Venus Protocol voting to migrate TUSD contracts on BNB Chain

The Venus Protocol, a decentralized borrowing, lending, and earning platform, has officially launched its VIP-129 governance proposal that focuses on migrating the TUSD contract on the BNB Chain.

Venus Protocol migrating TUSD contracts on BNB Chain

The migration behind VIP-129 involves minimizing the current TUSD market and introducing support for the new native TUSD contract on Venus.

The objectives that the proposal is set to achieve include deploying a new market with a new BEP-20-based TUSD contract as the new native token. It would begin deprecating or minimizing the current market that utilizes the old BEP-20 TUSD contract, or TUSD_OLD.

Finally, successfully voting and implementing the VIP-129 protocol would enact changes in Venus’s protocol. All borrowing, supplying, and utilizing of the current TUSD would be temporarily suspended for the current TUSD market, and the market would be renamed as TUSDOLD.

Furthermore, the distribution of XVS in TUSDOLD would be set to zero, while the distribution would be migrated to the new TUSD market, and be set at 12.5 XVS per day. XVS is the governance token of the Venus Protocol.

The Legacy vTUSD market will be upgraded and renamed Venus TUSDOLD. The reserve factor in TUSD old would be set to a maximum (100%), and the collateral factor would be halved (55%).

Security and cost implications

With the new market and native TUSD contract, the Gauntlet Network partnered with the Venus protocol by onboarding onto the BNB chain to manage market risk, improve capital efficiency, and simulate protocol recommendations for Venus.

In line with that, the Gaulet Network suggested establishing specific settings until the new market has adequate liquidity. These include a collateral factor of 0%, a reserve factor of 25%, a borrowing cap of 600,000 TUSD, and a supply cap of 1,000,000 TUSD.

To ensure adequate security, integrating the old vTUSD and new vTUSD markets would be tested in a simulated environment to verify functionality.

Moreover, to avoid the implications of a liquidity shortage, an initial liquidity of 10,000 TUSD will be provided as bootstrap liquidity for the market. This measure would also help to safeguard against potential attacks on empty pools, which have been observed in other lending protocols.

Ahead of this scheduled migration, TUSD borrowers are advised to repay their TUSDOLD loans to avoid liquidation.

Meanwhile, the Venus Protocol also said Binance, in collaboration with the Tusdio team, will soon launch a TUSD to TUSD_OLD Swap during the minimization period of the TUSD_OLD market on Venus.