Velocimeter has always been a think tank of innovation. It was one of the first Solidly forks to issue option tokens. It created the Masterbooster and the ExerciseSorter to name a few more. The next thing in the evolution for Velocimeter is version 4. These are the highlights of V4:
LP-backed veNFTs with much shorter lock times
Options Exercise fees lump sum to LPers
No more Rebase
Emission scale based on active gauge count
Permissionless gauges
VMCoupons for giveaways
NFT splitTo()
Gaugeless LPs earn fees
Single Pool Pausing
This article assumes you are familiar with ve33 and Solidly forks.
This article uses WETH as a placeholder for all other wrapped gas tokens of various chains.
In the past, and is the case for all Solidly forks, veNFTs only require users to lock liquid tokens into a veNFT to gain voting power. This separated the liquidity providers from the voters. It also allowed for the creation of veNFTs out of thin air from treasury or pre-minted assets.
In V4, Velocimeter will require lockers to lock VM/WETH liquidity pool tokens for VM.
These new locked tokens are referred to as veLPs and are still NFTs with decaying voting power based on time to unlock.
This will ensure that voters are in sync with LP holders. It will also removes the ability to mint veNFTs out of thin air.
Due to the fact that LPs will be locking other assets, such as WETH, lock times are drastically reduced.
The lock time of the veLP is yet to be concretely determined, and might even differ from chain to chain. That said, it won't be excessively long but rather something closer to 90 days.
The new veLP design allows holders to elect to auto-relock their veLP to maintain their voting power. If you have this feature enabled any action with the veLP, ie voting, will extend your lock time to the max.
Holding a veLP gains you lump sums of various rewards.
The fees from exercising oVM will still go to the LPers as they have done in V3. However, now they will be granted to veLP holders on a weekly basis based on their voting power.
Remember voting power decays linearly.
So two users that have the same amount of LPs tokens locked, but with different voting power from differing unlock times will not get equal shares of the WETH revenue from exercising options tokens. The user with the lock time further into the future will get more than the holder that unlocks sooner.
There will no longer be any regular VM/WETH gauge to earn oVM. However, there will still be the ability to vote to direct VM tokens to VM/WETH. Voting on this pool, will direct VM tokens to the veLPs but they will earn them weekly, with the same consideration of lock time decay as with the exercise revenue. They will also be in the form of liquid VM tokens.
These rewards are delayed by one week. So you get last epochs rewards this epoch flip.
One of the most common feedback was that the options for Velocimeter option tokens were too many and too complex. They are now simplified.
So now there are only 2 options:
Exercise which costs the most and converts oVM into liquid VM
ExerciseVE which costs less and requires users to bring forward the WETH needed to pair with the VM found in the oVM tokens. This method will always create you a new veLP.
The cost for each type will be clearly displayed on the front end where you are exercising the oVM tokens and can vary chain to chain.
In V4, there will no longer be any rebase of VM tokens to NFTs. This is for 2 reasons:
veLPs already get liquid VM token emissions based on voting directed to VM/WETH pair.
rebasing models simply increase inflation as they are most commonly employed.
In the past, emissions were designed with a declining arc where they started highest in week one and are reduced weekly. This design requires a large amount of participation from partners, and liquidity pool creators to ensure that few holders dominate the reward farming.
In V4, this is flipped. Emissions are now a factor of how many gauges there are. The more gauges there are the more emissions are minted. That being said, voting still fully directs emissions. If a gauge gets 5% of the total votes it will only still get 5% of the emissions even though the addition of that gauge may increase emissions by more than 5%.
At least 1% of the votes must be directed to any gauge to increase emissions. In the case some unpopular gauges are made, and they receive some small amount of votes (less than 1%) they don't increase the total amount of emissions for that epoch. They will however, get their allocated percentage of emissions. Additionally, if a popular gauge becomes unpopular and no longer gets at least 1% of the votes, this will cause emissions to decrease, assuming all other things remain the same. This has the added benefit of the system being able to automatically scale down.
This design does have one difficulty for investors in that there is no longer any Fully Diluted Value because there is no Max Supply of tokens. Velocimeter V4 will print on demand and print forever.
In V4, the creation of gauges have become permissionless as was the original vision of Solidly. However, there are safeguards added to ensure that they are not exploited.
First of all, LPs that want a gauge will be required to pair their assets with whitelisted assets such as WETH. This requires that projects use tokens that have a valid trading path and that siloed $SPIDERMAN/$SUPERMAN LPs never get gauges.
Secondly, because only gauges that are voted on will get emissions, projects will need to obtain voting power. Remember veNFTs are in fact veLPs with WETH in them. So this will ensure further "investment" thought in the plans to get a gauge on Velocimeter.
Thirdly, in the rare case that a user decided to still make a suspect coin liquidity pool with a whitelisted asset, deploy a gauge, and obtain 1% of the votes, these gauges can still be paused. Pausing the gauge will:
stop that gauge from getting reward allocations
lock that veLP's votes to that gauge PERMANENTLY
inflate emissions for a single epoch at worse
Velocimeter has always tried to give to veNFT holders on other chains and V4 will be no different. VMCoupons have been designed with this in mind.
VMCoupons are option tokens that hold VM tokens but can only be exercised to veLPs at no cost. Users will need to bring the Gas token needed to build the LP that is inside the veLP though.
Another factor here is that these coupons do expire. At some time, depending on the campaign of the chain, the team will trigger a cooldown which will start a clock for these to expire. After this cooldown, VM tokens inside unexercised coupons will all be burnt forever.
The burning/expiration features allow Velocimeter to be very generous with these coupons and to give many to many people with the only risk that there be a very large initial supply in the locked LP. Velocimeter wants the deployments to be sustainable, so there is certainly a point where this becomes a selling risk after veLPs unlock. So, the amount of coupons given out will be carefully considered for each campaign, considering both protocol owned liquidity, partner interest, and demand from participants.
In the past, when a user split their NFT, the original NFT was destroyed and two new NFTs were created. Velocimeter found this wasteful, so if you covet your NFT #69, you can keep it by calling the splitTo() function which will simply remove the amount desired and mint a new NFT with that amount, and the same expiry time but also retaining the original NFT.
In the past, Velocimeter always removed the fees from LPs and either sent them as bribes for LPs with gauges or collected them in a tank for LPs that didn't have gauges. This was based on the idea that LPs that didn't create gauges were gaining the benefit of the protocol without giving anything back.
This idea has changed.
Any memecoin creator worth their weight in fecal matter knows that the trading fees are the best way to farm their community. As a result, all trading fees for LPs that don't have gauges will remain in the LP as they do with all Uniswap V2 forks.
Many Solidly forks have the ability to pause the system in case something were to be suspicious. V4 takes this idea further and allows for the pausing of trading on a single pool. Beside the security incidents, this also allows for VMCoupons to maintain a certain exercise price for all holders. It also allows for other ideas where the pool needs to maintain its price for some period of time.When trading is paused LP provides still can freely enter and exit their LP positions.
Cer Ceazor Sandwich
