Velodrome bribes - Big opportunity for MetalSwap

🚀 Use Cases
1

Hi folks, I’m 0xFlow and I’m following MetalSwap since the first day.

MetalSwap has recently released its hedging swaps on the Optimism blockchain and after reading the article about the liquidity providing strategy within the Velodrome DEX I had an idea regarding a new use case that would be interesting to implement through the introduction of the VELO token into the dApp.

Inside the Velodrome DEX, the issue of bribes is highly developed, which involves incentives given to those who vote for certain pools.

To vote, it is necessary to lock the Velo token into the dApp, for a period that can be up to 4 years. Once locked, the voting power will be released in the form of veVelo.

The Velo token, since it’s all-time high, has lost about 55% of its value, which puts at risk the strategy of those following the bribes as it is very difficult to recover from this loss. Even by buying at the highest price, if one had opened a hedging position on MetalSwap, they would be in profit since the bribes would have exceeded the premium required by MetalSwap for this coverage.

Currently, 716,944,915 VELO tokens, corresponding to $118,990,854, are blocked to obtain veVelo and receive bribes. These tokens represent 75.5% of the circulating supply of the token, which is 949,249,557.
Those tokens are held by 30k different addresses.

I believe that MetalSwap should consider adding the Velo token to make this use case possible, especially now that they are distributing the OP token to all those who open hedging positions within the dApp.

If the community is interested in it, in my mind, the first steps to follow are:

  1. Create a paper/research that proves that this strategy helps those who bribe on Velodrome.
  2. Start to contact the Velodrome team to build a strategy together.

I will wait for the community’s reply. For now, I will conclude this post.

0xFlow

6 Likes
2

A very good food for thought this, which in my opinion also acts as a bridge to other very interesting protocols and realities for MetalSwap.

The reasoning you have made is not only very interesting, but I think it is also correct, the volumes speak for themselves and have been reached in a historical period not to be underestimated for DeFi and despite its decline in value, the TVL has nevertheless maintained respectable values that could probably find a new eldorado with the arrival of the new bull market.
In scenarios such as Velodrome, where token lock-up occurs over very long periods, a hedging swap could make the investment much more sustainable, both morally and materially, maximising the final profit.

Having said that, I believe that the inclusion of Velo is an excellent asset to include in MetalSwap and, as I said at the beginning, it could act as a pivot towards the introduction of other assets that in turn would open up other important use cases such as Synthetix.

I would love to hear what the community thinks about it too, in my opinion it is a very good idea!

Good work 0xFlow!!!

1 Like
3

The idea of ​​introducing VELO as an asset on MetalSwap has its basis.
In general, any asset blocked under the effect of price volatility finds an advantage in having the possibility of fixed-term hedging.
Linked to this discussion, we could consider the idea of ​​creating an exchange pool for the XMT-USDC governance token on velodrome.finance. Allowing us to have an exchange pair also on Optimism.
We have to keep in mind, however, that the inflation given by the rewards on the L2 will kick in.
It is up to us, as token holders, to evaluate whether the benefit of opening a market for XMT on optimism outweighs the possible downside of the new selling pressure.
Overall, I am in favor of a greater liquidity and accessibility of the token on every available chain.

1 Like
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Yes, I think if MetalSwap wants to continue its journey in this layer 2 it has to have at least one exchange pool in this blockchain. Obviously Velodrome, as the leading DEX in the Optimism ecosystem, is the place to build this pool.
The problem with this use case is that Chainlink has not yet added VELO price feed on the Optimism blockchain and without it we cannot do anything (I think, if there are other options write them here please).

I am also thinking that, in case we want to continue with the idea of implementing the VELO token on our dApp and there is also the idea of creating a new pool within Velodrome, we could ask for a grant from the Velodrome team, and use the obtained VELO tokens to bribe the liquidity providers to our pool. Just a random idea, tell me what you swappers think!