Velodrome (VELO) is a decentralized exchange (DEX) and liquidity protocol built on the Optimism blockchain. Designed to provide efficient capital deployment and enhance liquidity for DeFi users, Velodrome aims to optimize transactions and incentivize liquidity providers. With its innovative approach to governance and tokenomics, Velodrome is gradually establishing itself as a leading platform in the DeFi space. To learn more, Financial Insight Daily will dive deeper into “What Is Velodrome (VELO)” in this article.
What Is Velodrome (VELO)?
Velodrome Finance is a decentralized exchange (DEX) developed on the Optimism blockchain. The project is built based on the idea and codebase of Solidly, a well-known Automated Market Maker (AMM) with the ve(3,3) model on the Fantom network since early 2022. Velodrome claims to have addressed the weaknesses of Solidly and improved the application of the ve(3,3) model for better efficiency and liquidity utilization.
The Velodrome Finance development team previously worked on building veDAO, a project that actively participated in the ve(3,3) wars on Fantom and maintained a top position in this competition. Velodrome continues to inherit and enhance these successes, aiming to bring innovation and greater efficiency to the DeFi space.
Products and Revenue of Velodrome Finance
Products of Velodrome Finance
Velodrome Finance aims to become a decentralized platform offering a wide range of financial products such as Lending & Borrowing, Staking, and more. However, at this moment, Velodrome is focusing on developing its two main products: AMM (Automated Market Maker) and Liquidity Marketplace on the Optimism blockchain.
- AMM (Automated Market Maker): Velodrome Finance boasts its AMM product, which features advantages such as low slippage, cheap transaction fees, and deep liquidity due to the ve(3,3) mechanism that the protocol utilizes. The trading pairs on Velodrome’s AMM are quite diverse, with nearly 90 pairs supported, providing users with many options when trading on Optimism.
- Liquidity Marketplace: Following the model of Solidly, Velodrome Finance offers numerous Pool tokens, with each pool potentially representing the liquidity of a specific project token. Projects will encourage veVELO holders to vote for their pools, which helps increase rewards for the pool and attract more liquidity providers.
- Liquidity Pools on Velodrome: When more users provide liquidity, pools will have more liquidity, reducing slippage for traders when executing trades, creating a positive feedback loop for projects, traders, veVELO holders, and Velodrome.
The Flywheel between Traders, LPers, veVELO holders, and participating projects will enhance interaction and create value for all stakeholders involved.
Revenue of Velodrome Finance
The primary source of revenue for Velodrome Finance comes from transaction fees on the platform. The current transaction fee is 0.02% and can be adjusted to 0.05% if needed, depending on market conditions and system requirements.
Key Features of Velodrome Finance
Velodrome Finance operates by combining two prominent DeFi models from previous protocols in the crypto space:
- Vote-Escrow Token Model: This model was introduced by Curve Finance (with veCRV). The veToken incentivizes long-term holders, allowing them to earn greater benefits compared to short-term traders.
- Staking/Rebasing/Bonding or Game Theory (3,3): Introduced by Olympus DAO, this model focuses on sustainable staking rewards and encourages users to lock their tokens to benefit the system.
The integration of these two models has led to the creation of the ve(3,3) mechanism in Velodrome Finance. Although Solidly had a similar mechanism, Velodrome offers an improved version, focusing on sustainability, an area Solidly had not fully addressed.
Voting Mechanism for Pools
One of Velodrome’s innovative features is the introduction of a bribe mechanism. Projects or individuals who want their pool to receive more votes can “bribe” veVELO holders by offering additional rewards from their own funds. This encourages more veVELO holders to vote for their pool, increasing its rewards and making it more attractive for liquidity providers.
What is Velodrome Token?
There are two main tokens within the Velodrome ecosystem:
- VELO: The native token of Velodrome.
- veVELO: A voting-escrow token created when holders lock VELO. This token gives holders the right to vote on liquidity pools and govern the protocol.
VELO Token Key Metrics
- Token Name: VELO Token
- Ticker: VELO
- Blockchain: Optimism
- Token Contract: 0x3c8b650257cfb5f272f799f5e2b4e65093a11a05
- Token Type: Utility Token
- Initial Supply: 400,000,000 VELO
- Total Supply: 841,884,80 VELO
- Circulating Supply: 164,432,652 VELO
VELO Token Use Cases
- VELO: Used as a reward for Liquidity Providers (LPs) when they provide liquidity to Velodrome’s pools.
- veVELO: Used for governance and voting on reward distributions for liquidity pools within Velodrome. Additionally, veVELO holders receive transaction fees, bribes (extra fees to encourage voting), and rebase rewards (extra tokens due to VELO inflation).
VELO Token Allocation
The VELO token is allocated as follows:
- Community: 60%
- Partner Protocol/DAOs: 24%
- Velodrome Team: 10%
- Optimism Team: 5%
- Genesis Liquidity Pool: 1%
VELO Token Release Schedule
- 60% VELO distributed to the community will be unlocked.
- 24% VELO for partners will be locked as veVELO.
- 10% VELO for the team will be distributed as follows:
- 15,520,816 VELO will be distributed over 12 months (6 months locked as veVELO and 6 months linear distribution).
- 7,200,000 VELO will be distributed over 24 months (12 months locked as veVELO and 12 months linear distribution).
- 3% of future VELO inflation will be distributed over 6 months (3 months locked as veVELO and 3 months linear distribution).
VELO Token Airdrop
Velodrome’s airdrop aims to distribute VELO to as many users and protocols as possible to increase decentralization and competition for projects wanting to use veVELO to boost liquidity for their pools. The airdrop distribution is as follows:
- 60% VELO to the community:
- WeVE holders: 30%
- Users on Optimism: 25%
- DeFi users: 25%
- Liquidity providers: 20%
- 24% veVELO to projects:
- Top projects on Optimism: 60%
- Velodrome partner projects: 20%
- Key projects on Ethereum: 20%
Where to Buy VELO Token
Users can purchase VELO tokens through the following exchanges:
- Centralized Exchange (CEX): BKEX
- Decentralized Exchange (DEX): Velodrome Finance, Uniswap (Optimism)
VELO Token Storage Wallets
VELO tokens can be stored in any wallet that supports the Optimism network. Some reputable wallets include:
- Coin98 Super App
- Metamask
- Trust Wallet
Velodrome Finance Development Roadmap
The key development milestones for Velodrome Finance are as follows:
- June 2022: Velodrome Finance officially launched on Optimism.
- August 2022: One of Velodrome’s members, Gabagool, withdrew $350,000 from the project.
- December 2022: Introduced Velodrome 2.0 with UI/UX improvements.
Velodrome (VELO) represents an innovative decentralized exchange (DEX) and liquidity protocol that aims to enhance the DeFi ecosystem on the Optimism blockchain. With its unique blend of the ve(3,3) mechanism and sustainable tokenomics, Velodrome is positioning itself as a significant player in the decentralized finance space. Through its diverse range of products, governance model, and incentivization strategies, it is striving to optimize capital deployment, improve liquidity, and empower users and projects on the platform. With continuous development and a roadmap focused on further enhancing its services, Velodrome is set to make a lasting impact in the DeFi space.