Velodrome Finance launched on Optimism in June 2022, built by a team that forked and substantially improved Andre Cronje's Solidly protocol (which itself launched on Fantom but failed due to rushed deployment without governance safeguards). Velodrome fixed Solidly's critical flaw — the absence of vote decay, which allowed a single large holder to permanently dominate emissions — by implementing weekly vote resets and an improved governance design. Since launch, Velodrome has dominated Optimism's DEX landscape, consistently accounting for 40-60% of Optimism's total DEX volume.
ve(3,3) Mechanics on Velodrome
Velodrome's ve(3,3) model works as follows: (1) VELO holders lock their tokens for up to 4 years to receive veVELO (vote-escrowed VELO, represented as NFTs). (2) Each epoch (weekly), veVELO holders vote to direct VELO emissions to specific liquidity pools. (3) Traders pay swap fees in the pools. (4) veVELO voters who voted for a pool receive 100% of that pool's trading fees as their reward. (5) Protocols wanting liquidity in their pools can bribe veVELO voters with their own tokens to attract votes — making the "bribe per vote" metric the key economic indicator. (6) Weekly VELO emissions to pools attract LPs who receive VELO rewards, providing liquidity for traders.
Velodrome as the Parent of Aerodrome
Velodrome's team launched Aerodrome Finance on Coinbase's Base chain in August 2023 as a sister protocol using the same ve(3,3) architecture. Aerodrome quickly surpassed Velodrome in TVL and volume due to Base's faster growth, but Velodrome remains the dominant DEX on Optimism. The two protocols share codebase, team, and design philosophy — making Velodrome the prototype for the ve(3,3) DEX model that is now replicated across many EVM chains.
Using Velodrome in a DeFi Bot
Velodrome is a non-custodial DEX — no API keys. Bots interact via signed Ethereum transactions on Optimism:
import os
from web3 import Web3
# Optimism RPC
RPC_URL = os.environ.get("OPTIMISM_RPC_URL", "https://mainnet.optimism.io")
PRIVATE_KEY = os.environ.get("BOT_PRIVATE_KEY")
if not PRIVATE_KEY:
raise RuntimeError("BOT_PRIVATE_KEY not set in environment variables")
w3 = Web3(Web3.HTTPProvider(RPC_URL))
account = w3.eth.account.from_key(PRIVATE_KEY)
print(f"Bot wallet on Optimism: {account.address}")
# Velodrome Router address on Optimism
VELODROME_ROUTER = "0xa062aE8A9c5e11aaA026fc2670B0D65cCc8B2858"
Security notes for Velodrome bot:
- Store
BOT_PRIVATE_KEYandOPTIMISM_RPC_URLin environment variables only — never in source code. - Use a dedicated bot wallet with only the ETH and tokens needed for trading.
- Velodrome v2 uses a Router contract — always simulate transactions before executing on-chain.
- Optimism gas fees are low (~$0.01) but still non-zero — ensure the bot wallet always has enough ETH for gas.
Velodrome's ve(3,3) Flywheel and OP Ecosystem
Velodrome is the primary DEX and liquidity infrastructure layer for the Optimism Superchain — the most important DeFi primitive for any new protocol launching on Optimism or OP Stack chains. Velodrome's ve(3,3) model (pioneered by Andre Cronje's Solidly) combines vote-escrow governance with protocol bribe markets: VELO holders lock tokens for veVELO to vote on which liquidity pools receive VELO emissions each epoch, and protocols pay veVELO voters (bribes) to direct emissions toward their token pairs. This creates a self-sustaining flywheel where protocols compete to bribe veVELO voters, generating yield for VELO holders while maintaining liquidity for the bribing protocols.
Velodrome V2 introduced concentrated liquidity (CL) pools alongside the traditional xy=k pools, allowing Velodrome to serve both standard token pairs and correlated/stable asset pairs with improved capital efficiency. The combination of ve(3,3) incentive alignment and concentrated liquidity positions Velodrome as one of the most sophisticated DEX models in DeFi. Aerodrome Finance (Velodrome's Base Chain deployment) has become the primary liquidity hub for Base Chain, demonstrating the model's scalability to new chains. Compare with Uniswap for Optimism trading depth and Curve Finance for stablecoin pairs. Use our crypto tools and DennTech blog for Optimism DeFi updates.
Velodrome Superchain Expansion
Velodrome's roadmap includes deploying the ve(3,3) model across Superchain-connected chains, enabling a unified liquidity ecosystem across Optimism, Base, and any future OP Stack chains. This cross-chain Velodrome deployment would allow a single veVELO position to potentially direct emissions across multiple chains simultaneously, creating a powerful incentive alignment mechanism that scales with Superchain adoption. Velodrome's core team (including some members from the Optimism Foundation ecosystem) gives it structural alignment with Optimism's long-term development priorities, ensuring Velodrome will be at the center of Superchain liquidity infrastructure planning.
Velodrome's Relay system allows veVELO holders to automate their weekly voting, bribe collection, and relock decisions through smart contract automation — eliminating the need for weekly manual votes that is a friction point for small veVELO holders. The Relay also enables auto-compounding of bribe revenue back into additional veVELO, creating a passive compounding strategy for long-term VELO lockers. Velodrome's sustained TVL leadership on Optimism despite competition from Uniswap V3 and other DEX deployments demonstrates that the ve(3,3) incentive model generates stickier liquidity than standard token emissions on competing platforms.
Velodrome's protocol fee revenue — generated from swap fees on all pools — is split between veVELO voters (bribe supplement) and the Velodrome treasury, funding ongoing development, security audits, and ecosystem grants. The fee split ratio is governance-controlled, allowing veVELO holders to adjust the balance between direct voter yield and protocol treasury growth as the protocol matures. Velodrome's Slipstream concentrated liquidity implementation incorporates the ve(3,3) emission mechanics directly into CL pools — veVELO voters can direct emissions to specific CL pool fee tiers, enabling more granular incentive targeting than traditional CL DEXes where liquidity is incentivized at the pool level regardless of fee tier. Velodrome's long-term sustainability model relies on organic fee revenue from genuine trading activity replacing inflationary VELO emissions as the primary LP yield source, transitioning from a growth-phase emission-heavy model to a mature fee-revenue-dominant model as TVL and volume compound over market cycles.
Velodrome's permissionless pool creation allows any address to create a new liquidity pool for any token pair without protocol approval, enabling immediate liquidity bootstrapping for new Optimism token launches. The combination of permissionless pool creation and the bribe marketplace means that any new protocol launching on Optimism can instantly access Velodrome's liquidity infrastructure — create a pool, start a bribe, attract veVELO voters, receive VELO emissions, and establish meaningful liquidity within a single epoch without requiring exchange partnerships or market making agreements. This open infrastructure model makes Velodrome the default liquidity solution for new Optimism ecosystem projects regardless of their size or existing exchange relationships.