Velodrome Finance has made a name for itself in decentralized finance by giving all trading fees directly back to its users. This approach doesn’t just reward people who participate, it encourages more involvement and makes sure no profits end up in the hands of venture capitalists or big centralized organizations. Built on the Optimism network, Velodrome Finance put its community at the center from day one.
What Is Velodrome Finance?
Velodrome Finance is a standout decentralized exchange (DEX) and automated market maker (AMM) that works on Optimism, a scaling solution for Ethereum. Here, users can swap different cryptocurrencies quickly with very low trading fees, add funds to liquidity pools, and even help steer how the project runs through governance features.
With its user-friendly site at velodrome finance, the platform focuses on lightning-fast trades thanks to well-optimized smart contracts. Velodrome didn’t use any VC money, token pre-sales, or private investments to launch. Instead, it was designed for anyone to join and for all value to go right back to the ecosystem’s users.
How The ve(3,3) System Works
Velodrome Finance uses what’s called the ve(3,3) model, which takes ideas from other successful projects and alters them. Here, people can lock their native VELO tokens and receive something called veVELO. Having veVELO gives users power to vote on important issues and access to a portion of the fees collected.
Those who have veVELO can vote every week on which liquidity pools, known as ‘gauges,’ should receive new rewards. The more VELO someone locks up (and the longer they lock it for, up to four years), the higher their veVELO balance, making their votes more powerful. This setup encourages people to commit to Velodrome for the long term.
Protocols will often try to convince veVELO holders to steer rewards toward their pools by offering extra incentives, which are sometimes called bribes. This builds competition among pools, boosts liquidity, and makes sure lots of activity flows through Velodrome.
How Trading Fees Are Collected
Every time someone swaps tokens on Velodrome, a fee is charged—usually quite small, somewhere between 0.02% and 0.05% per trade, though it can go up to 1%. These fees are taken in the tokens involved and remain in each liquidity pool.
What’s different from many DEXs is how Velodrome splits these fees. Instead of passing fees on to both liquidity providers (LPs) and the protocol itself, Velodrome sends all these fees—every single bit—to the veVELO holders who used their vote to support those pools. This means if you vote for a pool, all those penalties for using it get sent to you and others who did the same.
This flexible structure lets Velodrome keep trading affordable, even when markets are wild, and puts users right at the heart of the action.
The 100% Fee Return Mechanism
The main thing separating Velodrome from others is that all trading fees gathered from a pool go only to the users who vote for that pool. Every week, these accumulated fees are collected, then handed out to voters who showed support via their gauge votes.
In Velodrome’s model, liquidity providers usually do not get trading fees directly. They instead make money through VELO reward emissions and possible bribes, making the voters the primary fee recipients. This is very different from competitors, like Curve, where fees are shared roughly 50-50 between liquidity providers and voters, or Uniswap, which generally gives fees to just the LPs.
By sending all fees straight to pool voters, Velodrome builds a community-driven cycle that mutually rewards activity and voting.
Why This Model Helps Liquidity Providers and Traders
When someone provides tokens to a liquidity pool, they get LP tokens, which can be staked to earn VELO rewards if that pool gets chosen in gauge voting. While they don’t collect direct trading fees, many still find the high token emissions and bribes generous, leading to some of the best annual yields in DeFi.
Traders gain too. With deep liquidity supported by incentivized pools and with Velodrome itself adding stable funds, swapping is smooth, slippage stays minimal, and experience outpaces many rivals.
This ecosystem spins up a “flywheel effect”—trades create more fees, which leads to higher voter rewards, which attracts even more liquidity, all of which then attracts still more trade.
Gauge Voting, Bribes, and Extra Incentives
Every week, veVELO holders can point their votes at certain pools. The pools with more votes receive more VELO emissions, which increases their LP rewards and often attracts even more liquidity.
Projects can further encourage voting by offering rewards of their own (known as bribes), so veVELO holders may earn from three places at once: trading fees from successful pools, VELO emissions, and any bribes that might be on offer. This makes voting very worthwhile and rapidly pushes liquidity to the most active pools.
For example, if a popular stablecoin pool gets a lot of votes, all the trading fees and any extra incentives offered find their way into the wallets of the voters supporting that pool.
Comparing Velodrome With Other DEX Platforms
Here’s how Velodrome’s user-first model looks next to some of the top names in the space:
| Feature | Velodrome | Uniswap | Curve |
|---|---|---|---|
| Fee Distribution | 100% to veVELO voters | Most to LPs | Split 50/50 between LPs and token holders |
| Swap Fees | 0.02%-0.05% | 0.05%-0.3% | 0.04%-0.4% |
| Voter Incentives | Fees, bribes, emissions | No direct voter rewards | Fees only |
| VC Funded | No | Yes | Yes |
With everything focused on the active users, Velodrome naturally sees higher portions of total revenue flow to those engaged in its community compared to many competitors.
Results and User Experiences
Since starting up, Velodrome has brought in daily trading activity that often tops $50 million and maintains over $300 million locked in pools. All fees earned feed back into the weekly payouts controlled by gauge voting.
Those with veVELO regularly pick up strong returns by voting for the busiest pools, while LPs who use additional tools like vaults can optimize their earnings even more. And with the low network fees on Optimism, payouts lose hardly anything to gas costs.
Avoiding outside investment keeps value in the community, with no investors “skimming” profits off the top.
How To Use Velodrome
Getting involved is simple: Go to https://velodrome-finance.app, connect a crypto wallet, move assets over to Optimism, and start swapping or supplying liquidity. To take part in voting and fee collection, VELO needs to be locked into veVELO.
Startby adding funds to stablecoin pools to minimize sudden losses while learning the system. The platform offers an easy way to watch how different gauges are performing.
Remember, security is very important. Velodrome’s code is open and externally audited, but take time to understand the risks of smart contracts before investing and always use caution.
The Secret To Velodrome’s Staying Power
At its core, Velodrome stands out because it lets all trading activity enrich users who participate as voters—not profit-seeking investors or corporations. By rewarding long-term, active governance, it encourages stability, deep liquidity, and strong daily volume, cementing its role as a key player on Optimism.
This way of sharing value signals a shift in DeFi that rewards commitment and active roles, removing profit extraction by outside parties and letting users share directly in the protocol’s growth.
In summary, every trade carried out on Velodrome isn’t just a swap between tokens—it’s an investment straight into the pockets of those helping make the project successful. This is true community-centered DeFi in action.











