Vela

Derivatives

Vela is a decentralized perpetuals exchange with advanced trading features and support for a wide variety of asset pairs.

Risk Rating
Watch Out
Protocol Code Quality
Protocol Maturity
Protocol Design
Summary
What we like
Vela is a perpetuals exchange with advanced trading capabilities and designed to overcome common DEX issues like front-running, slippage, asset limitations, and lack of risk management tools.
What we like less
The protocol is still fairly centralized as admins have permission to implement contract upgrades or halt key functions. There is also a pending Hacken audit that is not yet available to the public.
What it means for you
Vela is currently still in Beta so users can test the exchange's key features, such as Multichain Deposits, in order to potentially qualify for future protocol rewards.

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Information
Exploit/Hacks
None
Info
  • Website
  • Token: VELA
  • Tags: Derivatives
Key Metrics
  • TVL: $8.8M (Rank #148)
  • TVL Ranking by Derivatives: #7
  • Blockchain: Arbitrum, Base
  • Chain TVL
    • Arbitrum: $8.67M
    • Base: $81.9K
Risk Assessment
Watch Out
Protocol Code Quality
  • Code not reviewed by any experienced auditors
  • Public team promotes accountability
  • No documented protocol hacks since launch
Protocol Maturity
  • Latest protocol version launched in 2023; maturity over one year minimizes technical risk as smart contracts are well battle-tested
  • Top 10% by total value locked reduces risk
  • Core contracts can be upgraded with just an EOA wallet
  • No timelock exists or no information documented, which mean a malicious actor could approve upgrades without any delay
  • Low voting power concentration reduces risk
Protocol Design
  • No death spiral concerns
  • Solid controls to prevent oracle price manipulation
  • This protocol is susceptible to risks related to decentralized derivatives, such as LPs serving as the counterparty for all platform traders
Things to know about Vela

How Vela works

Vela is a decentralized perpetuals exchange that offers leveraged trading on a variety of assets, including crypto, forex, and market capitalization pairs. The exchange uses custom price feeds to determine asset prices and has different funding rates and open interest limits based on the volatility of each pair. To trade on Vela, users must deposit USDC, which is used to back the exchange's vault. The exchange is supported by two tokens: VELA and VLP. VELA is the primary utility token, while VLP is the liquidity provider token that allows users to stake USDC and earn fees based on generated trading volume on the platform. Both tokens earn a portion of protocol fees.

How Vela makes money

The Vela protocol generates revenue primarily through trading fees, which are charged when opening and closing positions on the VELA Exchange. There are two types of fees: position fees, which are a percentage of the position size, and funding fees, which accrue over time and are based on how much is being borrowed from the vault. Users can receive discounts on trading fees by staking VELA and eVELA tokens. Collected fees are distributed among various parties, including the VLP pool (50% in USDC), VLP stakers (10% in eVELA), VELA stakers (5% in USDC), and the Treasury Fund (25%).

What are the risks of VLP

VLP is the liquidity provider token for Vela that can be redeemed for USDC at any time. Users stake USDC to mint VLP and earn fees based on generated trading volume on the platform. VLP holders take on counterparty risks but can earn up to 60% of platform fees. When users provide liquidity to the VLP pool, they are essentially lending their money to traders who want to make trades on the platform. If the traders make a profit, they will pay users back with interest, and users will earn a fee based on the trading volume. However, if the traders lose money, users may not get all of their money back. The VLP price is based on the number of USD and VLP in the vault and is expected to gradually increase over time. By staking their VLP, users receive a share of 10% of the total perpetual fees in esVELA for each corresponding rewards cycle.

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