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Velodrome Finance is an automated market maker (AMM) on Optimism. It was launched in June 2022 by the same team that developed veDAO. The company behind it states that Velodrome Finance is a solution for protocols on the Optimism blockchain to incentivize liquidity for use cases. It was built on top of Solidly, another AMM that is based on Uniswap v2.
Velodrome FInance was developed with the intention of launching a protocol that addresses and fixes issues on Solidly and adds other improvements. Some improvements that were made on Solidily for the formation of Velodrome Finance include tying rewards with emissions to create a balance between voters and external bribers. It also ensures productive gauges with its addition of an on-chain governor to whitelist pairs used in gauges as well as an emergency group of people who can kill any gauge that they deem is unproductive for Velodrom Finance. The protocol was also designed to prolong emissions delay so it would be attractive to both early adopters and future protocols.
Users can access Velodrome Finance by first connecting their wallets to the dApp. Some wallets that can be used include MetaMask and CoinBase Wallet. Whichever wallet is connected must be connected to the Optimism network. Users also need to hold Ethereum (ETH) tokens to participate in Velodrome finance so gas fees are paid. They will then be able to swap, pool, vest, vote, and earn rewards on the protocol.
How to deposit with Velodrome Finance
The protocol has two tokens: $VELO, its utility token, and $veVELO, its governance token.
The airdrop for $VELO also occurred in June 2022, with 60 percent of the total supply allocated to the community. There was an initial supply of 400,000,000 $VELO tokens distributed. $VELO can be staked for $veVELO for rewards, such as trading fees. Users can also earn rewards through fees, bribes, emissions, and rebases.
Users can obtain $veVELO (also known as veNFT) by locking in their $VELO for a certain amount of time. $veVELO gives them voting rights and some of the perks of being a voter include transaction fees and external rewards from the liquidity pools they vote for, as well as anti-dilution $veVELO rebasing. Since the token is actually a non-fungible token (NFT), it, along with its voting rights, can be traded in the marketplace.
