the community was fried. The points of contention are as follows:

1) The total circulation of XVS is 10 million. Is the 2 million XVS owned by the big players or the project?

The HARD cross-chain currency market has reached a strategic cooperation with FinNexus to jointly expand BSC mining: According to the official announcement, the HARD Protocol cross-chain currency market is expanding to the Binance Smart Chain BSC ecosystem. At present, HARD Protocol has reached a strategic cooperation with FinNexus to jointly hold mining activities in the mining pool built by FinNexus on BSC. From 20:00 on April 1st to 20:00 on April 4th, Beijing time, users can mine FNX by depositing HARD, up to 1,500 FNX per day.

HARD Protocol is the first cross-chain currency market based on the Kava blockchain, supporting BTC, XRP, BNB, BUSD, KAVA and USDX assets such as borrowing and mining to earn income. Kava is a decentralized hub that supports cross-chain DeFi applications and services. It currently provides the Kava cross-chain lending platform and the cross-chain money market HARD Protocol, providing mortgage loans for mainstream digital currencies. [2021/4/2 19:38:29]

2) Not long ago, Venus raised the borrowing ratio of XVS from 60% to 80%. Last night, XVS was pulled up and then smashed. Did someone take advantage of the loophole or did it intentionally?

3) In the early days of Venus, CAN was randomly added as collateral, resulting in 3,000 BTC being borrowed short. Today, more than 4,100 BTC and 22,000 ETH were borrowed, and the same pit was stepped on twice. The ability of the project party is worrying.

For the first question, there is no solution for now. However, a user nicknamed "Jordy Roelofs" on Twitter provided an address that interested people can study: 0xEF044206Db68E40520BfA82D45419d498b4bc7Bf. With the help of Debank, it can be seen that the XVS of this address has been liquidated in large quantities.

Since it is currently not possible to go long or short XVS through contracts on centralized exchanges, as the market is showing signs of bearishness, if you are a large XVS owner or project owner, what would you do? Now there are two options: First, sell XVS directly to the market. Due to the extremely poor liquidity of XVS, a large number of selling will break the price of XVS, which will cause huge losses to yourself. Second, mortgage XVS to exchange for BTC and ETH. Since the mortgage rate of XVS is 80%, even if the collateral is liquidated, the value of hard assets such as BTC and ETH in hand will lose at most 20%.

At the same time, thanks to last night's pull, XVS was mortgaged at the high point. Theoretically swapping XVS collateral for BTC and ETH at $144. As XVS fell to less than $50, the mortgagor not only did not lose money, but also made a lot of money if he switched back to XVS now.

Regarding the second question, risk control is the bottom line of lending platforms. The lending platform has strict requirements on the mortgage rate of the collateral. If the value of the collateral fluctuates greatly and the liquidity is poor, it cannot be used as collateral. Otherwise, the market will fluctuate greatly and be easily liquidated.

Among mainstream lending platforms such as AAVE and Compound, the lending ratios of each platform to their own platform currency are 65% and 60% respectively. The market values of these two assets are US$7.5 billion and US$3.2 billion respectively, and the transaction volume in the past 7 days is US$2.5 billion and US$300 million respectively. There are more than 7 exchanges that support AAVE and COMP.

The mortgage rate of XVS is 80%. Before today’s liquidation event, the circulating market value was around 1 billion US dollars, and the transaction volume was around 300 million US dollars. There are only 3 exchanges that support XVS. The market value of XVS is lower than that of AAVE and COMP, and its liquidity is similar to that of COMP, and there are few supported exchanges. The volatility of such assets is much higher than the former two, and normally, the mortgage rate is lower than the former two. However, Venus passed a proposal to increase the collateralization ratio of XVS from 60% to 80%. This is not a wise move. Today's incident is also inseparable from the adjustment of the mortgage rate of XVS.

Regarding the third question, Venus has done harm to the community not once or twice. For example, the sudden charge of handling fees last month caused a large number of smart pool users to suffer losses. This time, someone took advantage of XVS's super high pledge rate, resulting in hundreds of millions of dollars in assets being taken away and not returned. If a platform product is made like this, if it is not because of Binance’s own son, it is estimated that it will have been eliminated long ago.

For the bad debts of more than US$100 million generated this time, some people suggested three ways to resolve them: First, Binance took over the bad debts. Second, the Venus project party sells coins to make up for the debt. Third, the Venus project party borrows money from other platforms to make up for it. Either way, it's not easy to implement.

For investors, the BTC or ETH mortgaged on the platform should be withdrawn in time to avoid failure to pay.

For BSC, the far-reaching impact of this incident has already appeared. The current situation is very tense. Polygon (Matic) has locked up 11 billion US dollars in less than two months. Solana is also spending money to staking the land. The first-mover advantage established by BSC in the DeFi field is gradually being eroded, and funds have been lost. Lending and DEX are the foundation of DeFi. As the largest lending platform of BSC, VENUS has accidents again and again, which is very likely to drag BSC down. Binance will either take advantage of this incident to completely rectify Venus or re-support it or simply build a lending platform by itself, otherwise the prospects of BSC will be worrisome.

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