Velodrome: The MetaDEX

“The best rides are the ones where you bite off much more than you can chew, and live through it.” — Dough Bradbury

Velodrome is the first MetaDEX. A single unified protocol that brings together the best primitives in DeFi into a single streamlined experience.

Traditional DEXs lead to fractured experiences, forcing protocols and users to jump between different dAPPs depending on what they are optimizing for. A protocol looking to incentivize their liquidity across vAMM, sAMM, and clAMM might need to interact six different protocols. Users seeking to participate might need to navigate the complex tokenomics of six different projects and the multiple layers and subprojects associated with each.

Velodrome solves this by bringing the best of DeFi under a single a roof:

• AMMs: UniV2 style vAMM, Curve Style sAMM, UniV3 Style clAMM
• Liquid Locks: veVELO is tradable, no derivative token needed
• Auto-Voting: Relay offers a Votium style auto-voter and compounder
• Rewards: veVELO voters earn 100% of staked platform rewards

This MetaDEX design has led Velodrome to becoming the largest decentralized exchange on Ethereum Layer 2. With over $125M of TVL, $7.5B of cumulative volume, and 65 protocols supported.

Velodrome also serves as the secondary economic engine of the Optimism ecosystem, having contributed over $80M in rewards to projects and users of Optimsm. These rewards serve as economic stimulus for the broader ecosystem, accelerating its growth and increasing its resiliency.

Let’s recap some of the core features that have gotten us here.

Velodrome V2

The launch of Velodrome v2 realized some of the project’s biggest, early goals and set us on our current trajectory:

• Enhanced User Experience through Nightride dApp: a fully decentralized and user-friendly frontend, providing real-time voting stats, reward estimates, simple navigation and sleek design.
• Security: a simplified, cohesive smart-contract architecture contributing to improved security and reduced gas costs for users.
• Innovative Features: customizable pool fees, simplified reward system, veNFT merging, and smart contract groundwork for veVELO automation and concentrated pools (more below).

Velodrome Relay

The Velodrome innovation races have only accelerated in 2024 with the release of Relay, an automated veVELO management solution designed for both protocols and users:

• Automated Compounding: Relay automates voting, claiming of rewards, and compounding into veVELO to maximize voting power.
• Customized Voting Strategies: directing emissions to preferred pairs and managing rewards to enhance liquidity incentive strategy.
• User-Friendly Experience: users can delegate their veNFTs for seamless voting and reward compounding.

Velodrome Relay provides a hands-off way for both protocols and users to engage in active governance and maximize their voting impact. Over 10% of the veVELO supply currently uses Relay.

Riding in the Slipstream

Slipstream is Velodrome’s next major release. Aiming to attract 4–5 times more trading volume and fees per TVL than current pools, Slipstream will introduce a novel implementation to Concentrated Liquidity pools powered by Velodrome’s incentives. It is designed for high-volume, lower volatility token pairs and will complement existing pools to expand Velodrome’s tools for acquiring volume.

Slipstream’s key features include:

• Tick Spacing Refinements: with Slipstream, VELO emissions incentivize liquidity to build around the active price range, deepening pools and allowing wider tick spaces to outcompete fee-only DEXes. Wider tick spacing will maintain the user friendliness for LPs, reducing the need for liquidity rebalancing.
• Automated Liquidity Management: enabling liquidity providers to deposit and effortlessly receive VELO rewards.
• Custom Fee Algorithm: algorithm dynamically adjusts fees, ensuring maximum rewards for veVELO voters and LPs under various market conditions.
• Oracle Updates: providing cutting-edge on-chain data to facilitate integration with the broader ecosystem.
• Optimized Fee Structure: balancing reward generation for veVELO voters while maintaining low fees remain competitive.

Slipstream’s code is open-sourced, audited by Spearbit, and a bug bounty program is live on ImmuneFi. Slipstream will be rolled progressively over the next few weeks, positioning Velodrome for its next leap in activity generation on Optimism and preparing it to become the liquidity and volume hub for the upcoming Optimistic Superchain.