Velodrome: Launch

Velodrome (🚴,🚴)
6 min readMay 19, 2022

I. Overview

Velodrome is an AMM (Automatic Market Maker) designed to provide deep liquidity, low swapping fees, and low slippage. As a public good, it supports the development and growth of the Optimism ecosystem.

Velodrome rewards liquidity providers and active governance participants through VELO (our native token; see the next section for definitions) and veVELO distribution. Liquidity providers (LPs) receive VELO emissions. Vote-escrow VELO (veVELO) holders vote on which liquidity pools receive VELO emissions. In return, voters receive the trading fees and bribes collected by the pairs they vote for. This structure helps incentives flow to the most valuable pairs for the ecosystem.

ve(3,3) Tokenomics

Initial supply 400M VELO. Weekly LP emissions start at 15M VELO (3.75% of the initial supply) and decay by 1% per week.

veVELO receives a rebase proportional to weekly LP emissions and the ratio of veVELO to VELO supply, reducing dilution for veVELO holders. LP emissions will not vary based on veVELO supply. The weekly rebase amount is calculated with the following formula:

$$ (ve.VELO.totalSupply() / VELO.totalsupply())³ * 0.5 $$

VELO can be vote-escrowed (locked) for up to 4 years, following the linear relationship shown below:

  • 100 VELO locked for 4 years = 100 veVELO
  • 100 VELO locked for 1 year = 25 veVELO

veVELO is contained in the form of a veNFT

Bribes

Velodrome has built-in bribe functionality that allows anyone to incentivize voting for their preferred liquidity pool. Bribes are distributed only to voters on the incentivized pool proportionally to the votes cast. They will be claimable 24–48 hours after the vote snapshot. The bribe collection period will end prior to the final vote snapshot to ensure rewards are fully allocated.

Whitelisting

Velodrome will adopt low-friction gauge votes. veVELO holders with 0.1% of veVELO supply can create proposals to create gauges. veVELO voters can then vote to approve or reject the tokens proposed, with the default being a pass if quorum is not met.

Commissaire

Checks and balances for token whitelisting are critical to ensuring that the protocol cannot be exploited by actors attempting to game emissions.

The Commissaire, a Curve-esque “Emergency DAO”, will have the right to vote down hostile gauges or whitelisted tokens. The Commissaire will be initially formed by seven members from the Velodrome team and prominent figures within the Optimism community.

II. Definitions

  • VELO: Native token of the Velodrome protocol
  • veVELO: Vote-escrowed version of VELO, conforms to the ERC-721 standard (i.e., veNFT)
  • WeVE: veDAO governance token

III. Protocol Launch

Initial Distribution

Distribution of the VELO token will kick off with an airdrop to users and protocols likeliest to contribute to Velodrome’s mission — to build deep liquidity on Optimism. The initial distribution is designed to kickstart activity while leaving enough room for new entrants to the VELO races later on. New players will still be able to capture voting power through emissions or token acquisition. This approach to distribution ensures that Velodrome as a protocol is able to bootstrap successfully and retain a team to guide its development.

Objectives

  • Generate natural demand for voting power from key protocols
  • Enable bribes as a capital-effective strategy to ensure liquidity
  • Encourage token velocity and the ability for new entrants to accrue voting power over time
  • Foster decentralization with less than 50% of supply initially owned by protocols
  • Attract experienced and engaged DeFi users
  • Ensure Velodrome can attract and retain a focused team to support the protocol’s ongoing build

Adjustments

Since our last update, we have received additional feedback from protocol partners and adjusted launch plans. This has led to a few key adjustments to the initial distribution:

  • Establishing a Genesis Pool to emit VELO to a few key pairs (e.g., VELO-USDC) in the five-day period before the Epoch 1 votes begin
  • Earmarking a portion of the protocol airdrop as “ecosystem grants” that will be used to reward and engage partners after launch
  • Increasing the upfront VELO community distribution
  • Increasing the Velodrome Team allocation so the team can resource and sustain further development of Velodrome

Details

Overview (400M)

  • 60% (240M) to Community as VELO
  • 24% (96M) to Protocols/DAOs as locked veNFTs
  • 10% (40M) to Velodrome Team as VELO
  • 5% (20M) to Optimism Team as locked veNFTs
  • 1% (4M) Genesis Pool as VELO

Community (60%), 240M VELO

Airdrop of VELO tokens for people who have played the biggest role in incubating Velodrome and those most likely to contribute to its long-term success, including:

WeVE holders (45%, 27% of total)

  • Type: Unlocked
  • Quantity: 108M VELO
  • Mechanism: WeVE holders “burn” their WeVE and claim USDC and VELO on OP
  • Target: All holders

Cross-chain DeFi users (25%, 15% of total)

  • Type: Unlocked
  • Quantity: 60M VELO
  • Mechanism: Claim on Velodrome
  • Targets: Curve.fi, Convex Finance, Platypus Finance, TreasureDAO, Redacted Cartel

Optimism ecosystem token holders (30%, 18% of total)

  • Type: Unlocked
  • Quantity: 72M VELO
  • Mechanism: Claim tokens on Velodrome
  • Target: Filtered list of OP airdrop recipients

Protocols/DAOs (24%) 96M veVELO

Airdropped as locked veNFTs aimed at attracting and engaging the protocols likeliest to contribute to Velodrome and Optimism’s long-term success. We considered a variety of metrics in assessing the recipients including TVL, transaction volume, unique wallets, and OP Team input. This approach will provide just enough power to familiarize protocols with the ecosystem and allow them a head start in incentivizing liquidity, while leaving space for them to continue to meet their liquidity needs through the further acquisition of VELO.

Protocols/DAOs (75%, 18% of total)

  • Type: Locked veNFT containing veVELO
  • Quantity: 72M veVELO
  • Mechanism: Airdrop veNFTs
  • Target: 10–15 Protocols essential for the success of Velodrome and Optimism

Grants (25%, 6% of Total)

  • Type: Locked veNFT containing veVELO
  • Quantity: 24M veVELO
  • Mechanism: Distributed post launch to partner protocols
  • Targets: TBD

Velodrome Team (10%)

The Velodrome Team will receive an initial allocation that it will use to vote to drive emissions to key protocol pairs such as VELO-USDC and to support ongoing protocol development. The team currently plans to vest 25% of its initial allocation in the form of a veNFT to vote for VELO pairs in perpetuity.

Optimism Team (5%)

The Optimism Team has a vested interest in ensuring that Velodrome achieves its mission of serving as an ecosystem public good. The Optimism Team may use its voteshare to incentivize pools it believes are most helpful to the ecosystem’s growth.

Genesis Pool (1%)

Establishing a Genesis Pool to emit VELO to a few key pairs (i.e. VELO-USDC) in the five day period before the epoch 1 votes begin.

Team

While a fully autonomous and immutable protocol is an admirable objective, it comes at a cost. Velodrome will ensure its long-term sustainability by employing a dedicated team focused on supporting the product, documentation, community, and ecosystem. As the protocol evolves, the Velodrome Mean may consider introducing more immutability or DAO components as appropriate.

Details

  • The team will support a product roadmap beyond base-layer AMM
  • Key functions such as marketing, product support, and community management
  • Ability to govern key protocol parameters to drive optimal performance and liquidity to core protocol pairs (e.g., VELO-USDC)

IV. Resources

Website: https://www.velodrome.finance

Twitter: https://twitter.com/VelodromeFi

Medium: https://medium.com/@VelodromeFi

Discord: TBA

Technical Docs: TBA

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Velodrome (🚴,🚴)

The central trading and liquidity marketplace on Optimism.