Sirwin
Sirwin

Across The Cryptoverse #32 - I Maximized DeFi Farming On Velodrome

By PVM | SuperUMAns | 22 Nov 2023


Over the last couple of months, the Across market share raised considerably on all available chains. Record volume was recorded from and to the Ethereum mainnet from Polygon, Optimism, Arbitrum, zkSync and Base.

The growth in bridged volume was fueled by low fees and fast transactions, direct perks for being secured by UMA's Optimistic Oracle. The OO made lowered the fees by removing the need for on-chain validation, which improves gas efficiency and lowers the bridging costs.

The OO verifies the cross-chain transactions optimistically, which improves capital efficiency and gets funds moving more quickly  The higher level of security is achieved through the Oracle decentralized design that allows anyone to raise a transaction dispute. Many of the innovations that Across enjoys in the bridging space are results of the ingenuities that UMA has pioneered in the oracle space!

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Velodrome was chosen by Across for DeFi opportunities, with ACX being able to be paired with ETH and USDC. I dived in immediately after launch, and paired 11,500 ACX with 0.35 ETH to create my liquidity. 

Velodrome Finance is a next-generation AMM that combines the best of Curve, Convex and Uniswap, designed to serve as Optimism's central liquidity hub. Velodrome uses locked $VELO NFTs to vote on token emissions and receive incentives and fees generated by the protocol.

Being early as a liquidity provider brings higher APY and better yield rewards. The early bird catches the worm! Being early brings extra benefits, and the emissions APR at 778% is the proof! It was close to 1000% when I staked in, but it dropped a little with every new provider. 

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The key problem with most AMMs was that the emission rate is often tied to liquidity, rather than to trading volume. Velodrome allows holders of their native token, VELO, to lock them for a selected duration between 1 week to 4 years and solve the issue.  

Any VELO holder can lock their tokens to convert to veVELO, and this was the path that I choose! The longer the lock, the more veVELO the user receives, which grants them more voting power. I initially claimed 136.67 $VELO and convert them into veVELO and voting power. I decided to play the long term game and locked all the $VELO for four years, receiving the maximum amount of voting power.

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The system is simple and efficient! The user locks $VELO for voting power, and can to use  it to direct liquidity emissions to specific pools.

Liquidity emissions from Velodrome are distributed proportionally based on votes received by each pool, and in return the voters receive 100% of all fees and bribes received by the specific pools that they voted for. Bribes flow to voters which incentivizes them to vote for the pools with the highest combined value of bribes and fees. 

The position in locked VELO will be represented as veVELO, a non-fungible token which can then be traded on NFT marketplaces. Rebasing is used to ensure that VELO lockers were not significantly diluted, where veVELO is distributed to VELO lockers, proportionate to their locked amount.

Lock ID 17364 was created, and I started voting for higher emissions in the ACX-ETH pool. The Rebase APR was 11.47%, adding VELO with each rebase, and my vote will help me earn more from my LP. 

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I basically tapped into rewards not once, not twice ... but three times. I earned $VELO with my ACX-ETH LP, then locked the tokens for voting power. I used the voting power to raise the ACX-ETH LP and also gained VELO from the rebases.

The system is mind-blowing, and earning multiple times makes DeFi on Velodrome more efficient than ever. I decided to claim another batch of $VELO and lock it for only one year. I locked 1,519 tokens for 365 days, and I received 373 veVELO voting power.

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I started voting with both batches of veVELO and I soon discovered that I was earning four times, not three as I thought above. Voting for emissions also generates rewards, on top of rebase APR and higher APY for liquidity pools. 

It's rewarding to lock $VELO tokens, but is even more rewarding to vote with the veVELO obtained from the locking. Active voters are rewarded with $ETH and $ACX obtained from fees, and more $ACX and $OP tokens as incentives. 

The voting round lasts one week, ending on Wednesday. I kept voting on a weekly basis after I locked my second batch of $VELO, and the rewards are accumulating at a good rate. The overall rewards so far are in ACX, OP and ETH. It's not much but it's honest work! 

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What about the LP rewards? Are they still as attractive as they were back in September? I let you analyze the stats and tell me your opinion. I farmed 1730 $VELO since my last claim, still considering % emissions APR as a decent rate for rewards. Will let the stash reach 2000 tokens and will claim them in bulk! Time to pedal even faster... and spin the ACX for more rewards!

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PVM
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UMA Ambassador 🐔 Across Committee Member 🌉 Horizen Ambassador


SuperUMAns
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