Using VSC

Introduction to concepts that help make sense of services VSC is able to provide.

Automated Market Makers (AMMs) & Liquidity Pools

Automated Market Makers (AMMs) are a key component of VSC’s decentralized finance (DeFi) ecosystem. AMMs allow users to trade assets automatically through liquidity pools, without the need for centralized order books or market makers. This system provides liquidity in the VSC protocol, allowing for asset swaps across chains.

What Are Liquidity Pools (LPs)?

Liquidity pools are collections of two or more assets (tokens) that are locked into a smart contract. These pools are used by Automated Market Makers (AMMs) to facilitate decentralized trading and ensure liquidity for the users interacting with the protocol.

In VSC, liquidity pools are designed to pair a volatile asset (such as Bitcoin, Ethereum, Solana…) with a stable asset: HBD (Hive Backed Dollars). This structure is intended to manage the risk of volatility in liquidity provision, making it more predictable for users providing liquidity.

LP Creation and Pairing

Every liquidity pool on VSC involves pairing a volatile asset (like BTC, ETH, SOL) with HBD. For instance, a BTC/HBD liquidity pool would contain both BTC and HBD tokens. By providing liquidity to this pool, liquidity providers (LPs) deposit equal values of both assets (e.g., an amount of BTC and an equivalent amount of HBD) into the pool.

The Role of HBD

HBD, VSC’s stablecoin, serves as the base asset in all liquidity pools. This means that every liquidity pair involves HBD as one of the assets.

HBD’s role as the stablecoin mitigates the risks associated with volatility. Since HBD is algorithmically backed LPs are exposed to only one-sided volatility - that of the volatile asset in the pair (e.g., BTC, ETH, HIVE). This reduces the complexity of hedging against multiple volatile assets.

AMM Algorithm

VSC uses an Automated Market Maker (AMM) algorithm to maintain the balance of assets in the liquidity pool. When a user performs a trade (e.g., swapping BTC for HBD or vice versa), the AMM adjusts the ratio of assets in the pool automatically.

Earning Fees

Liquidity Providers (LPs) are rewarded with transaction fees in proportion to their contribution to the pool. Each time someone swaps assets through the pool, a small fee is charged, which is distributed among the LPs as a reward for providing liquidity.

LPs can earn rewards continuously, making liquidity provision a passive income opportunity within VSC’s ecosystem.

Running a Node & Staking Hive as Collateral

To participate in VSC’s validation and security mechanisms, users can choose to run a validator node or stake Hive as collateral.

Running a Node: To become a validator in VSC’s decentralized network, users need to run a node that actively participates in verifying transactions and securing assets locked on the platform. Running a node contributes to VSC’s decentralized validation system and ensures the smooth functioning of the protocol.
Staking Hive: Validators are required to stake a minimum of 2,000 Hive tokens as collateral. This collateral is used to secure the network and incentivize honest behavior. Validators who act maliciously or fail to fulfill their duties may lose part of their staked Hive.
Interacting with VSC (ALTERA): Altera is VSC’s first dApp, a platform for managing assets and cross-chain swaps within VSC. It enables users to handle asset management, execute cross-chain swaps, and interact with the VSC ecosystem. Altera supports transactions and asset tracking across multiple blockchains, providing a unified interface that simplifies decentralized finance (DeFi) activities without requiring users to manage the technical details of each individual blockchain.