Venus Protocol operates algorithmic money markets enabling over-collateralized lending and borrowing through core and isolated pool architectures. The system calculates interest rates based on supply and demand dynamics while maintaining collateral ratios through automated liquidation mechanisms. Risk management separates assets into distinct pools with independent parameters including collateral factors and rate models. Protocol revenue distributes to XVS stakers through Venus Prime using non-transferable soulbound tokens that boost yields based on staking duration and market participation. Users mint VAI stablecoin against supplied collateral with peg stability maintained through direct swaps between VAI and other stablecoins at fixed ratios.
