Velodrome Finance (VELO): A Liquidity Hub for the Superchain
One of the most popular web3 finance fields right now is liquidity provision. There are all sorts of automated market makers looking for ways to sell liquidity to markets while providing profits for their own community members. Velodrome hopes to break free from the pack and beat its competitors with its uniquely user-focused experience. This liquidity provision service boasts a helpful combination of decentralization, user incentivization and user-led governance. To learn more about Velodrome's features and see how its token is performing, keep reading this guide.
Key Takeaways:
Velodrome Finance, an automated market maker (AMM) built on the Superchain network, aims to offer marketplace features from Convex and Uniswap in one convenient place.
Looking to trade Velodrome Finance tokens? Bybit now offers the VELODROMEUSDT Perpetual contract.
What Is Velodrome Finance?
Velodrome Finance is an automated market maker (AMM) built on the Superchain network that aims to offer marketplace features from Curve Convex and Uniswap in one convenient place. It’s designed to provide liquidity to many other programs while also allowing traders to swap tokens.
What Is Superchain?
The Superchain network is an ecosystem that combines multiple blockchains into one seamless network. Initially launched by the Optimism ecosystem, Superchain now has a variety of partners. It works with many Ethereum-based chains, including Base and World Chain.
History of Velodrome
Velodrome Finance’s evolution has involved various stages. The project initially began in 2022 as a decentralized exchange (DEX) called Solidly, created by Andre Cronje, a well-known decentralized finance (DeFi) architect who previously helped to found Fantom Foundation and Yearn Finance. One of the many features of this DEX was veDAO, a decentralized autonomous organization (DAO) focused on token distribution.
A few months after its launch, Solidly's founders parted ways over a disagreement. Initially, this left the future of veDAO up in the air. However, community members banded together and decided to save their system. veDAO took the best parts of the Solidly DEX design and moved it to Optimism.
What Does Velodrome Aim to Achieve?
Velodrome's main goal is to create a sustainable and user-focused version of other popular liquidity providers, such as Uniswap and Convex for Curve. Unlike many other automated market makers, Velodrome is entirely run by its users. As a DAO, Velodrome encourages users to submit proposals and vote on proposals. By giving users the ability to regulate everything from fees to branding, Velodrome ensures that each participant's opinions are heard.
Velodrome's governance model is also meant to incentivize users to commit to long-term community growth. Unlike some systems that are all about short-term individual profit, Velodrome has incentives that specifically reward those involved in community growth. It believes this design ensures the system has regular users who make decisions that enhance its overall sustainability.
How Does Velodrome Work?
Velodrome’s flywheel design starts with liquidity providers temporarily placing their tokens in concentrated liquidity pools. Traders then use funds from the liquidity hub to facilitate trading with minimal slippage, paying low fees for the privilege. These fees are then transmitted to liquidity providers in the form of VELO emissions. Liquidity providers can choose to lock their VELO tokens, if they wish to join the Velodrome governance model and vote on protocol upgrades. This flywheel cycle has a seven-day timeline. Every week, Velodrome updates its system to recalculate votes, trading fees and VELO emissions.
Another unique mechanic of Velodrome Finance is its blockchain base. Instead of being built on a single chain, Velodrome is designed to run on the Optimism Superchain network. When operating the liquidity management system, Velodrome doesn't focus on individual liquidity pools based on a token's home chain. Instead, its protocol router evaluates multiple types of liquidity pools to automatically select the one with the most efficient prices and optimal trade execution routes.
Features of Velodrome
Velodrome is a fairly focused AMM. Instead of providing a wide range of services, it prioritizes doing an excellent job at just a few things.
Swap
Velodrome's swapping service lets traders exchange one type of coin for another. It currently supports a broad range of coins, both on and off the Optimism Superchain network. This form of trading has many uses, ranging from portfolio management to profiting from market changes. Velodrome's convenient three-step system simply requires users to link their wallets, choose their desired tokens and approve their fee quotes before swapping.
Liquidity
Velodrome offers concentrated liquidity pools that help DEXs function properly. In exchange for these services, liquidity providers on Velodrome earn financial rewards. For many investors, participating in a liquidity hub is a way to earn passive income on tokens they don't yet want to sell. Velodrome's ability to provide deep liquidity is so popular that it's the primary liquidity hub on the Superchain.
Velodrome Road Map
Velodrome has changed a lot since its early days as a token-swapping system, gradually adding features like decentralization, dynamic fees and a decentralized application (DApp) interface. Its long-term future will depend upon the changes its DAO votes on. However, there are already several approved proposals currently in the works. In 2025, Velodrome plans to add more dynamic pricing options, additional governance methods, Superchain-based voting and bridgeless Superchain swaps.
Velodrome Tokens
The Velodrome ecosystem relies on the following two tokens to function properly.
VELO
VELO is the utility token for the entire Velodrome site. It's an ERC-20 – based token that’s used for fees and liquidity provision. You can obtain VELO either by purchasing it directly through the market, or by contributing to liquidity pools and receiving VELO liquidity incentives.
veVELO
If desired, users can lock their VELO tokens in order to receive veVELO, an ERC-721 governance token that exists as an NFT. The amount of veVELO you receive for your VELO is in part directly proportional to the amount of time you choose to lock your tokens. People who hold veVELO can submit and vote on community proposals for the Velodrome platform.
VELO Tokenomics
The VELO utility token has a circulating supply of roughly 900 million, with plans to unlock more tokens in the future. These tokens are distributed according to the following plan:
Community: 60%
Partner protocols: 24%
Velodrome Foundation: 10%
Optimism: 5%
Genesis liquidity pool: 1%
VELO Price Prediction
The VELO token was initially selling for around $0.04. However, after the project’s DAO adapted its platform from Solidly to Velodrome, token prices took off. In April 2023, March 2024 and December 2024, VELO token prices spiked. While the VELO token price is down from its all-time high of $0.42, it’s still sitting in the $0.10–$0.20 range.
This pricing pattern seems likely to persist for a while. Binance predicts VELO will reach an average price of around $0.17 in 2025. However, other price predictors are even more optimistic, with CoinCodex suggesting there will be a price jump in February 2025, resulting in yearly average prices of around $0.30 to $0.40.
Where to Buy VELO
Looking to trade Velodrome tokens? Bybit now offers the VELODROMEUSDT Perpetual contract. To get started, you’ll first need to create a Bybit account, then fund it with cryptocurrency and navigate to the VELODROMEUSDT Perpetual contract page.
Is VELO a Good Investment?
Velodrome has plenty of competitors in the liquidity management field, but several factors make its token a good investment. First of all, the VELO utility token has been around for quite a while. This stability makes it more reliable than tokens that were just recently added to the market. Secondly, VELO has a history of sharp price increases; the token is highly responsive to positive press and market upturns, so there's a chance for high prices. Finally, Velodrome is performing well, and Its partnership with the Optimism ecosystem has helped it attract users.
Nevertheless, any crypto token features some volatility in its price. For example, a DAO voting for abnormally low fees could cause sudden price downturns. If you want to invest in the VELO token, make sure to do your own research. As with any other medium-risk token, VELO isn't reliable enough to be the only asset in your entire investment portfolio.
Closing Thoughts
Velodrome has done a great job of transitioning from a DeFi tool to its own standalone liquidity provision system. By functioning as the primary liquidity hub on Superchain, Velodrome provides minimal slippage, deep liquidity and reasonable trading fees. Furthermore, its liquidity incentives appeal to a wide variety of users and help keep the system running. Ultimately, the Velodrome platform and the VELO token have a lot to offer to the world of decentralized finance.
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