Overview
Vesta Finance was a decentralized lending protocol on Arbitrum, forked from Liquity's proven codebase. The protocol allowed users to deposit various crypto assets as collateral and mint VST, a dollar-pegged stablecoin. Vesta aimed to be Arbitrum's native stablecoin infrastructure, similar to how Liquity serves Ethereum with LUSD.
Despite launching with reasonable traction during Arbitrum's growth period, Vesta struggled with persistent challenges: VST regularly traded below its $1 peg, collateral types expanded too aggressively without adequate risk parameters, and the protocol faced governance and team issues. The VSTA governance token lost most of its value.
Vesta Finance officially wound down operations, advising users to withdraw their collateral and repay loans. The shutdown demonstrates the difficulty of operating Liquity-fork stablecoin protocols on L2s, where the redemption mechanics that keep LUSD pegged on Ethereum may not function as effectively in thinner markets.
Risk Factors
- Protocol has shut down — this is a post-mortem analysis
- VST stablecoin persistently traded below peg before shutdown
- Aggressive collateral expansion without adequate risk controls
- L2 Liquity forks face structural challenges with redemption mechanics
Conclusion
Vesta Finance is a defunct protocol that failed to sustain a pegged stablecoin on Arbitrum. The 1.5 score reflects the project's complete shutdown. It serves as a cautionary tale about the challenges of forking Liquity's model onto L2s where thinner markets undermine the peg mechanics.