Velodrome Finance: A New AMM Focused on User Experience

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 Finance, an automated market maker (AMM) built on the Superchain network, aims to offer marketplace features from Convex and Uniswap in one convenient place.

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.

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