Velodrome Finance has become a significant name in the decentralized finance (DeFi) world, especially as it operates atop the Optimism blockchain. Its growth from a protocol inspired by earlier AMM innovations into a robust platform bridging multiple blockchains highlights an impressive journey marked by continuous learning and improving.
Where It All Began
Velodrome Finance first appeared on June 2, 2022, offering new ways for users to manage liquidity on Optimism, which itself is a popular Layer 2 enhancement for Ethereum. What set Velodrome apart from the beginning was its commitment to solving one persistent problem in DeFi: fragmented liquidity. Drawing inspiration from Andre Cronje’s Solidly Exchange and its unique token systems, Velodrome’s creators envisioned a platform that could avoid the issues that led to Solidly’s downfall. Their answer was to introduce an improved “Solidly 2.0” mechanism, connecting past lessons with fresh ideas.
The platform’s creation was driven by people from veDAO and Information Token (IT), who were keen to set up a system where governance and incentives aligned for both traders and liquidity providers. At the center was the VELO token, which users could lock to earn veVELO and participate in decision-making by voting on which pools would get extra rewards.
In its first few months, Velodrome quickly attracted attention because it offered very low trading fees and sizable rewards paid through emissions. This made it an attractive hub for trading and earned it the title as Optimism’s top decentralized exchange.
Features That Set Velodrome Apart
Velodrome’s foundation is as an automated market maker (AMM), with varied pools keeping trading efficient and focused both for investors aiming at stable assets and those who like more volatile trades. Swapping tokens comes with limited price slippage, and anyone can provide liquidity, collect part of the fees, or earn incentives using VELO emissions.
A key part of the platform is the ve(3,3) mechanics. This system allows users to lock up their VELO tokens—the longer they opt to do so, the greater the rewards they can earn. This arrangement encourages users to commit for the long-term, building sustainability and dependability into the pool’s liquidity. Fees adjust gradually based on votes, maximizing the efficiency for everyone and adapting flexibly to current needs.
Everyone enjoys a fair setup, as all rewards are issued directly on-chain, eliminating any outside parties or middlemen from the equation. Complete transparency and user control remain at the heart of Velodrome. Thanks to this thoughtful design—prioritizing fast trades, low costs, and unique governance—the platform saw a rapid increase in both new users and in liquidity provided.
A Timeline of Growth and Change
A year after its launch, Velodrome introduced its V2 upgrade in June 2023. This revamp brought deeper community control and better structural flexibility. A major step happened with Velodrome Relay, which streamlined how both regular users and entire protocols could automate their liquidity strategies.
In 2023, Velodrome’s total value locked (TVL) broke $236 million, making a strong signal of market dominance. The VELO token’s value also hit new peaks thanks to the Layer 2 ecosystem’s rapid expansion. Later, strategic moves kept Velodrome moving up, with its merger with Aerodrome to form the more comprehensive “Aero” platform. This giant step connected usage and liquidity across multiple chains and distributed new AERO tokens to VELO holders to reflect this new era.
By early 2026, the platform secured a sturdy presence on many networks, including OP Mainnet and Swellchain, holding almost $91 million in locked funds across 11 different chains.
Going Multichain
Merging with Aerodrome under Dromos Labs began Velodrome’s push to span multiple blockchains efficiently. Support for networks like Base, Unichain, and Celo made the protocol more accessible to different users and boosted activity. With innovative Concentrated Liquidity through Slipstream V2 and tools like Metaswaps for flexible trades between different chains, Aero—now incorporating Velodrome’s tech—gained even more ground.
Liquidity no longer stayed isolated to one chain. Daily decentralized exchange (DEX) volume pushed higher, reinforcing the merge’s success. By spreading across chains, Velodrome/Aero positioned themselves to capture a fair share of the DeFi market on layer 2 solutions.
How The Token System Works
VELO is the main utility and governance token of Velodrome Finance. By locking VELO, users get veVELO and can vote on which liquidity pools get more emissions or even decide on platform direction. Liquidity providers can then pick their rewards—trial low trading fees or compete for extra tokens. Traders gain from having plenty of liquidity to ensure lower slippage.
Planned changes after merging refocused incentives through the use of separate engines called AER and REV, aiming for better revenues and lower costs for the whole ecosystem. As activity remains robust on Velodrome, its vol-to-market cap ratio shows ongoing demand and healthy trading.
Forecasts for the token are positive, driven by support from both regular users and large liquidity takers. Prices have dipped from highs but still remain far above historic lows—yet another demonstration of the project’s strong foundation.
Difficulties Along The Way
No journey is without obstacles, and Velodrome tackled several, from challenging market conditions in early 2023 to competitor pressure from giant names like Uniswap and Curve. The team responded by expanding to more chains and merging governance boundaries, which helped smooth out differences in how assets were distributed between Velodrome and Aerodrome.
Cybersecurity was also a high concern—the protocol undertook regular audits and anchored operations on the blockchain for greater accountability. Regulatory developments in DeFi also led to the introduction of verified pools, making the platform more attractive for institutions that need to follow compliance rules closely.
Looking Ahead
Now in 2026, Velodrome continues to prove itself with high daily volumes and a strong TVL. The ongoing transformation into Aero points to bigger ambitions, with plans on the table to work directly with Ethereum mainnet, help launch bridges for USDC, and integrate dynamic rebasing for users to maximize earnings. The team also wants to join prominent launchpads, with expectations of another large increase in user activity.
Overall, the evolution of Velodrome Finance is a testament to adapting quickly—holding onto what works, listening to community feedback, and always embracing innovation. Look to https://velodrome-finance.app for the latest features, or to join this ongoing journey, as Velodrome/Aero takes its next steps toward DeFi leadership.
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