In May 2021, Venus allowed XVS — its own governance token, thinly traded relative to its market capitalisation — as collateral at a generous ratio. A large holder pushed the price up, borrowed heavily against it, and the price collapsed, leaving the protocol with roughly $100m of bad debt that depositors ultimately bore.
Why that incident is still the story
It was not a clever exploit. It was a listing decision that any risk framework would have prevented: a token whose market depth could not support the borrowing it enabled. The 2022 LUNA collapse added further losses through similar exposure. What the protocol has done since — isolated pools, caps, better parameters — addresses the mechanics. The question a depositor must answer is whether the judgement that produced those listings has changed.
Where it stands now
Isolated pools separate risky assets from the core market, supply caps limit exposure, and the risk framework broadly follows the patterns established elsewhere. There has been no comparable failure since, and liquidity on BNB Chain remains the deepest available.
Rates and coverage
Competitive rates on major assets, with the depth that comes from being the default market on its chain. Coverage extends across BNB Chain and several others.
Who should use it
BNB Chain users who need lending liquidity there, sticking to core-pool blue-chip assets and treating isolated pools with appropriate scepticism. For anything not chain-specific, Aave and Morpho are safer venues.