Cryptocurrency is gaining mainstream adoption very fast. Post COVID-19 global economic crisis has kick-started a renewed interest in cryptocurrency. DeFi or decentralized finance has achieved astounding success and it is growing exponentially. It is undeniable that cryptocurrency is a volatile asset. The high fluctuation of the price is a serious roadblock for using cryptocurrency as a medium of payment. Stablecoins are quite useful for that purpose. The first generation stablecoins were backed by fiat currency but MakerDao changed the game. DAI, issued by Makerdao, is multi-collateral stablecoin but its value is stabilized against the US dollar. Unlike normal stablecoins, DAI is backed by crypto collaterals. Nowadays, majority DeFi activity is prevalent on Ethereum blockchain and DAI is the lifeline of Ethereum DeFi. Considering the market size, many blockchains are trying to replicate the success of Ethereum DeFi and EOS is one of them. EOS has feeless transactions unlike Ethereum and it has very fast block times (0.5 sec). Quite a few DeFi projects have started their shops on EOS recently but EOS needs its own low volatility token which will supercharge EOS DeFi.
Vigor Protocol is a fully automated DeFi protocol on EOS blockchain. It offers borrow, lend and insure functions. Vigor is a community-supported project and anybody can become a member of the DAC (Decentralized Autonomous Community). Vigor Protocol codes are written in C++ and VIGOR contracts are professionally audited by Sentnl.io. The protocol is in the final testing phase and it’ll soon be open for full-fledged public usage after thorough safety check-up. As of now, the protocol accepts one free user per day and the successive users will have to stake their utility token to become members.
Two token system – VIGOR & VIG
The protocol has a two token system. VIGOR is the low volatility token and a bit similar to DAI. VIGOR is backed by a pool of overcollateralized cryptocurrencies and it provides value preservation and market hedging. VIGOR tokens are minted when EOS and other EOSIO native crypto tokens are locked in the VIGOR smart contracts and a loan is taken. 1 VIGOR is pegged to 1 USD. The fee utility token of the platform is VIG. It also acts as the final reserve. The maximum supply of VIG is 1,000,000,000. As per their whitepaper, “any VIG holder can stake a certain amount of VIG to become a Candidate and if garnish enough votes can themselves cast votes to elect Custodians.”
Comparison between MakerDao and Vigor – data from Vigor website
Lend and get rewarded
Current lending pool on Vigor – from Vigor Protocol dashboard
You can deposit VIGOR into a protected savings vault and get VIG rewards. Savings reward is approximately 6.33% annually.
You can deposit cryptocurrency like VIG, EOS, USDT, IQ and PBTC as collateral for your loan. You also need to deposit VIG tokens here to cover loan premiums. Borrow rates are as low as 2% now. When you take a loan, there is a chance of liquidation of the vault if the price of the assets drops drastically. To avoid a bailout, you need to keep adequate collateral and VIG tokens all the time. Borrowing and repayment happen through VIGOR token. The borrowers can get their crypto assets back by refunding their borrowings with VIGOR. This returned VIGOR gets retired.
Vigor Protocol looks well designed to transfer price volatility risks. The platform works in a decentralized manner and smart contracts manage everything. On-chain transactions make it transparent. The borrow rates are determined by the users through the process of risk-based discovery. The platform also has a reputation system and users with a good reputation can have some discounts. The protocol can accept any asset as collateral through voting consensus and take advantage of diversification. EOSIO has been built keeping in mind the objective of interoperability. Many EOSIO chains already exist and it is possible to make Vigor platform accessible across multiple blockchains down the line. Vigor can do well if it gets good initial liquidity as it comes with a great promise to deliver a community-driven stablecoin and unleash DeFi activity on EOS. Some support from the EOS community can help it to become more progressive.
Note: This post was first published here for Cryptowriter in association with voice.com.