From the launch of Slipstream to bringing early interoperability to the Superchain, Velodrome consistently raises the bar for technical innovation in DeFi.

In 2025, Velodrome has continued to lead from the front, dropping industry-defining features, an enhanced user experience, and expansions across the ecosystem.

Here’s a quick spin through Velodrome’s key highlights from the year to date.

Superchain expansion: Accelerating support for new chains

With six new deployments in Q1 and Q2, Velodrome now supports more than 10 chains across the Superchain.

From new players to industry heavyweights, builders of all shapes and sizes trust Velodrome to deliver durable liquidity infrastructure and cross-chain interoperability for their users.

Launches from just the first six months of 2025:

• Ink
• Soneium
• Swellchain
• Unichain
• Superseed
• Celo

Superswaps: Unlocking swaps across the Superchain, all in one app

With the launch of Superswaps, Velodrome officially became the first DEX to deliver a unified liquidity experience across the Superchain, benefiting swappers, LPs, protocols, and voters alike:

• Users: Swap seamlessly across chains.
• Protocols: Deploy liquidity on one chain and scale across the Superchain.
• LPs: Capture cross-chain trading volume.
• Voters: Receive 100% of protocol revenue generated from cross-chain swaps.

Since launch, volume across the Superchain has continued to climb.

Superswaps is built as lightweight, trust-minimized public good infrastructure. The feature offers built-in MEV protection and pure onchain execution. It’s also simple to integrate for builders.

More information on Superswaps can be found here.

VerifiedERC20: Piloting an innovative approach to verified liquidity

In June, Velodrome announced its latest innovation: the VerifiedERC20 token, in collaboration with Celo and Self. This new token standard uses hooks to allow builders to issue new tokens that require external verifications for specific function calls.

XOP: Bringing OP across the Superchain

With the introduction of XOP, protocols can now use OP from OP Mainnet as voting incentives on any chain where Velodrome is deployed. Voters can then easily claim OP rewards from their chosen chain and easily bridge it back to OP Mainnet for use.

More on XOP.

App updates: Upgrading UX for all users

Velodrome is the front end of the Superchain.

From lightning fast swaps to updated deposit flows and overall UI improvements, Velodrome became sleeker, faster and easier to use than ever before.

Swap flow improvements:

• Redesigned to deliver a clear, intuitive experience
• Simplified for faster, smoother transactions
• Mobile-optimization makes it easy to swap from anywhere

LP deposit flow improvements:

• Intuitive, guided experience
• Filter by pool type (Concentrated vs. Basic)
• Compare APRs across ranges and ALM
• Optimized for mobile

Overall, UX enhancements have delivered approximately 40% faster quote times, quicker page loads, smoother scrolling, and reduced lag.

Velodrome also integrated native support for Binance Wallet.

ALM V2: Improving the ALM experience for LPs

In January, Velodrome integrated Mellow’s ALM V2, delivering advanced Automated Liquidity Management to LPs looking for a hands-off approach.

Key updates:

• Auto-adjusting strategy powered by dynamic parameters
• Streaming rewards
• Vault caps for enhanced security and reduced exposure
• Optimization for LSTs and LRTs

Slipstream is one of the highest performing AMMs in all of DeFi, and, with ALM V2, it became easier to leverage for all LPs.

Decentralized operations: Setting a new industry standard

In collaboration with Chainlink and HackBG, Velodrome automated and decentralized weekly operational processes. More here.

Pool launcher: Launching a new way to launch liquidity

During EthCC, Velodrome announced the upcoming pool launcher, which will make it quick and easy for anyone to launch liquidity for any token on Velodrome. With the addition of Emerging tokens, permissionless launches will also have the potential to be easily surfaced in the UI.

Qualifying pools created through the launcher will be able to seamlessly graduate to emission-based pools without manual migration, generating more rewards for veVELO voters.

More here. Stay tuned for details.

The year to date, in numbers

In addition to technical innovation, Velodrome continues to dominate volume across the Superchain, returning revenue to veVELO voters.

Volume on OP Mainnet: 8 billion+

Volume Across the Broader Superchain: 2 billion+

Total Volume: 10 billion+

Swap Fees: 6.5 million+

Rewards distributed to voters: 7.9 million

Current veVELO Holders: 14k+ locking for an average of 3+ years

The next lap

Looking to the next half of the year, expect big updates:

• The pool launcher will soon be available to protocols and launchers of all shapes and sizes
• Slipstream V2 is coming, with dynamic fees
• Relay V2 will be here soon

Accelerate.

Background: The First Laps

Velodrome launched on OP Mainnet in 2022 and rapidly established itself as the ecosystem’s top trading and liquidity hub. Today, Velodrome is the number-one decentralized exchange on the Optimism Superchain, serving as the essential trading and liquidity marketplace for a growing network of interoperable chains — 10 and counting—with the goal of scaling Ethereum.

By the numbers:
$27B in Trading Volume
$68M in Voting Rewards distributed to veVELO voters
60% to 80%+ Volume Dominance across chains deployed
10+ chains supported via Hyperlane interoperability

Velodrome is powered by the MetaDEX Model which uniquely aligns the incentives of traders, liquidity providers, and token lockers to fuel enduring growth. Emissions are an essential part of the model, ensuring that those who actively contribute are actively rewarded.

Since the launch of Velodrome V2, the emission rate of newly minted VELO tokens has declined at a rate of 1% each week. This steady decline was predetermined, written into immutable code, and provided crucial predictability during the initial phase of Velodrome and the early days of the Superchain.

Soon, Velodrome’s emissions rate will automatically mature into the next phase: Dynamic Emissions as determined by veVELO voters.

The era of The VELO Fed is upon us.

The VELO Fed

The VELO Fed will function similarly to a governing body, able to nudge the emissions rate slightly up or down each epoch in response to changing market dynamics. While this will not initially have a dramatic impact on the number of emissions, in the long run, it can help slow inflation or provide needed stimulus, depending on the changing needs of the protocol.

This system will allow voters to guide something close to a monetary policy. By putting the power in the hands of veVELO holders, emissions will be determined by active participants who have a strong incentive to maintain a balanced and sustainable strategy.

From a technical perspective, the VELO Fed will replace the existing schedule with a dedicated governor smart contract. Each week, the “governor” will allow for one of three options:

• Increase weekly emissions by 0.01% of total supply (0.52% annualized).
• Decrease weekly emissions by 0.01% of total supply (0.52% annualized).
• Leave the rate the same, meaning emissions will be calculated as the same percent of total supply as the previous week (results in a small increase in the number of emissions).

Note: The emission rate will be capped between 1% of total supply per week (52% annualized) and a minimum of 0.01% per week (0.52% annualized).

The Interim Period

To ensure a smooth implementation, the VELO Fed will start with a transition phase, during which the governor will vote to maintain the emissions rate (neither raising or lowering it) at a fixed 0.3% of the total supply per week — or approximately 15% of the total supply per year.

This steady-state model replaces the prior trend of continuous reductions and is designed to provide strength during an era of critical expansion — maximally rewarding those contributing to the growth of the Superchain.

Why? Because predictable stimulus drives durable growth.

The Superchain Expands

As the Superchain grows and Velodrome expands further across it, VELO emissions will be used to catalyze a new stage of strategic liquidity growth and help ensure global dominance by:

• Supporting new and emergent Superchain chains from day one
• Providing stable and predictable rewards for liquidity providers during all market conditions
• Reducing liquidity fragmentation by concentrating incentives into unified pools across the ecosystem
• Scaling efficiently with the Superchain’s growth, ensuring new chains can launch with ready-made liquidity

At the end of the interim period, governance of the Fed will be passed on to veVELO voters, who will influence emission rate changes through weekly votes.

The Next Chapter: Beyond Emissions

To further grow liquidity, Velodrome has acquired and locked a total of ~46M VELO from the open market over the life of the exchange, compounding voting rewards back into veVELO. This substantial veVELO position will continue to drive strategic growth across new chains.

Velodrome will maintain its dominant position by a commitment to continuous product innovation, including:

• ALM V2 Expansion — Advanced passive liquidity management
• Relay V2 — Superchain governance and institutional rewards management
• Superswaps — Seamless cross-chain swaps with minimal bridging friction
• Lock Bonuses — Enhanced incentives for long-term veVELO participants
• Slipstream V2 — Dynamic fees to optimize swap execution and boost rewards

Join the Conversation

Velodrome’s success hinges on community collaboration. Share your insights on Velodrome’s Discord to shape emissions strategy and Superchain growth.

Stay tuned for updates as Velodrome cements its role as the liquidity engine of the Optimism Superchain.

Rise of the Superchain

The Optimism Superchain is a horizontally scalable network of Ethereum L2s, all built using the OP Stack. Over time, this network will unlock an experience that feels easy and accessible to users of all backgrounds and technical abilities. Once fully interoperable, it will eliminate crosschain friction, helping onboard the next wave of users to the onchain economy.

The OP Stack has emerged as the leading choice for major Layer 2 deployments, powering chains like Mode, Worldchain, and Unichain, with recent launches such as Sony’s Soneium and Kraken’s Ink.

Over the past year, OP Stack chains have seen remarkable growth, with TVL surpassing $5 billion, which will become increasingly unified by Superchain interoperability.

The liquidity problem: Velodrome and Optimism linking together

Like all economies, a critical requirement of any Superchain L2 is easy access to its local “currency,” or ecosystem token, aka “the liquidity problem.” Onchain, decentralized exchanges (DEXs) are the most efficient way to meet this need, and not all DEXs are created equal.

Velodrome is the first and only Superchain DEX, built from the ground up to serve as its essential liquidity marketplace and trading platform. Velodrome’s MetaDEX model balances the needs of all stakeholders, combining the most powerful DeFi primitives with an optimized economic model to onboard new chains, bootstrap protocol growth and deliver reliable low-fee token swaps for users.

Founded as a public good, Velodrome launched without outside investment, and the Foundation relies solely on the protocol’s activity to fund contributors. This unique approach eliminates insider preference and venture capital commitments, allowing Velodrome to metabolize 100% of its generated value back into the ecosystem. The result is a clean, transparent operating model that fosters sustainable growth.

The liquidity fragmentation problem: Bringing advanced interoperability to the Superchain

While L2s are faster and cheaper than Ethereum Mainnet, they also introduce a new problem: liquidity fragmentation. Since DEXs rely on liquidity providers (LPs) to deposit tokens, the proliferation of multiple DEXs across multiple chains risks liquidity being spread thinly across many different platforms. And the shallower the liquidity, the less competitive the chain (and the worse the user experience).

A native Superchain interoperability layer will eventually solve this problem, enabling Superchains to seamlessly share information back and forth, giving users and LPs a superior experience with cross-chain liquidity.

As the native solution continues to be developed, Velodrome has partnered with Hyperlane to launch the Superchain’s first interoperable experience, bringing cross-chain voting and rewards to ecosystem partners early.

Thanks to dual-layer architecture, when native interoperability is available, chains will be switched to it without any migration necessary.

Accelerating the velocity of growth

In 2024, Velodrome lapped all expectations, breaking records across key metrics:

Volume nearly tripled, growing from $7.4b to $22.6b

Voting Rewards (fees+incentives) distributed to veVELO voters totaled $31m

Slipstream market share grew to 70%

Durable economic design wins

On L2s across the network, Velodrome has shown that where the MetaDEX is deployed, other DEX models struggle to compete.

Velodrome is now the #1 Volume DEX on Optimism Mainnet, Mode, and Lisk.

With Slipstream, Velodrome’s novel and powerful take on concentrated liquidity, liquidity providers can earn VELO while enabling the lowest slippage swaps for traders. Wherever the MetaDEX deploys Slipstream pools, it wins the majority of volumes compared with competing concentrated liquidity implementations.

2025: A year to be Optimistic about

Velodrome is excited to help deploy and support industry-changing L2s, including the most recently announced additions, Kraken’s Ink and Sony’s Soneium:

Built by Kraken, a market-leading crypto exchange trusted by over 10 million users worldwide, Ink represents Kraken’s next step in strengthening the bridge between users and the builders shaping DeFi by providing tools, support, and easy onboarding needed for a thriving ecosystem

Soneium, developed by Sony Block Solutions Labs, marks the global tech giant’s expansion into the onchain economy. Leveraging Sony’s expertise in entertainment, technology, and digital ecosystems, Soneium is designed to bridge the gap between Web2 and Web3. By enabling seamless user experiences and creative innovation, Sony is positioning Soneium to attract the next wave of developers, creators, and users to the blockchain space.

2025 will also see the launch of innovative chains like Ozean and Superseed.

Reenforcing the strength of the Superchain

This year, Velodrome acquired and locked ~22M VELO from the open market to power its expansion across the Optimism Superchain.This voting power will support the growth of new pools on chains like those mentioned above, and all rewards from votes will be compounded into more veVELO and additional Superchain voting incentives. In the future, this effort may also power lock bonuses for VELO lockers, similar to Aerodrome’s Flight School program.

The next lap

In the new year, look forward to new product launches, an improved and more performant real-time onchain user experience and highly anticipated open governance:

ALM V2: optimizing passive liquidity management with enhanced security, streamlined rewards and dynamic parameters that lead to superior price availability in volatile markets.

Slipstream V2: leveraging dynamic fees with ALM to supercharge swap execution, boosting fees up to 1.4X according to early research.

The VELO Fed: furthering open governance of the protocol, empowering veVELO holders to nudge the emissions rate up or down each epoch.

Relay V2: using modular architecture to support Superchain voting functionality and rewards management for institutional users.

Superswaps: unlocking low-fee, Superchain swaps with a superior unified liquidity UX and without the friction of bridging tokens.

Lock Bonuses: lock bonuses encourage additional participation in the Flywheel as Velodrome expands across the Superchain, and veVELO voters will continue to share 100% of the Total Rewards.

Today we are proud to announce the release of GovNFT, an open-source public good to be employed by the Optimism Collective and protocols receiving vesting grants. The Velodrome team designed and built the GovNFT architecture to increase the number of active wallets participating in governance within the Optimism Collective.

GovNFTs enable the distribution of vested OP tokens that can be awarded for governance participation, giving holders a long-term interest in the success of Optimism. As the Optimism Superchain grows, governors should be incentivized to participate and cultivate an informed and aligned ecosystem.

Most immediately, this eliminates a major friction for the distribution of locked OP grants. Currently, locked OP grants introduce a lot of custodial and administrative overhead for the Optimism Foundation, which has to hold idle OP for some time before distributing it. With GovNFTs, grantees now have a way to use the OP for its intended purpose: having a voice in the Collective.

More broadly, we can see this being used for several purposes, among which is the distribution of locked allocations to project investors, who can now participate in governance structures from day one.

Specifications:

Here are the key specifications (GitHub):

• GovNFT is a ERC721, represented as a NFT
• GovNFT manages the vesting of any ERC-20 token
• A lock can be created that generates a GovNFT and ERC-20 tokens are vested over time to a specified recipient. Allows set parameters like:
  - ERC-20 token address
  - recipient address
  - total token amount
  - cliff length
  - start time
  - end time
• Recipients can claim vested tokens as they become available
• Governance can also be delegated, even for tokens that are not claimed
• GovNFTs can also be split

Distribution

Velodrome received 650k OP in a grant to distribute as vesting GovNFTs to users of the Optimism ecosystem. Last year, Velodrome ran a series of three-month long “races” to allocate 350k OP in GovNFTs. These GovNFTs will be distributed to individuals who are some of the most aligned with the success of the Optimism ecosystem veVELO Lockers. The dashboard for the races and the final distribution list can be found at the links to re-check eligibility. These govNFTs will unlock in a cliff on November 22nd, 2024, one year from the conclusion of the final race.

As part of a project-focused module, OP Mainnet protocols locking veVELO, which include Inverse, Metronome, Yearn, Alchemix, Tarot, and Stargate, received 110k OP. These NFTs will also be provided with an unlock cliff date of November 22nd, 2024. An extra ~25k OP has been awarded through ongoing lock bonuses for protocols under this program as well that will also unlock in November.

GovNFTs have been distributed directly to governance participants’ wallets. Vesting details can be found in the GovNFT portal by connecting the receiving wallet to the site. The vest starts and ends on Nov 22, 2024 when participants will be able to access their tokens.

Earn more OP GovNFTs

The eagle-eyed among us will note that only ~500k of 650k has been distributed so far. We are happy to announce that in conjunction with OP SuperFest, we will be running two more Velodrome Lock races for govNFTs that vest on November 22nd, 2024. 75k OP will be distributed in 2 races running:

• July 4, 2024 at 0:00:00 UTC to July 31, 2024 at 23:59:00 UTC
• August 1, 2024 at 0:00:00 UTC to August 28, 2024 at 23:59:00 UTC

Earn your share of OP distributed pro rata to veVELO lockers with more than 1,000 veVELO locked. Individual wallets are limited to 10% of the total rewards in any single race. A Dune Dashboard that tracks GovNFT bonuses for VELO locks can be found here.

GovNFT Participation Rewards:

Now that you have a GovNFT, what can you do with it prior to the unlock date in November? Participation in governance will be incentivized with 25k OP in additional GovNFTs. For details on how to earn your share of these rewards, check out this guide.

Conclusion

We anticipate the GovNFT to be critical infrastructure for not only Optimism governance but many other Web3 applications to emphasize fairness, transparency, and effective incentive designs.

Tokens are programmable and can be used for several purposes; our belief is that governance participation is among the most important things you can do onchain, and this tool will get that power into more hands.

The Velodrome Superchain Beta will begin its rollout over the next few weeks. Our first deployment, on Mode, will mark the beginning of a broad expansion across the OP Stack Layer 2 chains that make up theSuperchain. In collaboration with Mode and many other L2 partners soon to be announced, Velodrome will fuel the growth of the Superchain and seamlessly connect liquidity across the ecosystem. In this article, we’ll lay out the timeline and details for Velodrome’s Superchain evolution.

The Superchain Vision

The Optimism Superchain is designed to scale Ethereum to onboard billions of users by offering a user experience as intuitive as a mobile app. Combining the security of Ethereum’s base layer with the benefits of Layer 2 networks — high transaction throughput, low transaction fees, and verticalization — the Superchain solves common scalability issues while ensuring a smooth UX through seamless interoperability.

Superchain Growth

Optimism’s Superchain vision stands out as the most credible for realizing comprehensive Ethereum scaling. Both general purpose and application specific L2s will contribute to a vibrant ecosystem that benefits from the Superchain’s horizontal scaling.

To accelerate innovation in the ecosystem, Optimism will support Superchain builders with its perpetual Retroactive Funding mechanism, redistributing sequencer revenues to reward those who create impact, forming a growth flywheel effect for builders and users. Partner chains will also receive vital shared resources such as oracles, indexers, and block explorers for a best in class developer experience.

Notable Superchains include:

• OP Mainnet — the governance hub
• Mint, Zora — NFT-focused
• Lisk — RWAs and DePin
• Mode, Fraxtal — DeFi
• Build on Bitcoin (BOB) — BTC L2

With a combined Total Value Locked (TVL) surpassing $11.9 billion, the growth of the Superchain has accelerated rapidly, with more joining the ecosystem regularly.

The Superchain network is a constellation of specialized chains: Mint and Zora serve NFT aficionados, Lisk targets Real World Assets, Mode and Fraxtal excel in DeFi, and Build on Bitcoin stands out as a Bitcoin Layer 2 DeFi solution. Each chain contributes to the Superchain’s wealth of options, united by a shared ethos — the commitment to the Optimistic vision for scalable and interoperable blockchains.

Velodrome will service the liquidity needs of each.

Velodrome’s Path to the Superchain

As a MetaDEX, Velodrome combines the best of Curve, Convex, UniV2, and UniV3 into a single streamlined protocol. Velodrome will enable the Superchain vision by serving as the central liquidity and trading hub across the network of L2s, ensuring core pairs have ample liquidity needed to develop their ecosystems.

Mode, BOB, and Lisk have already committed to launch incentives campaigns on Velodrome totalling over $2M in voting rewards and customized points programs. They will also acquire meaningful veVELO voting positions to create a strong alignment with the Velodrome community and direct VELO rewards across their respective ecosystems.

Velodrome will evolve to a chain-level incentive layer, starting with a self-contained Superchain AMM implementation and expanding to a fully integrated MetaDEX as follows.

Velodrome Superchain Beta

• Self-contained gauges and Automated Market Makers (sAMM, vAMM) deployed on each Superchain to enable liquidity bootstrapping.
• The ability for layers and protocols to incentivize LPs directly on their native chains using the native network token.
• Trading fees are compounded and redistributed to LPs as VELO emissions and voting will not yet be live.
• All accessible through the Velodrome front-end.

Velodrome Superchain 1.0

• Supported by the early interoperability technology and standards being developed by OP Labs, rolling out soon.
• veVELO voting occurs on OP Mainnet for all Superchains, emissions are bridged and flow to LPs on Superchain networks.
• Protocols can incentivize voters either on OP Mainnet, or the specific Superchains. Voters claim their rewards on the chains they are deposited.
• The addition of Slipstream AMMs to Superchain deployments.

Velodrome Superchain 2.0

• Integrated liquidity infrastructure to seamlessly serve every major chain on the Superchain network.
• Deep liquidity for critical assets such as ETH, WBTC, OP, LSTs and stablecoins, as well as Superchain tokens.
• Invisible cross-chain interoperability, including swapping, voting, liquidity provision, and incentives.

Optimistic Vision

The Superchain represents a pivotal shift in the landscape of Ethereum scaling, offering a comprehensive, security-focused, and efficient framework that not only enhances user experience but also aligns closely with the ethos of decentralization and public goods.

Velodrome will be working closely with OP Labs’ in designing interoperability for the Superchain and expect early developments later this year. Velodrome is dedicated to being the cornerstone of liquidity and is uniquely positioned to empower chains and protocols on the path to an integrated, user-centric Superchain future.

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.

Created By: Alex, Stas, Jack

Last Modified: 2023–12–03

This document examines, in-depth, the technical, organizational, and process-oriented reasons that led to funds being drained from the velodrome.finance and aerodrome.finance domain websites.

For more information and documentation, or to ask us any further questions, please visit our Discords.

Summary

The domains velodrome.finance and aerodrome.finance went through a DNS attack which resulted in an estimated loss/damage of [up to] $250,000 to individuals who interacted with the attacker’s websites. This report represents an early and provisional understanding of the attack and may be updated and modified as the investigation continues.

Following implementation of remedial measures, continued testing, and user feedback, we found no traces of any internal/external accounts linked to Velodrome/Aerodrome and/or linked to the registrar to be compromised.

The attacker used a social engineering attack on the domain registrar to gain ownership control of the account that holds domain names, overriding 2FA and other security mechanisms. As a result, the attacker was able to change the nameservers of the domains and to route the legitimate domain traffic to malicious clones of the Velodrome/Aerodrome websites.

The attacker’s malicious websites prompted users to connect their wallets and to sign transactions which approved asset transfers to the following wallets on multiple chains:

• 0xf64fcedfce714bbe835761e54d7067f2f8231443
• 0x02ba13f39d7df9c3f7592257b636ed6c7cc4ae78
• 0x554b54b6691e1f90a5902bf46d24d7f316e33b11
• 0x927e18fd7c854f43ae9f3c6ec4d03de28ab092dc

A non-comprehensive list of IP addresses used by the attacker, likely VPN addresses, follows:

• 51.89.204.23
• 167.88.61.175
• 2001:ac8:8b:26::d001

Timeline

All times ET.

[22nd of November]

-–: — First social engineering attempt directed at registrar support. The owner of the domain names is not notified. Ongoing attempts continue for multiple days, including multiple failed fake identity verifications associated with Velodrome and Aerodrome, using names that are both on and not on the registrar account.

No notification of the domain owner that this attack is underway as it proceeds.

[28nd of November]

— : — Attacker successfully gains access to account via invalid ID verification.

1:58 [First Attack Begins]
The attacker creates an API key as the owner of the account.

Nameservers got changed to harley.ns.cloudflare.com and danica.ns.cloudflare.com

2:00 Domain name owner receives the email from the registrar about the ownership change

2:31 First user report received that the websites are compromised

2:37 [First Mitigation Begins]
Investigation started and attack confirmed

2:58 The first announcements of the attack are distributed via social channels and users are advised to not use the affected domains

3:09 First attempt to reach out to the registrar.

3:13 Next attempt, followed by attempts at 6:51, 8:31, 8:56, 8:57, 9:00, 9:02, 9:10, 9:15, 9:24, 9:30

5:05 Cloudfront abuse request confirmation received

9:31 The registrar returns the call and is requested to freeze the account and remove any nameservers, initiate an investigation and help with access recovery. The registrar requests 1 hour before being able to escalate the case.

9:55 The registrar sends an email requesting the account to KYC

11:05 The non-owner user (domain names technical contact / authorized user) submits the KYC

13:11 The registrar requests the owner to KYC

13:12 The registrar is requested to do the KYC while on call with them to speed up the things

13:13 Cloudflare escalated the abuse request

13:20 The registrar is reached out on the phone with the request to freeze the account and remove the nameservers. The KYC is requested again and the conversation ends.

13:36 The registrar representative returns the call to assist with the KYC process and locks down the account. The KYC passes and the attacker nameservers’ removal is accepted.

13:49 [First Attack Ends]
The nameservers removal confirmed

14:00 Owner account restored. The access is still locked due to the 2FA reset.

14:00 Cloudflare is reached to remove the restrictions/abuse on the domain names. The registrar is using Cloudflare nameservers, having in place abuse restrictions, these refuse to work for the affected domain names.

14:13 The registrar is reached out to assist with 2FA reset

14:46 The registrar reaches to assist with the 2FA reset

16:51 The registrar is reached to help lift the restrictions on the Cloudflare nameservers

16:54 The registrar is reached out via phone to confirm they are working on lifting the restrictions with Cloudflare

18:07 The owner account was restored

[30th of November]

7:43 Nameservers moved to he.net and DNS records restored

7:53 [First Mitigation Ends]
Domain names were restored to serve the correct websites

8:01 Metamask team is requested to lift up the restrictions/alerts

9:59 Metamask restrictions/alerts lifted

12:00 Legal council call on the next steps

13:44 Cloudflare restrictions for the affected domain names lifted

15:30 DNS vendor call on the next steps to migrate the domain names

[1st of December]

21:42 [Second Attack Begins]
First user report that the websites are compromised again

21:42 [Second Mitigation Begins]
Investigation started and confirmed we are under attack, the attacker nameservers were added back

21:46 First announcement about the second attack went out

21:56 First attempt to reach out to the registrar via all available channels

22:17 The registrar VP was reached and the case got escalated

22:38 The registrar reached out and started freezing the domain name access

23:13 [Second Attack Ends]
The nameservers were restored to point to the safe websites. The registrar is requested to do an audit of the access to our domain names and owner account. The attacker API key is removed. The domain names are requested to be locked at the TLD level pending a transfer in the next few days.

[2nd of December]

00:16 [Second Mitigation Ends]
Announcement about the services being restored is out

Root Cause

The root cause of the attack were multiple carefully orchestrated socially engineered attempts to take over the access to the velodrome.finance and aerodrome.finance domain names. Lack of verified ownership records (generally a yearly requirement by ICANN) for the domain names and lack of alerting protocols to break-in attempts over a series of days led to access being granted to the attacker, in breach of the registrar’s 2FA requirement. The registrar’s delayed reactions to standard OPSec demands to freeze the domain operations and failure to implement control/direct-line over the nameserver restrictions (managed by the registrar partner) provided the attacker with a generous time period to conduct the attack.

Action Items

DEVCO-68: Collect affected users transaction and KYC details for potential mitigation program

DEVCO-69: Launch bounty program to facilitate the return of funds and further investigation of the attack

DEVCO-70: Finalize the review of the decentralized and non-decentralized DNS providers and transfer the domain names to the new infrastructure

Appendix

We’re still working together with all the parties on gathering the logs and supporting material to better understand the attack and attacker.

Dune query returning all the wallets, amounts and transactions towards the attacker addresses: https://dune.com/queries/3249843

Velodrome combines a powerful incentive engine, vote-lock governance model, and friendly user experience to offer a simple platform for protocols to build and maintain liquidity on-chain.

Projects on Optimism can leverage veVELO votes to direct VELO emissions and attract liquidity for their pools. Since voters receive 100% of the fees and incentives on Velodrome, protocols with a veVELO NFT (veNFT) can actively build liquidity while simultaneously earning rewards.

Managing a veVELO NFT, however, can be time-consuming for teams requiring multisig signers to execute transactions related to locking VELO, voting, and claiming rewards each week.

Velodrome Relay will transform the protocol and user experience by automating the process of managing veNFTs. With Relay, protocols will be able to create personalized voting strategies, select how rewards should be managed, and let the Relay vaults do the work for them.

How Relay Works

Velodrome Relay is designed with two primary audiences in mind:

Protocols seeking liquidity can automatically direct emissions to their preferred pairs and compound any earned rewards into additional veVELO voting power.

Users seeking rewards can allow Relay to vote optimally to maximize rewards and sometimes convert into veVELO.

In Relay V1 protocols will control Relay auto-compounder vaults, for which they’ll create personalized strategies for voting. Once a strategy is created, protocols can delegate their veNFTs to the vaults and let Relay do the voting and compounding of rewards for them. Protocols may choose, for example, to vote exclusively for their own liquidity pools or split voting across different pairs. This will make it easy for them to grow their veNFT positions passively while continuing to support their pairs.

All veVELO holders will be able to use the vaults created by protocols. In its next release, Relay will also enable vaults that will vote optimally to maximize the value of rewards each epoch, ensuring that veVELO holders always get the most out of their votes.

Core Features

• Protocols will be “given” a Relay auto-compounder vault that they can control. This means they can control how the managed veNFT votes.
• When depositing into a Relay auto-compounder vault, the veNFT positions are merged and converted into a single managed veNFT. Any user may deposit into these vaults.
• Managed veNFTs are in a permanently locked state, which maximizes voting power and thus rewards and rebases. A veNFT withdrawn from a managed veNFT will have its lock time set to the maximum.
• Rebases will be automatically collected and distributed to depositors.
• Rewards will be automatically collected and compounded into the veNFT position, with the amounts distributed proportionally between depositors.
• The auto-compounder is fee free in the ordinary case, as Velodrome will run keepers that will do the auto-compounding (cost should be minimal).
• In the event our keepers are down, the keeper functions are openly available for permissionless calls on the last day prior to the epoch flip. The maximum allowed slippage for the swap call is 5%.

Other Details

• In Relay V1, voting follows strategies defined by the owners of the Relay auto-compounder vaults. A version with auto-max reward voting and compounding will follow following the release of Slipstream.
• Relay V1 will only support V2 pools for compounding; support for Velodrome Slipstream pools will follow after its launch.
• The auto-compounder factory has a list of all tokens that Relay will programmatically compound into more votepower. These tokens have been chosen because of of their relatively deep liquidity.
• All other tokens — may be swept on first day of every epoch by auto-compounder owners, by keepers after day 1, and any user last day.

Future Roadmap

• The product can be tweaked to provide alternate options for autocompounding (e.g., to USDC or to WETH)
• Can decentralize creation of autocompounders (e.g. check some on chain metric for activity / bribe and create an auto-compounder for them). Will still require monitoring afterwards.

Velodrome Relay will be released in the coming weeks and represents another significant step in Velodrome’s ongoing mission to offer user-centric solutions and provide the best platform for protocols to build liquidity in DeFi. By automating the management of veNFTs, Relay simplifies the process for protocols and users looking to maximize the benefits of their veVELO holdings, contributing to the continued growth and development of Velodrome’s ecosystem.

Soon Velodrome will not just be the liquidity hub of Optimism, but also its volume hub. Introducing our new AMM, Velodrome Slipstream.

The Velodrome model of combining token emissions with standard vAMM or sAMM pools remain the optimal choice for most project’s liquidity needs. While UniV3 style concentrated pools have their benefits, in low volume conditions liquidity supported on fees alone (even with active management) provide inconsistent trade execution and suboptimal outcomes. There are however high volume pairs (i.e. OP, WETH, wstETH, etc) that are well served by UniV3 style concentrated liquidity pools.

This represents a major opportunity for Velodrome. On Optimism, pairs such as WETH/USDC typically do millions in daily volume, most of which is currently being captured by Uniswap liquidity providers. Even modest improvements in the liquidity concentration and capital efficiency of Velodrome pools could capture 4–5x the volume and fees, winning swap execution at any price on critical high volume ecosystem pairs.

Just as combining UniV2 style pairs with an optimized emissions based incentive model has catapulted Velodrome far ahead of traditional UniV2 forks like Sushi Swap, we believe Velodrome Slipstream’s novel approach to incentivized clAMM pools will make Velodrome one of the best places in in DeFi provide liquidity on pairs such as WETH/USDC and OP/USDC. Establishing Velodrome as both the central liquidity and volume hub of Optimism Mainnet and the coming Optimistic Superchain.

Velodrome Slipstream: Objectives

The primary objective of Slipstream is to add support for concentrated liquidity pools as an additional option on top of our existing sAMM and vAMM models in a way that uniquely leverages the Velodrome flywheel.

We’ll do this by:

• Encouraging persistent LPing on Velodrome in all market conditions
• Incentivizing LPers to stake for VELO emissions, directing fees to veVELO voters
• Maximize emissions efficiency to driving optimal concentrations and rewards for liquidity providers
• Maintain full protocol decentralization and transparency (no off-chain gauge computations)

The primary benefit of our Slipstream clAMM is to improve the capital efficiency of stable pools and less volatile assets. Most volatile pools won’t benefit from concentrated liquidity and will likely not transition to it.

Velodrome Slipstream is a novel and fully audited clAMM implementation based on UniV3’s trusted contracts and will fall under our BUSL.

Velodrome Slipstream: Design

Gauge Rewards

Gauge rewards are distributed over time and only in the active tick. The active tick is the liquidity around current price that traders trade against.

• Distributing over time is similar to V2 and encourages persistent liquidity that doesn’t move day to day in response to market conditions
• Incentivizing only the active tick means that we maximize capital efficiency by only rewarding useful liquidity
• Gauges accept positions created by the NFTPositionManager
• Residual emissions (e.g. if there is no liquidity in the active tick for a non-zero amount of seconds in a given epoch) will be rolled over to the following epoch
• The gauge will have helper functions that will allow users to manipulate their liquidity position while it is in the gauge should the user want to increase or decrease liquidity in response to market conditions

Fees + Emissions

The pool factory will allow a fee module to be set. The factory can update the fee algorithm being used by the protocol at any time.

• The factory will ship with the custom fee module that exists with V2
• The maximum fee on this fee module will be set to 3%

During volatile market conditions, emissions may not adequately compensate LPs for the risk they are taking in CL pools.

To keep liquidity on Velodrome, unstaked liquidity will be able to earn trading fees rather than emissions. However, to encourage restaking of LP’s back into the Velodrome flywheel, the pool factory will allow a unstaked liquidity fee rake / tax (i.e. the fee that is levied on LPers that choose not to stake in the gauge) module to be set. The fees earned by this module will be given to the veVELO voters of that pool.

• The factory will ship with the custom fee module similar to the one described above for pool fees
• The default value of the rake will be 10%, with the valid values ranging from 0 to 20%

This fee is designed to incentivize users to stake so that they can participate fully in the flywheel. By not staking, they will still contribute to the flywheel via the small fee that they pay. A small rake should allow Velodrome pools to maintain their TVL advantage meaning LPs will not benefit from moving to a different DEX.

The goal is that Velodrome is able to provide adequate liquidity for baseline market conditions, but also adapt dynamically to volatile ones.

Tick Spacings

Larger tick spacings will make the pools more retail friendly and reduce the frequency of which ALMs will need to rebalance liquidity. The pools will still be more capital efficient than v2, but potentially slightly less efficient than a UniV3 pool of the same tick size and fee. However, because emissions will be able to attract more liquidity, Velodrome will still offer better trade execution at lower levels of concentration.

In addition, since Velodrome will be using custom fee algorithms, it can still maintain another advantage here (e.g. stable pool depegs and the fees go up, our clAMM pools become more attractive to LP in vs alternatives).

Suggested tick spacings are:

• Stable pairs use 0.05% fee tier, with tick spacing of 10
• Established pairs (e.g. OP/ETH), .3% fee tier, with tick spacing of 60
• Volatile pairs, using 1% fee tier, with tick spacing of 200

Miscellaneous

• The oracle will be updated to add a new observation once every 15 seconds as opposed to once every block a unique optimization enabled by the OPStack
• We will provide support for swaps between V2 and V3 pools by adapting Uniswap’s Universal Router for our contracts
• The routing will provide support for actions across a whole host of different NFT platforms
• We may also choose to implement additional support for contracts within the Velodrome ecosystem to make it easier for users to bulk collect emissions / rewards and swap them
• Velodrome Slipstream will ship with the ability for automated liquidity management to be offered on top of it. The goal of this is to help non-professional users benefit from concentrated liquidity pools without having to put a lot of effort in re-balancing their positions

Conclusion

Velodrome Slipstream will be heading to audit soon and represents a major leap forward for Velodrome style DEXs. By combining the best features of Curve, Convex, UniV2, and UniV3 into a single streamlined DEX design it further entrenches its position as one of the leading exchanges in DeFi.

Hope you are ready for the next leg of the race. 🚴‍♀️💨✨

Velodrome has recently received 1.25 million OP to support the Optimism ecosystem by fulfilling three key governance “intents”:

• Expanding the Optimistic Vision: A program that rewards individuals and collectives for attracting new projects and protocols to the Optimism ecosystem. In short, earn OP for making connections and bringing new protocols and projects to Optimism.
• Increasing Governance Participation: We are developing new technology to distribute OP that will vest for 1 year, in line with governance requirements, allowing holders to participate in governance during the vesting period. OP govNFTs will be distributed to individuals and protocols making a commitment to the Optimism ecosystem by locking veVELO. In short, receive OP by locking VELO.
• Enabling Ecosystem Growth: We will continue our successful voting incentive match program on Velodrome to continue to attract new protocols and partners to the ecosystem. In short, receive OP boosts as a protocol for incentivizing on Velodrome.

Expanding the Optimistic Vision

An invitation to contribute towards growing the Optimism Ecosystem.

Velodrome has committed to being a key growth driver of the Optimism ecosystem. To date, our efforts have onboarded 58 new protocol partners to Velodrome and Optimism. To accelerate this growth, we want to empower the broader Optimism community to spread the Optimistic Vision to projects that would benefit from deploying on Optimism and contributing to the ecosystem.

Velodrome is committing 100,000 OP to supercharge its onboarding efforts and spread awareness of the Optimistic Vision — a model of funding public goods and regenerative activities, ultimately working towards the creation of a new economic model. Beginning on the 1st of September, Velodrome will be inviting the community to participate in its business development activities, offering 100% of its OP grant allocation to individuals as rewards based on the impact of their contribution.

These rewards will be split into two categories:

1. Referrals: Make connections between projects not on Optimism and the Velodrome team. Receive bonuses for levels of protocol engagement.

2. Proposals: Create a governance proposal that results in a new project’s deployment on Optimism.

Referrals

Baseline 100 OP: Individual makes an intro to relevant stakeholders, and a discovery meeting occurred with the verified core team of the project, leading to a whitelisting.

Bonus 1 — Incentives (3 tiers, capped at 2.5k OP)

• 50 OP — protocol deposits total voting incentives of >$1k USD over 10-week period
• 500 OP — protocol deposits total voting incentives of >$100k USD over 10-week period
• 2.5k OP — protocol deposits total voting incentives of >$1M USD over 10-week period

Bonus 2 — Locks (3 tiers, capped at 2.5k OP)

• 50 OP — 100k veVELO locked during 10-week period
• 500 OP — 500k veVELO locked during 10-week period
• 2.5k OP — 1M veVELO locked during 10-week period

Stakeholders introduced to Velodrome team members will be added to a public facing tracker on Google Sheets, managed by the Velodrome team. Grants can be split between a group of individuals that make the case to a project together.

Velodrome Team to confirm on tracker once meeting has occurred and met minimum criteria. Voting Incentives and locks will be verified on Velodrome Dune Dashboards.

Proposals

Baseline 500 OP: Proposal to meet minimum quality and be approved by Velodrome team before published and pass a vote in governance.

Bonus 1 — Incentives (3 tiers, capped at 2.5k OP)

• 50 OP — protocol deposits total voting incentives of >$1k USD during 10-week period
• 500 OP — protocol deposits total voting incentives of >$100k USD during 10-week period
• 2.5k OP — protocol deposits total voting incentives of >$1M USD during 10-week period

Bonus 2 — Locks (3 tiers, capped at 2.5k OP)

• 50 OP — 100k veVELO locked during 10-week period
• 500 OP — 500k veVELO locked during 10-week period
• 2.5k OP — 1M veVELO locked during 10-week period

OP rewards will be distributed to all contributors at end of Season 4

Increasing Governance Participation

Velodrome is committing 1,000,000 OP to undertake an ambitious project to increase governance participation. Optimism has implemented a one-year vest requirement to distributions of some of its grants. Currently, the Optimism Foundation does not have a means of maintaining this vest while distributing the tokens to individuals, preventing their immediate participation in Governance at a time when we are seeking to grow overall participation. Velodrome wants to solve this through the creation of GovNFTs, which will allow recipients to use their OP voting power to vote and participate in governance while their OP tokens vest.

That means that veVELO lockers, who are making a 4-year commitment to the ecosystem, will receive 1 year vesting OP that is immediately usable for Governance.

The technology is currently being built for this distribution. However we will be tracking new veVELO locks starting this epoch for three monthly “Velodrome races” that will reward the biggest lockers: so locks that are in by Thursday, September 7th 0:00:00 UTC will start to qualify.

Individuals

Individuals that lock veVELO will be eligible for 350k OP govNFTs to be distributed for 12 epochs based on newly created veVELO deposited to their wallet. The 12 weeks will be divided into 3 different 4-epoch-long “races”. 100K in OP GovNFT’s will be distributed to the top 100 veVELO lockers pro-rata based on the amount of Velo locked by the top 100. The maximum amount any racer can earn in any one race is 10k (we will be monitoring for sybil attacks). At the end 50k, will be distributed among the top 50 lockers across the full 12 weeks. We will exclude known protocol wallets from this promotion.

OP Gov NFTs will be distributed after November 22nd at the conclusion of the full event. The reason for including only the top 100 lockers is that we want to create invested governance participants and distributing higher value govNFT’s to fewer participants will encourage invested participants.

Protocols

Protocols that lock veVELO will be eligible for 250k in OP Gov NFTs. We again want to distribute OP to protocols looking to make a commitment to OP governance participation — in part because they are significant stakeholders on OP, and in part because they are an excellent means of spreading the Optimistic Vision through their own stakeholders. We will have slots for 10 protocols that express interest, and agree to lock 100k for 10 weeks (1 million total) or longer if interested. These protocols will be invested in both Optimism and Velodrome’s success. At the conclusion of this time period, we will distribute a 25k Gov NFT to these partners. This program will run until all 10 slots have been taken. Protocols, please reach out if you are interested.

All

We will create a communication channel for GovNFT holders and other interested participants to receive updates on governance cycles, key upcoming events and provide other critical information relevant to being an Optimism governance participant.

Growing the Optimism Ecosystem

In addition to the programs above, Velodrome is committing 150,000 in OP to continue its successful Tour de OP incentive match program in pursuit of continuing to grow the broader Optimism ecosystem. Current details of this program are copied below:

We hope you are excited as we are for these programs and the next phase of growth for Optimism, Velodrome, and the broader Superchain.

🚴‍♀️💨✨