Vela
Vela is a decentralized perpetuals exchange with advanced trading features and support for a wide variety of asset pairs.
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- Website
- Token: VELA
- Tags: Derivatives
- TVL: $449.9K (Rank #221)
- TVL Ranking by Derivatives: #10
- Blockchain: Arbitrum, Base
- Chain TVL
- Arbitrum: $435.73K
- Base: $14.13K
- Code not reviewed by any experienced auditors
- Public team promotes accountability
- No documented protocol hacks since launch
- 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
- 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
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.