Venus Protocol enables yield earning on stablecoin deposits while borrowing

Venus Protocol just solved one of DeFi’s most annoying either-or problems: the choice between earning yield on your stablecoins and using them as collateral to borrow. With its new Liquidity Hub, users can now do both at the same time.

The feature, which went live around August 31, introduces a mechanism that automatically allocates stablecoin deposits across multiple yield sources while issuing share tokens that remain fully usable within Venus’s lending markets.

How the Liquidity Hub works

When users deposit stablecoins like USDT or USDC into the Liquidity Hub, they receive ERC-4626 share tokens called vhUSDT and vhUSDC. These tokens accrue yield in the background while simultaneously serving as collateral in Venus’s core lending markets.

The vhTokens carry an 80% collateral factor, meaning a user depositing $10,000 worth of vhUSDT could borrow up to $8,000 in other assets. They also come with a 10% liquidation incentive and zero borrow cap, a design choice that keeps the tokens focused purely on their collateral function.

Behind the scenes, the Hub allocates deposited capital across Venus Core lending, Flux/Fluid markets, and Fixed-Rate Vaults according to governance parameters.

One technical detail worth noting: the vhTokens are not rebasing tokens. Instead of adjusting the number of tokens in your wallet to reflect yield, the value of each token simply increases over time.

Real-world assets enter the picture

On September 24, Venus Protocol expanded the Liquidity Hub by integrating real-world assets through a partnership with Centrifuge. Two tokenized fund products, JTRSY and JAAA, are now live on the platform.

JTRSY provides exposure to tokenized US Treasury yields, while JAAA offers access to AAA-rated collateralized loan obligation (CLO) credit returns.

This isn’t Venus’s first foray into bridging traditional finance with on-chain lending. The protocol previously integrated CASH+ as a collateral option, signaling a deliberate strategy to bring conventional financial instruments into its ecosystem.

Venus Protocol’s market position

Venus operates primarily on BNB Chain and functions as a decentralized money market where users supply assets to earn variable interest or borrow against collateralized positions. Interest rates adjust dynamically based on pool utilization.

The protocol’s total value locked has ranged between $1.4B and $2.8B over recent quarters.

What this means for DeFi lending

The core innovation here is capital efficiency. In traditional DeFi lending, depositing stablecoins to earn yield and using stablecoins as collateral to borrow are separate actions that require separate capital. The Liquidity Hub collapses those two functions into a single position.