Velodrome V2: A New Era
One year ago today, Velodrome Finance embarked on an ambitious journey to become the liquidity hub of the Optimism ecosystem. As Velodrome celebrates its 1-year anniversary, we look forward to Velodrome V2, a protocol overhaul that will reshape the future of decentralized exchanges.
A Year of Resilience and Growth
In just one year, Velodrome has become synonymous with resilience in DeFi. Launched with the goal of becoming the central liquidity hub of a growing Optimism ecosystem, the Velodrome Team has worked tirelessly to support and grow a robust decentralized protocol. Despite being often underestimated, Velodrome is now the leading DEX on Ethereum Layer 2s, with a TVL of approximately $250 million and cumulative trading volume exceeding $6 billion — a level of growth only possible due to the support of our partners and community.
V2: A New Era Begins
On June 15th, Velodrome V2 will officially launch, representing a new protocol fully redesigned to bring forth a significantly improved end-user experience, enhanced security measures, and a simplified smart-contract architecture. Velodrome V2 will not only meet the needs of its users but empower developers to create innovative solutions on Layer 2.
This redesign lays the foundation for an array of powerful features such as concentrated liquidity pools, customizable pool fees, and automated veNFT management (Relay). As a result, it makes Velodrome one of the most advanced decentralized exchanges anywhere in DeFi, adding additional fuel to Velodrome’s flywheel through increased fee capture and setting a new standard for low-slippage trading and liquidity management.
What is new in V2?
- Nightride dApp: Velodrome’s new frontend has been rebuilt from scratch to be both more user friendly and fully decentralized. It is deployed and served from a decentralized filesystem without any intermediary caching/API layers. The UI/UX is designed to provide transparency and intuitive controls for complex operations, including real-time voting stats and reward estimates.
- Custom Pool Fees: V2 pools will support a wider range of fees (up to 1%) customizable on a pool by pool basis. This will allowing more dynamic and substantial voting rewards.
- Custom Pool Names and Symbols: V2 pools allow for custom name and symbol changes to differentiate partner pools and reduce confusion.
- Zapping into LPs: The new V2 router makes it easier to LP on Velodrome by allowing users to “zap” into a liquidity pool by depositing just one of the pool’s tokens to create a position.
- veNFT Artwork and Metadata: The new veNFTs will come with unique on-chain dynamically generated artwork. The underlying balance and unlock dates are provided via metadata that will be indexed by our upcoming integrated veNFT marketplace.
- Permalocked veNFTs: V2 veNFTs can be set in a (maximum) 4-year lock state. In such a state, veNFTs’ veVELO balance constantly reflects the underlying VELO, no longer decaying.
- Managed veNFTs: Managed veNFTs operate like a vault and represent a foundation for reward-compounding products like Velodrome Relay. veNFTs can be deposited into a Managed veNFT which is run (not owned) by a partner, with rewards distributed to all depositors. Managed veNFTs aggregate NFT voting power whilst perpetually compounding and locking the underlying tokens.
- Improved veNFT Transfers: V2 veNFTs can be reset, transferred, and used vote on the same epoch, allowing for a more frictionless secondary sale experience.
- Velo FED: When VELO emissions fall below 6m per epoch (in ~92 epochs), veVELO voters will automatically gain control of Velodrome’s monetary policy, allowing them to increase or decrease the rate of emissions by one basis point per epoch, unlocking a novel mechanic to collectively manage Velodrome’s economic sustainability.
- Streamlined Voting Rewards: V2 gauges and rewards contracts were rewritten and simplified, resulting in significantly reduced gas costs for claiming rewards. Fees will now accumulate and be delivered similiar to bribes.
- New Governor Functions: veVELO holders will soon be able to control key processes such as token whitelisting.
- New VELO Token: Onboarding to VELO V2 will be a simple, seamless process. The new VELO token and veNFTs will replace Velodrome’s current governance and utility tokens. V1 VELO and veNFTs will be convertible at a guaranteed 1-to-1 rate to V2. The convertor will be registered as a pool, allowing users to simply trade V1 for V2 and aggregators to integrate the conversion pragmatically.
- Opt-In Upgradability: V2 uses a registry with protocol component factories. Simply, factories can be upgraded, and users can opt-in to new factory pool types, gauges or reward contracts. This enables future functionalities like native incentivized concentrated liquidity pools while maintaining protocol decentralization and immutability.
- Governance Delegation: The delegation for governance voting has been rewritten to accommodate the decentralization needs and the Bedrock Upgrade. Caching layer has been removed and voting allows for larger number of delegations.
Overcoming Challenges and Thriving
The journey has not been without its challenges. Velodrome launched during one of the most tumultuous periods in the crypto world, just three weeks after the collapse of Luna. Despite the odds stacked against us, Velodrome emerged stronger thanks to an unwavering focus on two core principles: consistently improving Velodrome’s core technology, and onboarding the best protocols to the Optimism ecosystem. Today, category leaders such as Synthetix, Lido, Rocket Pool, Liquity and Stargate rely on Velodrome as their primary liquidity hub.
Expanding Our Horizons
While being the leading DEX on Ethereum Layer 2s is a significant achievement, our sights are now on the Superchain, an expanding network of tightly aligned modular roll-ups and roll-apps aimed to serve the next billion on-chain users. The Superchain will have complex liquidity and infrastructure needs, which Velodrome will evolve to service. By constantly pushing technical and operational boundaries and working closely with OP Labs and the leading players building on the OP Stack, Velodrome will establish itself as a foundational force in the expanding scalable DeFi.
As we celebrate our 1-year anniversary, Velodrome Finance is proud of the milestones we have achieved. Our relentless pursuit of quality has propelled us to the forefront of the L2 DeFi world, but the road ahead is long. Velodrome will continue doing as it has always done: focusing on tech and protocol collaborations, and making Optimism the home for the next billion DeFi users and builders.
