VVS Finance (VVS): The Biggest Cronos DeFi Project Yet?
Since the Singaporean-based Crypto.com launched Cronos in November 2021, the EVM-compatible blockchain has steadily gained prominence in the crowded decentralized finance (DeFi) space. The Cronos DeFi ecosystem currently boasts a total value locked (TVL) of $1.83 billion with over 44 protocols.
VVS Finance is the largest project on the Cronos chain and one of the top 10 decentralized exchanges (DEXs). This article takes a deep dive into the VVS Finance protocol and why it's considered the biggest Cronos DeFi project to date.
What Is VVS Finance?
History of VVS Finance
The team behind VVS hides behind the pseudonym The Craftsmen. Choosing to remain anonymous, they are self-described as “humble farmers” with a “deep product design background.” They partnered with Cronos to develop the DEX, which became the first AMM DEX built on Cronos.
Launched in November 2021, the project was also backed by Particle B, a startup accelerator focused on DeFi projects built on the Crypto.com Chain as well as the Ethereum and Bitcoin networks. The particle B connection means that both Crypto.org and the Crypto.com ecosystem support VVS.
Through the partnership with Beefy Finance, users can earn Beefy Finance tokens (BIFI) when they stake VVS, which lets them participate in liquidity pool farming for the CRO/BIFI pair.
VVS is ranked 28th on the cryptocurrency decentralized exchanges list as of May 15, 2022. The platform has a TVL of $886.63M, according to DeFi Llama, down from its all-time TVL of $1.4 billion on February 11, 2022.
How Does VVS Finance Work?
VVS Finance powers a suite of decentralized applications (DApps) within the Cronos ecosystem. Decentralized exchanges that use the AMM model feature liquidity pools which allow digital assets to be traded in a decentralized and permissionless fashion. No single entity has control, and there are no human intermediaries. Since these liquidity pools are automated, they allow 24/7 trading.
Liquidity pools solve the problem of low liquidity that can make trading cryptocurrencies challenging. Liquidity providers create liquidity by depositing their assets to the liquidity pool in exchange for a fee.
AMM DEXs like VVS maintain a constant balance of assets in the pool using a mathematical formula. In theory, this helps to regulate the price of assets locked in the liquidity pools. When prices of assets in an AMM move too much from the market prices on other exchanges, traders are incentivized to exploit this difference, which returns the price to equilibrium.
VVS's design ideology is to make DeFi products accessible to the masses. Despite its simplicity, VVS Finance is loaded with many valuable features, listed below.
Key Features of VVS Finance
The Bling Swap feature is an algorithmic routing system that allows users to seamlessly swap tokens across several liquidity pools without a centralized order book. Users can swap tokens for a small fee of 0.3%, split between Liquidity Providers and the VVS platform.
Bling Swap also allows users to earn by providing liquidity. Liquidity Providers (LPs) deposit their tokens in the VVS protocol to facilitate trading. They earn ⅔ of the trading fees made from any pair of tokens they’ve deposited, according to their pool ownership.
Liquidity Providers can stake their LP tokens in crystal farms for high returns.
Glitter mining allows non-LP users to stake VVS tokens and earn more $VVS or other partner tokens with auto compounding benefits.
Initial Gem Offering
IGO provides users the opportunity to buy new tokens that have been freshly launched on Cronos. It gives project owners a flexible launchpad with a fast-growing user base. Projects get maximum exposure with optimized sales mechanisms.
The overall performance of tokens is available in a user-friendly dashboard interface.
What Is xVVS?
Launched on March 25, 2022, xVVS is VVS Finance's reward-bearing governance token. It will gradually replace VVS as the governance token of the ecosystem. xVVS tokens were created to provide more incentives to miners to support the network and improve the long-term utility of the VVS ecosystem.
To receive xVVS tokens, users must stake VVS. For now, one xVVS is equal to one VVS. However, VVS Finance will allow the price value of xVVS to gradually increase over time by spending a significant portion of platform revenue from token swaps on buying back VVS. Another portion will be shared among xVVS holders in the pool in proportion to their contribution.
Miners can lock their xVVS into vaults to earn VVS without suffering impermanent loss (temporary loss of funds due to volatility of staked trading pairs). The locking mechanism encourages long-term holders, with rewards increasing exponentially as the lock-up duration increases. The lock-up period ranges from one week to four years.
VVS Finance vs. Other Cronos DeFi Projects
VVS Finance is the largest project on Cronos, making up 47.7% of the TVL on the Cronos chain. But how does it match up against other protocols on Cronos?
VVS Finance vs. Mad Meerkat Finance (VVS vs. MMF)
Like VVS Finance, Mad Meerkat Finance (MM Finance) is an AMM DEX running on the Cronos blockchain. MMF uses a unique proof of liquidity protocol in which a percentage of trading fees form MMF/CRO liquidity.
VVS Finance can boast being the first DEX on the Cronos blockchain, with the highest liquidity. It has a TVL of $886.63 million, compared to MMFs TVL of $308.9 million which places the project as the second largest on Cronos.
The two projects share similar features, such as a launchpad, yield farming and staking.
MM Finance offers fee rebates through trade mining — i.e., you earn free $MMF tokens from each trade, whether or not you’ve made a profit. In addition, they have the lowest trading fees on Cronos.
However, when it comes to earning money, MM finance takes the lead. They offer mouth-watering APRs, which are far higher than those provided on VVS Finance. This is why many investors are locking up their coins in MM Finance.
Despite having a lot in common, VVS Finance provides users with less complicated ways of earning. For example, in order to earn free xVVS tokens, all you have to do is lock your $VVS for a period of time, for which you’ll be paid. MM Finance, however, requires you to actively trade your assets to earn free $MMF tokens.
From a security perspective, VVF is the safer Cronos DeFi platform. In late April 2022, a DNS vulnerability on the MM Finance website was exploited by a cyber attacker, who carted away $2 million of user funds.
VVS Finance vs. Tectonic (VVS vs. TONIC)
Tectonic is a cross-chain money market and liquidity platform for earning passive yields and taking advantage of DeFi borrowing. Users may borrow crypto for trading, or for brief exposure to other types of crypto, without having to liquidate their other original asset holdings. Tectonic offers users loans of up to 75% of the collateral they deposit. In contrast, VVS doesn’t offer loans.
TONIC is Tectonic's protocol token, used for staking into the community insurance pool, securing the protocol and earning more rewards.
Funds are deposited or staked at various repayment interest rates, and then provided as liquidity to borrowers. The rates are dynamic and are based on the supply and demand for the asset. Smart contracts manage everything.
Unlike VVS Finance, which guarantees you a certain reward for locking your assets for a fixed period, Tectonic rewards your asset holding based on present market demands. For these reasons, Tectonic reward rates are subject to continuous change.
Both VVS Finance and Tectonic let you generate passive yield.
VVS Finance vs. Mad Meerkat Optimizer (VVS vs. MMO)
Mad Meerkat Optimizer (MMO) is the DeFi yield aggregator for MM Finance. Yield aggregators are protocols that automate and optimize the processes of staking and collecting interest for users, often leveraging other DeFi protocols to maximize yield.
Compared to VVS Finance, Mad Meerkat Optimizer allows yield farmers to earn a higher APR. The protocol also leverages auto compounding, which enables users to gain more than when compounding manually. It works with different DeFi protocols such as Aave, Compound Finance and MakerDao.
VVS and MMO both offer low gas fees for users, and are built with beginners in mind.
VVS and xVVS Tokenomics
VVS, a Cronos Chain (CRC20) token, is the VVS Finance protocol's governance token and the utility and reward token.
As of May 15, 2022, VVS Finance's price is $0.000009658. It has a circulating supply of over 17 billion VVS coins and a maximum supply of 100 trillion VVS coins.
VVS adopts an emission model, in which 50 trillion VVS will be produced in the first year and half of that every year after that (e.g. 25 trillion will be minted next year). The VVS distribution schedule is as follows:
· 30% to farms and liquidity mining
· 23% to the team
· 15% to the community wallet for future initiatives
· 13.5% for network security and maintenance
· 13.5% for ecosystem development
· 2.5% to traders and referrers
· 2.5% to market makers
Is VVS Finance a Good Investment?
The VVS token has all the markers of a good crypto project. It has a large initial market cap, reasonable price action, and good trading volume.
However, VVS has a current circulating supply of 17.3 trillion and is expected to reach 100 trillion in the next 10 years, based on the emission schedule.
Comparatively, other major DEXs have far lower circulating supplies (the closest, Uniswap, has just 590.8 million UNI). With such inflationary tendencies, VVS price performance looks doubtful.
While it may seem that the value of VVS will encounter difficulty in rising, due to its extremely high supply, total supply is not the primary indicator of its long-term potential. After all, some major cryptos have greater supplies, and even Ethereum has unlimited supply. What matters more is how the tokens will be distributed and utilized.
For instance, if the supply is high and the token doesn't have enough usage (via staking or burning, etc.), there will be downward pressure on the token's value.
That said, going by their ambitious road map, the VVS Finance project is just getting warmed up. Some of their planned new products include Smart LP removal to prevent impermanent loss, Pool/Farm Performance Insights, Flash LP, VVS Multi-Rewards Farms, and VVS Voting Governance.
VVS Price Prediction
The VVS token's recent price performance hasn't been too spectacular. Rising immediately after launch in November 2021 from $0.0001123 to $0.0001542, the token witnessed some volatility before settling at its current price of $0.000010
What Might the Price Look Like in the Next Few Years?
According to DIgitalCoinPrice.com, VVS's price is expected to cross $0.0000154 and reach a minimum of $0.0000127 by year-end 2023. The site also forecasts minimum prices of $0.0000119 and $0.0000167 for 2024 and 2025, respectively.
From all indications, most forecasters don’t think the VVS is a good investment. It's inflationary for the crowded DeFi market, and historically has not performed well. Rather, because of the deflationary nature of xVVS tokens, many investors are choosing to turn towards xVVS instead.
The Bottom Line
The VVS Finance protocol is currently the top DeFi application on the Cronos chain. The protocol's appeal lies in its simple interface, which allows anyone — even beginners — to swap tokens and earn high yields via staking and yield farming. All things considered, the promising VVS Finance road map might create value within the Cronos ecosystem as the team aggressively seeks to improve its long-term prospects. This can be seen through the introduction of xVVS tokens and VVS token vaulting.