Velodrome

Market Making

Velodrome is a decentralized exchange focused on low slippage trading for highly correlated assets on the Optimism network.

Risk Rating
Average
Protocol Code Quality
Protocol Maturity
Protocol Design
Summary
What we like
Velodrome innovates upon the platform designs of popular stableswap exchanges to better incentivize liquidity and allow users to trade crypto assets with low fees and low slippage.
What we like less
Liquidity providers (LPs) on Velodrome are only rewarded in inflationary protocol emissions (paid in VELO).
What it means for you
Offers you a top decentralized exchange (DEX) on Optimism to generate yield through market making and bribe fees.
Information
Exploit/Hacks
None
Info
  • Website
  • Token: VELO
  • Tags: Market Making
Key Metrics
  • TVL: $1.6M (Rank #184)
  • TVL Ranking by Market Making: #0
  • Blockchain: Optimism
  • Chain TVL
    • Optimism: $1.56M
Risk Assessment
Average
Protocol Code Quality
  • Code reviewed by at least one experienced auditor
  • Anonymous team reduces transparency
  • No documented protocol hacks since launch
Protocol Maturity
  • Latest protocol version launched in 2022; maturity over one year minimizes technical risk as smart contracts are well battle-tested
  • Top 10% by total value locked reduces risk
  • Core contracts require on-chain voting for parameter updates
  • Multisig consists of less than 4 signers, which makes the protocol more susceptible to centralization risks
  • 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
  • This protocol is susceptible to risks related to decentralized exchanges (DEXs), such as impermanent loss
Things to know about Velodrome

How Velodrome works

Velodrome leverages Curve's stableswap DEX design with its native VELO token emitted on a weekly basis and used to reward Velodrome LPs. Like CRV, VELO holders can lock their tokens (up to maximum of 4 years) on the platform to receive veVELO and participate in governance, which includes voting on which liquidity pools should receive VELO emissions. Velodrome offers two kinds of pools: variable pools for uncorrelated assets and stable pools for pegged assets. Stable pools leverage the same Automated Market Maker (AMM) design as Curve's stableswap invariant and variable pools use the standard constant product AMM formula (like Uniswap V2).

How Velodrome makes money

Velodrome makes money through protocol fees that are currently set at 0.02% for each swap within both variable and stable pools. These pools can be assigned different trading fees by veVELO holders. veVELO holders vote on which liquidity pools receive VELO rewards, and pools earn proportionally to the voting power they accrue per week. veVELO holders earn trading fees generated by the pools they voted for proportionally to their voting power.

How you make money on Velodrome

You earn VELO emissions for providing liquidity on Velodrome. You can also stake VELO (veVELO) to earn trading fees. veVELO holders also earn bribe fees paid to the pools they voted for, as well as non-dilutive rebase emissions.