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Vesta Finance is a lending protocol that allows users to obtain liquidity against their collateral without paying interest. Users can deposit collateral to mint Vesta Stable (VST), a USD-pegged stablecoin. Vesta offers features such as low collateralization ratio, immediate redemption of VST, community-oriented tokenomics, and governable parameters. They plan to expand into the NEAR ecosystem and aim to be the most widely used stablecoin in that ecosystem. Vesta operates as a collateralized debt platform, where users can issue VST tokens by locking up collateral in vaults. The stablecoins are designed to maintain a value of $1 USD and are fully redeemable. The system controls the generation of VST through an issuance fee. Vaults with a collateralization ratio above 110% can issue tokens, and the tokens are freely exchangeable. The system updates the collateral price against USD and liquidates under-collateralized vaults.
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What is Vesta Finance and how does it work?
Vesta Finance is a layer 2 lending protocol called based on Liquity. It offers users the ability to obtain liquidity against their collateral without paying interest. By locking up collateral, users can issue Vesta's stablecoin VST to their own Ethereum address and transfer it to any other Ethereum address. These collateralized debt positions are known as vaults.
Vesta's stablecoin tokens, known as VST, are designed to maintain a value of 1 VST = $1 USD. The system ensures that it is always over-collateralized, meaning the value of the locked Ether exceeds the value of the issued stablecoins. Users can redeem their VST tokens for the underlying collateral (minus fees) directly with the system.
VST tokens can be freely exchanged by anyone with an Ethereum address, regardless of whether they have an open vault or not. The tokens are burned when a vault's debt is repaid. The Vesta system regularly updates the price of the collateral against USD using a decentralized data feed. If a vault falls below a minimum collateralization ratio (MCR) of 110%, it is considered under-collateralized and vulnerable to liquidation.
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