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📝 Introduction
🟡 Velodrome Finance
Velodrome Finance is the liquidity base layer for the entire Optimism ecosystem. Launched in June 2022, it focuses on properly incentivizing liquidity for DeFi protocols. Interestingly, Velodrome is built on the foundation put in place by Solidly.
🟡 What Problems Does Velodrome Finance Solve?
The importance of liquidity to DeFi protocols cannot be over-emphasized. For a DeFi protocol to function properly, it needs to have some form of liquidity. There are, however, several problems associated with generating and incentivizing liquidity in the DeFi space. These problems include:
- The costly nature of Pool 2 emissions: This form of liquidity incentivization usually fosters “farm and dump” investments.
- Bribing voters: this is a major issue as existing LPs are already ahead as compared to incoming LPs
- Protocol Owned Liquidity (POL) is at times difficult to acquire.
The above are some of the most important issues facing liquidity incentivization on DeFi protocols. To address the above-listed issues, Velodrome introduces several improvements to the Solidly ecosystem. These improvements include:
1️⃣ Strapping Rewards to Emission → On Solidly, access to rewards is possible before emissions. Velodrome solves this by strapping rewards to emissions. This means that bribes deposited in an epoch will be made available to all voters of that particular epoch irrespective of the time the bribe was sent. This, in turn, will help facilitate much-needed equilibrium among voters and external bribers.
2️⃣ White-Glove Support → Velodrome will provide its partners and stakeholders with much-needed support post-launch. To achieve this, Velodrome Finance assigns 3% of perpetual emissions to its team multi-sig.
🟡 Liquidity Pools on Velodrome Finance
Velodrome offers two major liquidity pools (LPs):
1️⃣ Stable Pools: Usually designed for tokens with very low volatility.
2️⃣ Variable Pools: These pools are especially for token assets with high price volatility index.
✍🏻 Methodology
- In this dashboard, the following tables are used to extract data:
optimism.velodrome.ez_swaps→ The data in this table has been used to check the status of the swap in Velodrome Finance.optimism.velodrome.ez_velo_locks→ This table is used to evaluate the amount of locked VELO on this platform.optimism.core.fact_hourly_token_prices→ This table is used to check the price performance of VELO.optimism.velodrome.ez_staking_actions→ This table is used to evaluate the status of staking on this platform.
Correlation(VELO,ETH)=0.466
Moderate Correlation & Positive Correlation
Correlation(VELO,BTC)=0.34
Weak Correlation & Positive Correlation
Correlation(VELO,OP)=0.625
Strong Correlation & Positive Correlation
1️⃣ Swap Volume
The highest volume of swaps on Velodrome Finance was recorded on July 29. On this day, users swapped a total of $94M USD. From this date until the end of October, the volume of swaps had a downward trend, but then again entered an upward trend, which was weaker than the previous trend, so that on November 8, the volume of swaps equivalent to $41M USD was recorded on this platform. In the past days, the volume of swaps on this platform was below 10M $USD. But to answer the question of whether the volume of swap is low or high on this platform, it is better to check the status of swap on another platform such as Sushiswap. The highest volume of daily swaps on this DEX was recorded on June 1. On this day, users had a total of about 531k $USD swaps. Which is very small compared to the volume of swaps in the Velodrome.
On the other hand, the volume of swaps in this DEX has been below 10k $USD in the past days, which is in no way comparable to the volume of swaps in Velodrome. So we conclude that Velodrome is healthy in terms of swap volume.
Almost in July, the trend of the chart related to the average volume of each swap has been upward. In fact, in this month, users have made swaps with a larger volume. Since August, the volume of each swap has almost decreased. It can be argued that since August, the participation of smaller users on this platform has increased.
2️⃣ Number of Swaps & Swappers
The chart related to the number of swappers shows that in general the number of users of Velodrome Finance is increasing day by day. For example, the number of daily swappers on this platform in June was less than 500 addresses, while the number of swappers on this platform reached more than 6700 addresses in November.
On average, 2294 unique users have swapped on this platform. Meanwhile, more than 2098 users have swapped on this platform in half of the days.
The number of swaps has been on the rise in two time periods:
- July → During this period, the number of swaps reached more than 71k in one day → July 29
- The first week of October to the first week of November→ during this period, the number of swaps reached more than 71k for the second time. → Nov 9
On average, more than 20k swaps are recorded on Velodrome Finance daily, which means that in the daily time frame, each user record about 9 swaps on this platform.
3️⃣ Volume of Swap in vs. Swap out
When swapping an asset, the value of the swapped tokens in terms of USD must be equal. The analysis of swaps recorded in Velodrome Finance shows that on October 20, the total swap_out volume was about $428k USD more than the total swap_in volume. On the other hand, on July 30, the total volume of swap_in was about 311k $USD more than the total volume of swap_out. Obviously, the more swap_out than swap_in, it will benefit the users. The results show that since the beginning, the volume of swap_out has been about 0.5M $USD more than the total volume of Swap_in.
5️⃣ Classification of Swap Volume & Distribution of Swap Count
- About 41% of users have total swaps between 100 and 1000 USD. If we assume that swaps with a volume of less than 1 USD are fake swaps to get to know the platform or swaps to increase the number of transactions, then only about 5% of users have such swaps, which is an acceptable amount for Velodrome Finance.
- The chart related to the distribution of the number of swaps is also a uniform diagram, which means that the number of users has decreased uniformly with the increase in the number of swaps. On the other hand, a numerical difference between the number of users who had only 1 swap and the number of users who had 2 or more swaps is not uncommon.
🧐 Observation
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The number of VELO deposits is increasing periodically. On the other hand, the number of VELO withdrawals is also decreasing periodically. The same is true for the number of depositors and withdrawers.
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So far, about 57k deposits have been recorded with Velodrome Finance. This is while the number of VELO withdrawals is about 2.2k transactions.
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On average, each user has deposited for 8 times. This is while the average number of VELO withdrawals by users is about 2 transactions.
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The largest deposit volume of VELO on this platform is on July 27 (about 1M $USD). Meanwhile, the largest VELO withdrawal volume was recorded on July 29 ($547k USD).
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So far, the volume of VELO deposits on this platform has been more than 4 times the volume of withdrawals.
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0xe247340f06fcb7eb904f16a48c548221375b5b96 user has deposited the largest amount of VELO on this platform. This user has deposited a total of about 890k $USD in 142 transactions. But the 0xd5448f6ca7fca7c54e694aa6bf0b3bb9881bd49d user has deposited VELO the most times. This address has only deposited about $9 USD in 194 transactions.
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Most depositors have deposited between 100 and 1000 $USD. (32.1%)
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Fake deposits make up only about 10% of the total volume of deposits. (Fake deposits mean deposits with a volume of less than 1 USD.)
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19 addresses have locked more than 100k $USD of VELO currency on this platform.
1️⃣ Standard Deviation of Price
The standard deviation is one of the dispersion indices that shows how far the data is from the average value. Therefore, it can be a good indicator to determine the amount of data fluctuation. On the other hand, the standard deviation is also used to determine the reliability coefficient in statistical analysis. In scientific studies, data with a difference of more than two standard deviations from the mean value are usually considered outliers. Therefore, in this part, the standard deviation is used as a tool to determine the fluctuation of the VELO price. The standard deviation of VELO price is around 0.014, which shows that the price of this currency is not far from its average price.
On the other hand, there have been no sudden fluctuations in the price of VELO since August 11. But from July 27 to August 10, the price fluctuations of this currency have been significant. In June, VELO price fluctuations were significant for several days.
2️⃣ Price Correlation
The evaluation of the correlation coefficient of the price of VELO token with other currencies shows that the correlation between the price of VELO and BTC is weak, which can be a strong point for this project. On the other hand, the correlation between VELO and ETH is moderate and the correlation between VELO and OP is strong. This shows that VELO is more dependent on OP price than BTC.
🧐 Observations
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The number of stakers and the number of transactions related to staking in Velodrome Finance are increasing day by day. In other words, the number of stakers has increased from about 300 addresses in June to more than 4500 addresses in November.
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The number of transactions related to staking is about 2.5 times the number of transactions related to unstaking.
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The VELO/USDC pool is the top pool in terms of staking count.
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Since the middle of September, the number of new users who have staked in Velodrome finance has been increasing.
💡 Conclusion
In this dashboard, the performance of Velodrome Finance was analyzed using metrics. Some of the most important results obtained are:
- The volume of swaps in Velodrome Finance is far better than other dexes such as Sushiswap.
- The number of swappers on this platform is increasing day by day.
- VELO currency is the fourth best currency on this platform in terms of swap volume.
- The largest number of users had total swaps between 100 and 1000 USD.
- Only 5% of users recorded fake swaps (swaps with volume less than 1 USD).
- The number of transactions related to locking VELO on this platform is increasing day by day.
- Most users have deposited between 100 and 1000 USD of VELO currency.
- Since August, the price fluctuations of VELO have been very low.
- The correlation between VELO and BTC price is weak while the correlation between VELO and OP price is strong.
- The number of transactions related to staking in Velodrome finance is increasing day by day.
Analyst: Emanoel
***Twitter: ***
Discord: Eman#9698
Special thanks to the Flipsidecrypto 🧡