# What is Virtue?
Virtue is a decentralized stablecoin protocol built on IOTA, enabling users to mint $VUSD by locking crypto assets into a secure, over-collateralized system.
It offers a capital-efficient borrowing experience with predictable costs, while maintaining strong price stability for $VUSD. Whether you’re a long-term holder of IOTA ecosystem assets or a DeFi user looking for yield and leverage, Virtue is designed to support your goals.
**Key highlights**
* Borrow $VUSD using supported collateral like $IOTA and $stIOTA
* Enjoy fixed, predictable fees with long-term cost efficiency
* Benefit from liquidation by deposit $VUSD into Stability Pool.
* Participate in arbitrage and flash strategies to enhance returns
# What is VUSD?
VUSD is a decentralized, over-collateralized stablecoin issued by the Virtue protocol on IOTA.
It is pegged to the US Dollar and backed by on-chain assets such as $IOTA and $stIOTA, ensuring transparency, capital efficiency, and strong price stability.
**Key characteristics of VUSD**
* Fully backed by on-chain collateral
* Cannot be under-collateralized
* Trustless, censorship-resistant, and always redeemable via CDP repayment
* Plays a central role in Virtue’s ecosystem (borrowing, liquidations and more)
By minting and using VUSD, users can retain exposure to IOTA ecosystem assets while unlocking stablecoin liquidity for additional yield strategies.
# Key Features
Virtue is optimized for both safety and capital efficiency. Here are some core features that make it stand out:
* Over-Collateralized Stability\
VUSD is backed by collateral that exceeds its value, helping it maintain a reliable peg.
* Predictable Borrowing Costs\
Predictable borrowing cost with no rate volatility — perfect for long-term strategies.
* Unified Stability Pool
Users only need to deposit VUSD into the Stability Pool to participate in liquidations across all types of collateral within the Virtue protocol.
* Flash Mint & Arbitrage Opportunities\
Advanced users can leverage instant VUSD minting for strategic gains.
# CDP(Collateralized Debt Position)
To mint $VUSD, users must open a CDP by depositing supported collateral (e.g., $IOTA and $stIOTA) into the protocol.
**Here’s how it works:**
1. Deposit Collateral\
Choose a supported token and lock it in a CDP.
2. Mint $VUSD\
Based on your collateral value and the required Minimum Collateral Ratio (MCR), you can borrow $VUSD.
3. Manage Your Position\
You can repay your debt anytime to withdraw collateral. If your CDP falls below the MCR, it becomes eligible for liquidation.
**Key parameters:**
* Collateral Ratio (CR) = (Collateral Value / Debt Value) × 100%
* To avoid liquidation, keep your CR above the MCR at all times.
Virtue’s CDP system is designed to be efficient, transparent, and predictable — with fixed fees and real-time updates.
# Stability Pool and Liquidations
The Stability Pool is a central mechanism in Virtue that allows users to contribute VUSD to help absorb under-collateralized debt, in exchange for a share of the liquidated collateral.
What makes Virtue unique is its single shared pool design: by depositing VUSD into one pool, you’re automatically participating in liquidations across all supported collateral types — no need to manage separate pools for each asset.
### How it works
When a borrower’s position drops below the required Minimum Collateral Ratio (MCR), the system considers it under-collateralized and makes it eligible for liquidation.
In Virtue, this process happens in four clear steps:
1. Collateral Ratio Drops Too Low\
When a position’s Individual Collateral Ratio (ICR) falls below the Minimum Collateral Ratio (MCR) — typically due to a drop in the collateral’s price — the position becomes under-collateralized.
2. Liquidation Is Triggered by Whitelisted Executors\
Only addresses approved on the liquidation whitelist can call the liquidation function to initiate the process. This ensures liquidations are handled efficiently and securely.
3. Debt Is Repaid Using VUSD\
VUSD from the Stability Pool is used to fully or partially repay the borrower’s outstanding debt, depending on pool availability.
4. Collateral Is Claimed\
The protocol seizes collateral from the liquidated position and distributes it as follows:\
• 0.7% protocol fee\
• 99.3% distributed to Stability Pool depositors based on their share\
(Note: whitelisted liquidators do not receive additional rewards.)
📘 Example
Imagine a user locks $200 worth of stIOTA as collateral and mints 100 VUSD. Later, if the price of stIOTA drops and the user’s collateral ratio falls to 110% (meaning the total collateral value becomes $110) or lower, the position becomes eligible for liquidation.
Here’s what happens:
• The system uses 100 VUSD from the Stability Pool to repay the user’s debt
• The protocol seizes approximately $110 worth of stIOTA
• From that, 0.7% is charged as a protocol fee
• The remaining 99.3% of the stIOTA is distributed proportionally to all Stability Pool depositors based on their share
Now, from a Stability Pool depositor’s perspective:
Assume the Stability Pool’s total deposits amount to 1,000 VUSD, and Bob has contributed 100 VUSD — giving him a 10% share.
This means Bob contributes 10 VUSD to cover this liquidation. In return, he receives 10% of the seized collateral after deducting the total 0.7% liquidation fees.
As a result, Bob ends up with 90 VUSD remaining in the pool and $10.923 worth of stIOTA ($110 × 99.3% × 10%).
### Consideration for Stability Pool Depositors
While the Stability Pool offers opportunities to earn collateral from liquidations, it’s important to note one key risk:
**Asset Volatility**
The collateral you receive (e.g., stIOTA) may fluctuate in value after liquidation. Even if you acquire it at a discount, rapid price drops can result in losses relative to the VUSD you initially deposited.
Stability Pool returns depend on market conditions — the more stable the collateral, the more predictable the rewards.
### Why it Matters
The Stability Pool is not only a yield opportunity — it’s a key part of how Virtue defends the VUSD peg and preserves solvency. Contributors are rewarded for stepping in when the system needs liquidity most, and the shared-pool structure makes it simple to participate.
# Redemption
Redemption allows VUSD to be exchanged for collateral at a 1:1 value through the protocol. This mechanism plays a key role in maintaining VUSD’s price stability, especially when its market price drifts below the intended $1 peg.
However, at launch, the redemption function will be **restricted to protocol-level actors only**. This precaution is designed to prevent unintended disruptions to borrowers while the system is still in its early stabilization phase.
***
#### 🚧 Temporarily Restricted Access
Unlike typical swaps, redemptions directly interact with existing CDPs — reducing their debt and seizing a proportional amount of collateral. If enabled too early or used without proper understanding, it could negatively affect borrowers, especially those with lower collateral ratios.
To mitigate this, redemption will **initially be limited to protocol-controlled operations**. Governance may later expand access to whitelisted actors or the general public once the system matures.
***
#### 🔁 How Redemption Works
1. The user initiates a redemption and manually selects the CDP to redeem from.
2. VUSD is burned by the protocol
3. The debt of the affected CDP is reduced by the redeemed amount.
4. The redeemer receives an equivalent USD value of the selected collateral.
5. A **Redemption Fee** is charged and sent to the affected CDP owner as **compensation**
***
#### 📌 Important Notes
* **CDPs are not closed or liquidated** during redemption — their debt is reduced and their collateral ratio increases, making them **safer**.
* The **Redemption Fee** serves as **compensation** for the CDP owner, who involuntarily gave up a portion of their collateral in exchange for debt reduction.
* Redemptions are settled using **oracle-based system prices**, not external market rates.
> In short: redemption strengthens weaker CDPs, supports the VUSD peg, and balances risk across the system — while protecting borrowers through fair compensation.
# Flash Loans
Virtue supports flash loans for assets that are accepted as collateral within the protocol — such as IOTA and stIOTA.
Flash loans let users borrow these assets without upfront collateral, as long as the borrowed amount is returned within the same transaction.
They are mainly used for arbitrage opportunities, including:
* Price discrepancies across DEXs
* VUSD depegging events
**Example: Arbitrage when VUSD trades below $0.95**
1. Flash loan $10,000 worth of IOTA
2. Use the borrowed IOTA to buy discounted VUSD on a DEX (e.g. $0.95), receiving approximately 10,526.3 VUSD
3. Redeem 10,526.3 VUSD through the protocol for $1 worth of IOTA per VUSD → receive $10,526.3 worth of IOTA
4. Repay the original flash loan of $10,000 in IOTA
5. Profit the \~$526.3 difference
```
This is a simplified example and does not include protocol fees such as the flash loan fee or redemption fee, which may affect final profitability.
```
All of this happens in a single transaction, with no capital or collateral needed.
Flash loans are permissionless and available for any collateral-eligible asset in Virtue.
They help reinforce the VUSD peg while enabling capital-efficient strategies — all executed in a single atomic transaction.
# Flash Mint
Flash Minting allows users to mint VUSD within a single transaction, without collateral, provided the same amount is repaid by the end of the transaction.
This makes Flash Mint especially useful for advanced liquidation strategies or arbitrage.
Example: Liquidation via Flash Mint
1. Flash Mint VUSD
2. Deposit into the Stability Pool to help clear an under-collateralized position
3. Receive the liquidated collateral as a reward
4. Swap the collateral back into VUSD
5. Repay the Flash Mint within the same transaction
6. Keep the spread as profit
By design, Flash Minting supports the system’s solvency during periods of high liquidation demand — even when the Stability Pool lacks sufficient VUSD.
It’s an open, permissionless mechanism that incentivizes arbitrageurs to help maintain system stability.
# Arbitrage Opportunities
Virtue’s architecture creates several avenues for low-risk arbitrage, particularly using Flash Minted VUSD and cross-chain price spreads.
A. Stability Pool Arbitrage
If the Stability Pool lacks sufficient VUSD during liquidation, users can:
* Flash Mint VUSD
* Deposit into the Stability pool to trigger liquidations
* Receive underpriced collateral
* Swap it back to VUSD
* Repay the mint and keep the arbitrage gain
This rewards participants for supporting system health and provides decentralized liquidation coverage.
B. Cross-Chain Arbitrage (Mainnet → IOTA EVM)
Due to price differences across chains, VUSD may trade below $1 on IOTA Mainnet. In this case:
1. Buy discounted VUSD on a DEX (e.g., 0.97)
2. Bridge VUSD to IOTA EVM using the native IOTA cross-chain bridge
3. Swap VUSD → USDC.E via a DEX on IOTA EVM
4. Profit from the price gap (e.g., 1.00 vs. 0.97)
These opportunities encourage active market participants to enforce the peg and ensure liquidity across environments.
# How to use Virtue?
Using Virtue is simple and permissionless. Here’s how you can get started:
1. Deposit Collateral\
Choose a supported asset (e.g., $IOTA or $stIOTA) and deposit it into the system to open a CDP(Collateralized Debt Position).
2. Mint $VUSD\
Based on your collateral value and the system’s minimum collateral ratio, you can borrow and mint $VUSD, a decentralized, over-collateralized stablecoin.
3. Use VUSD Freely\
Spend, buy more assets, or deposit your VUSD into the Stability Pool to participate in liquidations and earn steady returns. $VUSD is designed to remain stable and usable across the IOTA ecosystem.
4. Manage or Close Your CDP\
You can repay your debt at any time to retrieve your collateral. If your position becomes undercollateralized, it will be fully liquidated through the Stability Pool.
# Position Management
This guide walks users through managing a Collateralized Debt Position (CDP) on Virtue.
### Open a CDP
1\. Connect your wallet on app.virtue.money
2\. Select a supported collateral type (e.g., stIOTA)
3\. Enter deposit amount and mint VUSD
4\. Confirm and submit the transaction
### Monitoring Your Position
• Keep an eye on your CR (Collateral Ratio)
• Avoid dropping below the MCR(Minimum Collateral Ratio) to prevent liquidation
• You can add collateral or repay VUSD to increase your CR at any time
### Closing a CDP
• Repay all outstanding VUSD (including any interest)
• Withdraw your full collateral balance
# Stability Pool Management
### Depositing into the Stability Pool
1. Acquire VUSD
2. Navigate to the Stability Pool section
3. Enter the amount of VUSD to deposit
4. Confirm the transaction
Your VUSD will be used to absorb debt from liquidated positions, and in return, you’ll receive collateral (e.g., stIOTA) at a discount.
### Withdrawing from the Stability Pool
* You can withdraw your remaining VUSD and claimed collateral at any time.
* No lockup periods, but rewards vary based on liquidation activity.
For advanced users, combining Flash Mint with pool deposits can enhance yield through liquidation arbitrage.
# Leverage in Virtue
Virtue enables users to amplify their exposure to IOTA ecosystem assets through a simple looped borrowing strategy.
For example, users can:
1. Deposit $stIOTA as collateral
2. Borrow $VUSD
3. Use $VUSD to acquire more $stIOTA
4. Repeat the cycle
This strategy allows users to achieve greater stIOTA exposure with less upfront capital. Not only does it provide leveraged access to IOTA itself, it also amplifies the staking yield earned through holding more stIOTA.
With fixed fees and real-time liquidation protection, Virtue makes this leverage loop both efficient and predictable — ideal for long-term IOTA believers seeking to maximize their on-chain returns.
# Technical Resources
This page contains useful resources for developers and users interacting with Virtue.
### 🛡️ Audit
Virtue Protocol has been audited to ensure the security of our smart contracts.
* 📄 [**MoveBit Audit Report (July 10, 2025)**](https://github.com/Virtue-CDP/virtue-audits/blob/main/Virtue-Audit-Movebit-20250710.pdf)
* Auditor: MoveBit
* Status: ✅ Completed
***
### 📄 Contract Address
**Mainnet**
* Framework
`0x7400af41a9b9d7e4502bc77991dbd1171f90855564fd28afa172a5057beb083b`
* VUSD Treasury
`0xd3b63e603a78786facf65ff22e79701f3e824881a12fa3268d62a75530fe904f`
* Oracle
`0x7eebbee92f64ba2912bdbfba1864a362c463879fc5b3eacc735c1dcb255cc2cf`
* CDP
`0x34fa327ee4bb581d81d85a8c40b6a6b4260630a0ef663acfe6de0e8ca471dd22`
* Stability Pool
`0xc7ab9b9353e23c6a3a15181eb51bf7145ddeff1a5642280394cd4d6a0d37d83b`
***
### 🖥️ Virtue SDK
The Virtue SDK provides tools for developers to easily integrate Virtue Protocol into their dApps and services.
* 📂 **GitHub Repository**: [Virtue SDK](https://github.com/Virtue-CDP/virtue-sdk)
# Official Links
Stay connected with official Virtue channels:
* Official Website: [virtue.money](https://virtue.money)
* Documentation: [docs.virtue.money](https://docs.virtue.money)
* Twitter/X: [@Virtue\_Money](https://x.com/Virtue_Money)
* Discord: [Virtue](https://discord.com/invite/2sM3AeBdGG)
For security, always verify links from trusted sources.
# Glossary
| Term | Definition |
| ------------------ | ---------------------------------------------------------------------------------------------------------------------------------- |
| **CDP** | Collateralized Debt Position — a vault where users lock assets to mint VUSD. |
| **VUSD** | Virtue’s native over-collateralized stablecoin. |
| **ICR** | Individual Collateral Ratio — the collateral-to-debt ratio of a single CDP. |
| **MCR** | Minimum Collateral Ratio — the minimum required ratio to avoid liquidation. |
| **Stability Pool** | A shared pool of VUSD used to repay debt from liquidated positions, in exchange for discounted collateral. |
| **Flash Mint** | A mechanism that allows users to mint VUSD without collateral within a single transaction, typically for liquidation or arbitrage. |