What is 0VIX?
Decentralized finance has grown exponentially over the last couple years. The revolution started on Ethereum and quickly expanded to every other layer-1 blockchains. While the concept of DeFi remains general across all these platforms, each protocol seeks to leverage the base chain features to create a better product. Some projects will use Ethereum for its security guarantees and user activity, while others will prefer faster chains like Avalanche and Solana.
As popular as Ethereum is, users will call out the expensive gas fees as the #1 entry barrier. For this reason, 0VIX chose to deploy on Polygon, a network which offers much lower fees and comes with the security guarantees of Ethereum.
To explain 0VIX, it's important to share some background. The protocol was built in 2022 by a team of engineers with previous experience in fintech and blockchain. Hossam Saraya, the CTO at 0VIX is also the co-founder of GOGO, a DeFi protocol for asset management and savings.
0VIX and GOGO have a shared history, as both products have been built by the same team. Naturally, both protocols share a symbiosis with each other. GOGO comes with a user-friendly interface, while 0VIX offers sustainable yields.
The GOGO team realized that in order to bring users to DeFi, the user experience had to be worth ditching your local bank. Web3 is often promoted for being open, transparent, censorship-resistant and efficient. All these milestones have been reached at the industry level.
So, how come banks haven’t run out of business? The answer lies with the user experience. Most users are still borrowing and lending via banks because it’s the known path. Slow and opaque as it is, you can be sure that it works.
Early on, the crypto space has gained a bad reputation for its ambiguous technicalities. Users had to buy crypto from exchanges, set up their MetaMask, and read pages of documentation before interacting with a DeFi protocol — all this effort for a small loan or a 2% APY. Somewhere along the first two steps 90% of users will have lost patience.
This is why the GOGO team focused all their efforts to provide an elegant user experience, a dapp that emulates the Fintech interface with instant access to DeFi. With the user experience out of the way, the GOGO team turned their attention to adding new features.
0VIX protocol derives its value from sustainable yields, thanks to its internal mechanisms. If the price of an asset goes below the collateral threshold, 0VIX ensures liquidation happens smoothly. This is an important feature, as it guarantees the long-term health of the protocol. As a user, you always want to have a fair liquidation price. By reducing risk in DeFi operations, 0VIX protocol can attract more liquidity, which results in better yields.
Whenever you are interacting with a dapp, it is natural to ask yourself: “is it safe to use 0VIX?”
As with all DeFi protocols, there are always elements of risk associated with using 0VIX. While DeFi removes the risk of fraud and corruption, the code is written by humans, and humans are prone to mistakes. The biggest threat for DeFi protocols are hacks. Partly because of the protocol’s open source nature.
The 0VIX code is open source and publicly viewable by everyone. Open code represents a double edged sword, namely because hackers can view in real-time if 0VIX has a vulnerability. Usually, dapp developers go through multiple steps before deploying a dapp to mainnet. Preparations involve testnets, phased releases, bug bounties and audits.
As much as an audit can help weed out the obvious bugs, it doesn’t guarantee that the protocol is safe. For 0VIX to get hacked it would imply a vulnerability that wasn’t spotted by the team nor the auditors, or a malicious governance attack. The latter scenario can easily be prevented with the governance mechanism in place.
0VIX has been hacked in April 2023. The attacker manipulated an oracle, which then allowed them to perform a flash loan and run away with nearly $2M.
In response to the incident, the 0VIX team stated that they will review the protocol's smart contracts and implement additional monitoring tools.
Before the hack, 0VIX had $6.4M in TVL, which quickly dropped to $1.4M. Borrowing was paused for the duration of the investigation, as 0VIX works to regain users' trust.
0VIX is powered by the $VIX token, a central piece of the 0VIX ecosystem. Liquidity providers (LPs) are rewarded with $VIX, which gives them voting rights. VIX token holders can vote on adjusting the protocol parameters, including the amount of VIX distributed per epoch. Because 0VIX is a decentralized protocol, anyone can provide liquidity and earn $VIX – no KYC is required.
The price of $VIX is strongly tied to the usage of the protocol. Users who borrow or lend receive a bonus reward in $VIX, which can be used as collateral. Token emissions follow a pre-determined schedule that keep the price of VIX on a stable path.
How does 0VIX work?
The bread and butter for DeFi is lending and borrowing, two of the simplest operations. As basic as it may sound, making it work between volatile assets can be a hard challenge. This is because DeFi protocols work with liquidity pools instead of order books.
Liquidity pools are a new concept that was first implemented by Uniswap. They make it possible to trade assets in a permissionless manner. Instead of matching the buyer with the seller, all assets are pooled together and matched by a formula. Because interactions are mitigated by a smart contract, there is no need for a central party to match buyers with the sellers.
DeFi services, very much like traditional financial products, work with small profit margins. Because new liquidity is constantly being added, the difference between bids and asks (called spread) is getting narrower. This results in better stability at the expense of smaller profit margins. As long as offer and demand are constantly being matched, this represents the sign of a healthy market.
Liquidity is an important health indicator for a dapp. If 0VIX has low liquidity, this indicates low traction, hence less users willing to engage in financial transactions. The risk with low liquidity pools is that in order to exit the protocol, you may have to swap your tokens for less value than the actual market price. To mitigate this risk, 0VIX is issuing $VIX rewards for interacting with the protocol.
Token issuance is a common practice to bootstrap liquidity and attract new users. The tricky part is to distribute tokens in such manner that capital stays on the platform. Too many tokens issued in a short period will lead to exponential growth at the expense of the token value, too little issuance will make the protocol go unnoticed. 0VIX protocol uses a couple strategies to ensure the long-term health of its token price.
The first strategy is to cap the token supply. $VIX has a capped total supply of 200M tokens that are distributed to the users based on their interactions with the protocol. Having a capped supply places more responsibility on the team, as they need to plan their spending budget. Furthermore, it maintains the price stability of VIX, especially if it's used as collateral.
51% of the tokens are being held by a legally registered DAO entity in Switzerland, with the rest of the supply distributed between strategic partners, a public sale, the team and personal experts (legal, marketing, future hiring pool).
The second strategy is to remove $VIX from circulation via governance participation. Locking $VIX gives users veVIX, and the right to vote in the protocol. The amount of voting power is proportional to the duration of the lock-up, incentivizing users to play the long game.
The maximum locking duration for 0VIX is 4 years, and if 1 VIX is locked for 4 years, the user will receive 1 veVIX in return. If a user were to lock 1 VIX for 1 year, they would get 0.25 veVIX, for 2 years they would get 0.5 veVIX and so on. As the unlock gets closer, users will gradually receive their VIX tokens back.
0VIX 0Tokens
0Tokens are interest-bearing collateral tokens on 0VIX. They are a representation of user deposits issued according to the ERC20 standard. When a user deposits ETH, he receives oETH. Instead of distributing the interest to the user's account, the oTokens accrue the interest and appreciate in value.
For example, after lending out a token like ETH, you will receive equivalent amount of oETH to represent your lending position. Over time, the amount of oETH increases and the amount is exchangeable for equivalent amount of USDC.
oTokens do not possess a 1:1 exchange rate with it (1 USDC is not equal to 1 oUSDC). Holding oUSDC even for one second or longer, the custodian automatically earns interest paid by borrowers. Even while the number of oTokens in a user's wallet stays the same, the quantity of the asset they can be redeemed for increases.
Whenever a user mints, redeems, borrows, repays, liquidates an account, or transfers oTokens, they are doing so through an interaction with the relevant oToken contract. This mechanism ties with the idea of automatic interest accrual and represents one of the advantages in DeFi – no more complicated bank accounting.
0VIX Lending
0VIX aims to be the native money-lending protocol on Polygon. The team choose Polygon because it’s the leading platform for Ethereum scaling and infrastructure development. Over 3000 dapps are building on Polygon, which means more liquidity for the 0VIX users. Their association with Polygon demands some level of excellence when it comes to reliability and performance. This is why the 0VIX protocol is being constantly stress-tested across multiple scenarios to demonstrate its resilience.
Lending is determined by two important factors: the interest rate and the ability to redeem funds. The interest rate is paid by the borrowers and accumulates from the second assets are provided. Because 0VIX supports the most popular crypto assets, liquidity quickly adds up leading to a source of passive income.
0VIX Borrowing
Due to the pseudonymous nature of DeFi, all loans must be overcollateralized. Without this limitation, borrowers would default and never pay back the loan.
0VIX has a borrowing limit. It is based on the value of their supplied assets and their combined max Loan-to-Value ratios. Once the Borrow Limit is reached, the user cannot borrow more.
There is no fixed time period to repay loans. As long as the collateral doesn't get liquidated, borrowing can be done for an indefinite period.
How to make money on 0VIX?
The primary methods of making money on 0VIX are reduced to two methods: borrowing and lending.
0VIX derives its value from its optimized liquidation mechanism, making it safe for borrowers to take a position and not fear about extreme volatility. Lenders, on the other hand, have a wide variety of liquidity pools to deposit with and earn interest.
All you need is an Ethereum wallet like MetaMask and some MATIC to pay for the gas fees.
0VIX Lending
Lending on 0VIX can be a great method to put your idle crypto assets at work. This is a relatively low-risk strategy that requires no advanced knowledge.
Here's how you lend on 0VIX:
Open the 0VIX app
Select the asset you would like to lend in the Supply Markets bracket
Click on the "Supply" button and input the amount you would like to lend
Approve the transaction
Deposit
Upon lending, you will be credited with 0Tokens representing your position in the lending pool. These tokens automatically accrue interest.
On top of the interest, 0VIX lenders get rewarded in VIX tokens, which can be sold or staked to gain voting power in the 0VIX DAO.
Once you have deposited, your crypto assets will start producing interest immediately. Funds can be withdrawn at any time along with the accrued interest. The longer you lend, the higher the accrued interest.
0VIX Borrowing
Borrowing is a useful strategy to increase your buying power while maintaining exposure to the underlying collateral. Unlike lending, borrowing is a more advanced strategy because there's always the risk of having the collateral liquidated.
0VIX uses a visual representation of your borrowing position in the form of a Health Factor. As long as the Health Factor stays above 1 the borrowing position is safe. If the Health Factor drops below 1 users can deposit more collateral or risk having a portion of the collateral liquidated.
With these caveats in mind, here's how you borrow on 0VIX:
Open the 0VIX app
Select the asset you would like to borrow in the Borrow Markets bracket
Click on the "Borrow" button and input the amount you would like to borrow
Approve the transaction
Deposit
To incentivize activity on 0VIX, borrowers will also get rewarded in VIX tokens.
Price Prediction for 0VIX — Can it hit $1000?
Buying and hodling VIX — the native token of the 0VIX protocol — is one way of potentially making money on 0VIX.
It is important to outline the two main utilities of the VIX token: governance and liquidity incentives. Therefore, the value of VIX is tied to the token issuance and the number of users it attracts.
By looking at its current price, it’s natural to think about the chance of VIX hitting $1000 per token. This can happen sooner, or way in the future, and is determined by a couple of ever changing factors.
Let’s examine the potential growth of the VIX token by analyzing its tokenomics. VIX’s current market cap sits comfortably at ${MARKET_CAP}. With {CIRCULATING_SUPPLY} VIX tokens being in circulation today, that means a price of {PRICE} per VIX.
How did we come to that calculation? It’s quite easy, the price of a VIX token is equal to its current market cap divided by the number of tokens in circulation. Dividing ${MARKET_CAP} by {CIRCULATING_SUPPLY} gives us a result of {PRICE} for each VIX coin.
By changing the order in the simple formula above we can use it to calculate other things as well. This helps us a lot because we can deduce the market cap of VIX at different token prices. Then, we can use the result to compare it to the current state of the network and see what would be required for VIX to hit that price.
At a price of $1000 per token, that means the current market cap of VIX would equal ${{CIRCULATING_SUPPLY} * 1000}. Remember that we arrived at this number by multiplying the amount of circulating tokens by $1000.
Now let’s shift our attention to the fully diluted market cap.
Some blockchains may have their tokenomics built in a way that only a small percentage of tokens are circulating at the beginning. This can be misleading because we don’t have the full picture and only take into account the current number of coins released in the market.
The fully diluted market cap represents the total value of a coin if all tokens were in circulation. VIX’s whole supply of tokens is {MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} VIX which means that no more coins above that number will ever be created.
These tokens are not created at the discretion of a specific entity. They are created automatically by the network to reward different actors that keep it secure.
How does this impact the price of VIX? Taking into account the current price of a VIX token, that would result in a fully diluted market cap of ${MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY * PRICE}. VIX coins that have been burned are not taken into consideration because they have been permanently removed from circulation.
Whether it seems gigantic or not, the number we came to above only takes into account the current price of a VIX token. Doing the same calculation but with a price of $1000 gives us a result of ${{MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} * 1000} for the VIX protocol fully diluted market cap.
These are all crucial details to know when calculating if VIX can reach the price of $1000 per token. If the diluted market capitalization is way too high, the token has little room left to grow. Blockchains in general have no cap on the value they can reach, whether that number seems possible it’s totally up to you.
The future of VIX depends solely on its growth as a network used by tens and hundreds of millions of users.
If you’re looking to add some VIX to your portfolio, the most trusted places to get some are Binance and Coinbase.