Algorithmic / under-collateralized stablecoin
Venus Protocol's assessment for RD-F-069 — scored yellow on the v1.7.0 rubric. The evidence below is the curator's reasoning for this score.
Evidence summary #
VAI is Venus's USD-pegged synthetic stablecoin. It is over-collateralized by construction: minting requires at least 200% collateral backing (50% collateral factor applied to Venus-supplied collateral). VAI has a Peg Stability Module (PSM) allowing 1:1 swaps with USDT/USDC at low fees to mechanically anchor the peg. VAI is NOT an algorithmic under-collateralized design (not Terra/LUNA style). However, XVS (governance token) can be used as collateral to mint VAI. XVS is subject to governance-driven emission, concentration, and price manipulation risk (2021 incident: XVS pumped 90% to enable $100M+ bad debt). An XVS price collapse could force VAI-collateral liquidations, creating an indirect soft-algorithmic feedback loop. This is a second-order risk, not a primary algorithmic design flaw. Score: yellow (soft loop risk, not a hard algorithmic design failure).
Sources #
- URLBSC Venus Protocol — XVS Liquidation Incident2021 XVS manipulation incident — XVS-as-collateral price loop risk evidencedretrieved 2026-04-28
- Venus Protocol Docs v4 — VAIVenus Protocol docs — VAI and PSM description (200% collateral requirement, PSM 1:1 swap)retrieved 2026-04-28
- What is Venus Protocol — Nansen AINansen AI — Venus Protocol overview including VAI stablecoin mechanicsretrieved 2026-04-28
Methodology #
Classify whether the protocol is an algorithmic or under-collateralized stablecoin design per curator classification.
See the full factor methodology and distribution across all protocols →