Alex Cutler and TaoWatts are Core Contributors at Velodrome Finance.

In this episode, we discover how Velodrome defied all odds in the bear market to become a DeFi darling and recently shipped Velodrome V2. Launched in June 2022, just weeks after the Terra UST collapse, Velodrome has managed to not only survive, but gone on to thrive as the most popular DEX to deposit liquidity on Optimism.

The first half of the pod explores the remarkable story of how they built  a popular DeFi product during the worst crypto bear market. The second half is a guide on everything you need to know to understand Velodrome V2, including their ve(3,3) mechanics and how to strategically approach being a liquidity provider or veVELO voter.

------
🔗 Essential Show Links 🔗

► Subscribe on Youtube: https://youtube.com/@defidad
► Subscribe on Apple: https://tinyurl.com/edgepod
► Subscribe on Spotify: https://tinyurl.com/edgepodspotify
► Subscribe on Linktree: https://linktr.ee/edge_pod

► Follow DeFi Dad: https://twitter.com/DeFi_Dad
► Follow Nomatic: https://twitter.com/Nomaticcap
► Learn about DeFi and Web3: http://defidad.com/

------
The Edge Podcast Sponsor Resources

⚖️ KYBERSWAP | DEX AGGREGATOR, AMM, AND AI-POWERED TRADING ANALYTICS POWERED BY KYBER AI
https://kyberswap.com/?&utm_source=KOL&utm_medium=post&utm_campaign=defidad&utm_content=overview

🏗️ MANTLE | HIGH-PERFORMANCE ETHEREUM L2 WITH MODULAR DESIGN, LOW FEES, AND HIGH SECURITY
https://linktr.ee/mantle.xyz

🏢 PARCL | TRADE YOUR FAVORITE CITIES WITH REAL ESTATE SYNTHETICS
https://parcl.cc/edge

🚜 OETH BY ORIGIN DEFI | AN INNOVATIVE ETH YIELD TOKEN LEVERAGING LEADING LSTS AS COLLATERAL 
https://bit.ly/edge-pod

🥑 INSTADAPP | THE NEW AVOCADO SMART CONTRACT WALLET
https://avocado.instadapp.io/

⛩️ UTOPIA | PAYROLL AND EXPENSE MANAGEMENT FOR DAOS
https://www.utopialabs.com/features/offramps?utm_source=podcast&utm_medium=edge

🚀 LIQUITY | UNSTOPPABLE ETH-BACKED STABLECOINS AND LEVERAGE
https://www.liquity.org/

🥩 ETHER.FI | DECENTRALIZED AND NON-CUSTODIAL ETHEREUM STAKING PROTOCOL
https://ether.fan/edge

🙋‍♀️ Interested to sponsor The Edge Podcast? Fill this out:
https://hl6pu9d99u5.typeform.com/to/E3NY5Mqn

------
Timestamps

00:00 - Intro
06:39 - Background on Alex and Tao
14:10 - 2 theses that guided them through the bear
19:47 - A true community launch
25:30 - How less resources led to being resourceful
26:28 - Locking the Velodrome treasury for 4 years
28:34 - Why ve(3,3) AMMs incentivize action
34:32 - Velodrome explained
39:40 - How the weekly rebase yield works
41:43 - Locking up VELO
42:55 - Velodrome V1 vs V2
46:17 - Biggest updates in V2
52:02 - Velodrome Relay and LP voting
53:43 - Fees flipping bribes/incentives in V2
55:05 - Sustained high yields
58:39 - Emission rate updates in V2
1:01:18 - Alex's alpha 
1:02:56 - Closing

------
🔗 Guest Links 🔗

► Velodrome Finance on Twitter: https://twitter.com/VelodromeFi
► Taowatts on Twitter: https://twitter.com/taowatts
► Alex Cutler on Twitter: https://twitter.com/wagmiAlexander
► Learn about Velodrome Finance: https://velodrome.finance/
► Dune Analytics dashboards referenced: https://dune.com/0xkhmer/velodrome
► Velodrome V2 Docs: https://velodrome.finance/docs#

------
🙏 The Edge Podcast is produced by 4RC Labs. If you're a DeFi/Web3 builder, contact our team at: https://fourthrevolution.capital/

All opinions expressed by hosts and podcast guests are solely their own opinions and not necessarily those of Fourth Revolution Capital. Podcast guests and 4RC may have positions in the assets or other matters discussed in this podcast. As disclosed in the interview, DeFi Dad shared he has been an active veVELO holder since summer 2022. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Do your own research. This is not a recommendation or endorsement to buy any token(s) related to any platform(s) discussed.

And something to highlight related to all this is that by having limited resources, in a way what ended up occurring is that we became very resourceful, and it was a natural filter for the people that stayed in the team were the people that were willing to do the work because they had the commitment to build a great protocol.

And the people that were more in it for the money or just for the quick rewards ended up leaving over time just because they didn't have the same perspective.

Hey everyone, welcome to the Edge Podcast.

I'm Dee Fajdad from Fourth Revolution Capital, and I'm here with my co-host and colleague from 4RC Nomadic.

This episode, we will speak with 2 of the core team members at Velodrome, Alex Cutler and Tao Watts.

Building off of the foundational work of the short-lived Solidly protocol by Andre Krohnhe, Velodrome aims to provide a solution for bootstrapping liquidity by aligning protocol emissions with fees generated, not just liquidity.

In VeloDrum's V33 model, V Velo holders vote on which liquidity pools receive weekly Velo rewards and claim trading fees and bribes, while LPs earn the Velo weekly emissions based on how much liquidity they have in a pool instead of the trading fees.

As of this recording, Velodrum has close to $230 million in total value locked in the protocol, which represents nearly 25% of the TVL on Optimism L2.

Having launched in July, 2022, Felidrum just celebrated their 1 year milestone.

And so we're here today to talk about their newly launched V2 protocol.

But before we do just a Quick word from our sponsors who make the Edge podcast possible.

Origin invented the yield-bearing stablecoin in 2020 with OUSD, delivering boosted stablecoin yield with unparalleled usability.

Using OUSD's battle-tested code, Origin launched OETH.

OETH is a liquid staking yield aggregator backed by ETH and LSTs.

Swap for OETH with RocketPool's RETH, Lido's STEF, Frax's FRXETH, or ETH to earn top yield on Ether with a 30-day trailing APY more than twice that of STATH.

With Origin's best-in-class yield strategies, OETH holders enjoy the best ETH yield in DeFi.

Deposit any supported LST, mint OETH, and earn automatically with yield delivered directly to your wallet.

To learn more about OETH, go to OETH.com.

Ecosystem of decentralized and token-governed technologies powered by Mantle's native token, MNT.

a high-performance Ethereum Layer 2 network built with modular architecture.

At Mantle, we're passionate about supporting builders and created a milestone-based grants program for promising Web3 projects.

Calling for ambitious Web3 entrepreneurs.

Visit mantle.xyz forward slash grants and apply for it today.

Whether you're a trader, farmer, analyst, or newbie, you can trade smart with KyberSwap, the OG decentralized exchange and aggregator on 13 chains.

Swap at the best rates, farm with real yields, set limit orders, use their proprietary trading and AI tools with the best UX and DeFi, securely and permissionlessly.

Get better rates, better opportunities, better alpha, and a better trading experience.

The future of Web3 is bright, but crypto startups, DAOs and on-chain organizations can't scale without tooling to power world-class financial and payment operations.

Introducing Utopia, your all-in-one platform to create, execute, and understand your Gnosis safe transactions.

Execute payroll 10x faster through automated payment plans.

Coordinate reimbursements and accounts payable through payment requests.

Execute multi-sig transactions faster with your global team through signing links.

View, label, and categorize all of your safe transactions in 1 place.

Start managing your on-chain payments today by going to utopialabs.com.

To get started with gasless payments, message Utopia's co-founder on Twitter at 0xKaito.

It all started so simply with CryptoKitties and Maker on Ethereum, but quickly became complex with more applications and many chains.

Today, everyone agrees, UX issues are the biggest blocker standing in the way of crypto adoption.

Multi-chain UX redesigned from the ground up.

The first wallet to abstract networks, accounts, and gas.

1 gas tank to pay transaction fees on all chains in USDC.

And native access to Instadap's powerful custom DeFi strategies.

Adam, have I ever told you about my first time home buying experience?

This was years ago when my wife and I lived in the Bay Area, prices for single-family homes were going up, and we were just trying to scrape together whatever we could for a down payment.

But it wasn't long before we realized we had been priced out of buying in our own neighborhood.

Now the most frustrating part of this story is that we knew prices were going up and yet there was nothing we could do to benefit from it.

If I could have been long real estate prices in my region, then at least we could have participated in the market upside with even a lesser amount of money to invest.

So when I stumbled upon Parcel, I immediately recognized a solution for many of us who have been locked out of real estate markets and looking for an alternative way to Get exposure parcel is a decentralized perps AMM where I can long or short real estate Synthetics based on the median price per square foot and some of the most sought-after cities in the world.

Meaning I can get exposure to real estate markets like Boston, Washington DC, and Chicago.

For example, if I had parcel years ago and I was bullish on real estate prices in San Francisco, I could have longed parcel San Francisco index with a minimum of 1 USDC.

Or, if I had just bought a home and wanted to hedge against the price of our home crashing, I could have shorted the same real estate index.

To learn more about Parcel, go to parcel.cc.edu.

In just a moment, we'll introduce Alex and Tao from Velodrome.

They are core contributors for the protocol.

Velodrome is the leading Dex on optimism and is a pioneer in the popular V33 style of AMMs.

Prior to getting into DeFi, Alex worked in politics, tech, and consulting.

Tao has a background in economics, having previously worked in strategy for a Swiss asset management firm and consulting within the tech sector.

Alex and Tal, welcome to the Edge Podcast.

Part of the background to this interview is I have been in Velodrome as a user since summer 2022.

I think I got in within the first few months of you having launched.

And it was a very tumultuous time, of course, because the Terra ecosystem had collapsed, UST had de-pegged.

And meanwhile, this really promising project that is Velodrome had launched.

And since then I've continued to participate in the protocol and I was excited to see that V2 had just launched.

And you are a perfect example of the kind of protocol I think that is doing work to actually progress us to the next generation of DeFi products.

But With all the noise in this space, I think sometimes the fundamentals of really great teams can get drowned out.

So we're here per usual with another quick hit to kind of dissect what is Velodrome and specifically Velodrome V2.

So, you know, normally we like to kick off with just a bit about your guys' background.

I shared some details there, but I would love if either of you would like to share anything more about what led you to working on Velodrome and in DeFi specifically.

So my, you know, my career or professional journey has been very kind of twisty-turney.

I think early in life I got very involved in politics and campaigns,

which was an environment where I was able to learn a lot, but it was 1 of those environments that can quickly burn you out.

And so luckily it happened when I was very young.

So I kind of pivoted and had the opportunity to go work in big tech and learned a lot there.

I've always been very passionate about technology.

I was very excited to work directly in tech and eventually I decided to go try out something else adjacent.

I sort of went to the the marketing and consulting world, got to work not only across a bunch of different tech companies, but of course, kind of every major category touching so many different Fortune 500s, learning a lot there.

But all of that really built up until the point where I had a very close friend of mine, basically red pill me on crypto, started doing what I think many of us did, which is to start playing around a little bit.

I think I built a gaming PC, I started mining.

It's like, what do I do with this stuff that I'm mining?

Well, let me bring it into this ecosystem, my God, I can deposit this thing on a thing, it's gonna give me more things, and before you know it, I was just really snowballing, and I was writing about everything I was learning, and that just naturally led me into a DAO, which at that point was VDAO on the Phantom Network, which was kind of a sub DAO of Solibly.

You know, that's where I met Tao and a whole bunch of the other sort of core contributors to Velodrome.

And that's sort of how I ended up being a part of the launch and everything that's followed with Velodrome.

Yeah, so I think that the beauty of crypto is how you pull on a string and then it just leads you into like wild adventures.

So previously, as you mentioned earlier, I was working basically in asset management, kind of portfolio allocation.

And I just love the field because you get a chance to actually prove the impact of your decisions, right?

You have to take into consideration the, you know, the, the macro, but then also overall market sentiment, you know, a bunch of stuff that goes into the decision making, of an investment.

So, at the same time, of course, I was hearing about crypto in general and like everybody started playing with it a little bit, just like Alex bought a little bit of ETH.

And then when you see the price pumping, you just, you know, your interest rises, right?

And I don't remember exactly how I ended up going into deeper into crypto, but I think for me it was NFTs.

Actually, I started getting a little bit into the NFT wave.

And 1 of the NFTs that I bought early on was this IT token.

It was part of a DAO that had a hundred members, a lot of them crypto native.

And it was an amazing opportunity to just kind of get much deeper into the industry.

It was 1 of the members of the idea of creating VDAO to kind of capitalize on the buildup.

Back in the day, it was, you know, the launch of Solely was getting a lot of attention and Vita was just kind of a Solidly Wars as a service protocol basically.

So it was about strategizing around how to play the Solidly Wars and it was born from IT, eventually became Vita and I was pulled into the team as well, again, where I met Alex and that's where we started.

So like learning about Soli to the, you know, to the every detail and figuring out where it had gaps and where the idea of Velodrome, right, like kind of like, let's do solidly, but properly, how it was supposed to do, because we thought it made a ton of sense.

We thought the overall design was very smart.

It was just the execution itself that didn't work out.

It was right when the market was turning, so everything sort of started collapsing and felt like the world was ending in DeFi.

So yeah, from that, kind of like we bridged over to Velodrome, it's just been, continued to be a wild ride.

Ups and downs and just kind of trying to kind of overcome all the setbacks that we've had.

And just to also final comment to give a perspective of how bad it was when we launched, it was 2 weeks after Luna collapsed.

So in front of us, we still had 3AC, we still had FTX, we still had a lot to deal with from our lunch too today.

That's an incredible story and journey you've been on.

A lot of what you both said resonates so much with me.

Like Tao, just kind of speaking to that speculation aspect and how it draws you in.

I'm a firm believer that speculation is needed.

I know it's always painted with a bad brush, but hey, look, that's how you grab a lot of this attention early on.

And then a lot of us stay for the other things we find and discover within the industry.

Once you look under the hood, it's not just speculation.

It's actually a really interesting movement.

So you touched on, I was kind of struck when I looked at your launch, June 2nd, 2022.

That's like, that's peak doom bear market playing out.

And that's when you launched this protocol.

So we'd love to just hear like, did launching at that time, like harden you as founders and harden the protocol?

You know, how I would describe our mindset going in, right.

So let's say prior, prior to even launching, I think, I think we had, a few key theses like, even before Luna, right.

Many people were, were starting to speculate, right.

That, that we might be heading into, a bear market.

And we even had a lot of people discouraging us from doing what we were about to do, which was potentially launch a brand new emissions-based protocol straight into the store.

But I think there are a few key things that were going through our head at that time.

1 was, of course, that we thought the underlying primitive that Andre Cronin had designed in solidly was fundamentally what I think was originally promised and what the broader ecosystem believed it to be, which was a next generation AMM that took and built upon, improved upon the best of the last generation.

So in this case, Univ2, Curve, Convex, right?

Rolling this all into 1 single streamlined design, aligning the incentives in a much, much more efficient way.

But I think we held onto that conviction even as the market kind of abandoned it.

There was a moment there where A bunch of people were popping up with forks, right?

They weren't changing anything fundamentally about the protocol.

And then nobody was popping up with forks when we launched.

There was a lot of skepticism about us initially because of that.

They thought the primitive was broken, right?

They thought the underlying model was broken.

But I think our faith sort of never wavered there.

The other big, I think, thesis that was present in our mind is that the alt L1 moment was ending, that most of these chains did not need to exist.

So that even if we were going into a bear market, even if we were going to go into a moment of kind of crazy contraction and uncertainty, that if you found the right spot in that market that you could continue to see growth.

And so for us it was we know all L1s are ending and We got a lot of shit for that at the time.

By the way, we now have double the TVL of Phantom, the chain that we left, on Velodrome.

But we said, you know, there will still be builders, there will still be capital, it will just need a place to congregate.

And we thought the opportunity was on optimism.

So then it was really just a question of, you know, is it arbitrary?

We really aligned with optimism's vision.

We thought there was absolute product market fit there for a platform like Velodrome.

And we talked with the Optimism Foundation a lot, had total alignment on that.

So we just, we just figured, you know, if we're in the right place, it's not always going to feel like the, the, the destination is clear, but if we stick to those sort of 2 theses, the primitive works, and no matter what ETH L2s are going to grow throughout all of this.

We're going to be able to persevere and survive.

But there were plenty of very, very dark days.

Plenty of periods where, you know, none of us were getting paid.

All of our vesting tokens were functionally 0 and and you know we really had no idea so we had to just kind of keep that strength of conviction.

Tao is actually amazing at this I think he he's the the in-house optimist he will always always sort of look at what the best possible outcome could be to be sure we don't get lost in despair.

And today is of course another great day for recognizing that yeah, you keep pushing forward because as much as maybe everybody says, you know, we're f**ked, the SEC is gonna, you know, come kill us and it's all going to 0, that may not be true.

And then on a day like this, you know, you see it validated, right?

And here we are, optimism is growing, you know, we're the largest protocol on optimism.

And, you know, we've got a TVL that's more than 2 times that of Uniswap, curve, balancer, kyber combined, right?

And I don't think anybody, even us, would have expected this level of success.

So 1 thing about that launch that we haven't covered is, and this stands out for Velodrome, you all took a route that was not the norm in DeFi.

Normally DeFi protocols start out very centralized.

a core team and the part of it that I think really is at odds with, I think, the backbone of what we all believe DeFi is and what it promises is that there are private rounds normally done.

So you raise money from like VCs and angels and then eventually as you continue to build there is eventually a token and that token at some point gets distributed to investors and most obviously like core team members, including founders.

The part of this that I want to highlight and I'd love your takeaways from is You skipped doing a private round with investors.

And I also am curious if part of that was just the tumultuous time we were in.

Like, did you feel like there was a better opportunity to just launch versus having to, I'm sure, fight the headwinds of trying to raise money in

But anyways, why did you choose to go this path and what are your takeaways from it now looking back a year?

we ever really considered seriously raising.

And I think that that's probably rooted in a few things.

1 is the underlying model was designed to be a ecosystem public good, right?

It was designed to be something that was, that the control of the totally immutable protocol was fully distributed, you know, amongst the ecosystem, that there, you know, there's no proxies on top of the contracts, there's no, to your point, VC allocations, that the stakeholders in the protocol are the ecosystem, it's users, it's builders, and all sort of that.

So we had that basis, that vision, right, from Andre, he gave it to us.

And then of course, optimism totally aligns with that ethos.

They have embraced this vision of organizing their entire chain around the idea of retroactive public goods.

This is why Vitalik is so aligned with the optimism ecosystem.

They are very much trying to bring to life something that was a key vision of his, which is that builders in this space shouldn't have to go out and raise funds.

They shouldn't have to go out and sell tokens.

They should be able to build public goods and then there should be a system in place designed to reward the builders of public goods, right?

And you know, his, I think, famous line on this is it's so much easier to look backwards at what worked than it is to look forwards and guess what will work.

And there's so much, you know, in that Alt L1 thing was just throwing money at people being like, maybe this will work and maybe it won't.

What we know is none of it worked, right?

LPs came in, they took all that money and they moved it all back to mainnet.

So this idea of a public good totally aligned with what Optimism was doing.

It aligned, I think, with our own values.

Optimism gave us a $150k grant to get started, and When you're thinking about paying smart contract devs or bootstrapping a DeFi protocol, you know that that is like almost nothing.

So it wasn't much to start with, but it was enough to get the wheel turning.

And actually, I think probably part of that public good ethos and that mission that we had, that drive is probably what also to a degree helped us persevere because none of us went into launching Belladrome expecting to get some sort of giant payday.

You know, there weren't like our team allocations were very small, relatively speaking, for what you see out there.

We gave away almost the entire protocol in the spirit of being a public good, in the spirit of decentralization.

So yeah, I think that's kind of what was going through our heads.

But I'm curious if if Tao has has any comments on that too.

Since we were VDAO and we had been sort of supported by the VDAO community, we allocated a really good amount to to weave, the token was weave holders, that they were able to basically convert weave for Velo.

I think that was maybe 1 third of the initial allocation.

Then we left a huge chunk for partners, so protocols that were either important for the overall DeFi ecosystem or had a big presence on Optimism.

We gave them big locked positions, VE Velo positions.

And somewhere on those, you know, a small percentage went to liquidity.

Maybe I'm forgetting, there was an airdrop as well, I think, we did, oh yeah, we did a bit of an airdrop for lockers of Curve token, of Platypus, we included a few different DeFi protocols to sort of reward people that have also shown commitment to these protocols by locking their tokens.

And so, as Alex mentioned, we left a small part for the team.

And something to highlight related to all this is that by having limited resources, in a way what ended up occurring is that we became very resourceful.

And it was a natural filter for the people that stayed in the team were the people that were willing to do the work because they had the commitment to build a great protocol.

And we ended up with a team of people that expect nothing.

And in fact, we still have people that sometimes tell us, you know, I don't need as much composition.

You can reduce it while they're doing amazing work.

Some of our devs are incredible and I'm mind blown by them, but they're happy because they're having fun.

And another really cool thing that we did early on that I don't think many other teams have done is that we locked our entire well the way that Velo works you can actually lock it over time so we were vesting the team allocation right initially it was something like 6 months to a year just like a regular vesting schedule but we decided to lock it entirely for 4 years so that we could actually get the you know as a poke was assigned to get some of the rewards of your locker and instead of distributing vel tokens to the team members so that they could sell.

So, I mean, we were basically giving them the option to sell, but instead of doing that, we locked everything and got the rewards and distributed the equivalent value of the Velo equity, but in USDC or in other tokens.

So that would be basically reduced not only reduced the sell pressure from from the team but we basically give them team members the incentive to rebuy Velo if they wanted to, instead of just getting the liquid Velo.

See all DeFi Dad transcripts on Youtube

Velodrome Finance: How They DeFi'ed The Bear Market and Delivered V2