Across Protocol’s pilot program on Velodrome is ending soon. This proposal aims to extend the program for 16 weeks in order to ensure sufficient liquidity for $ACX on L2s and incentivise holders to LP in a capital efficient way.
L2 adoption continues to gain significant momentum as we head into 2024 and as a core cross-chain bridge, Across Protocol stands to benefit by maintaining a strong presence for its native token $ACX.
On Velodrome, Across protocol has attracted $560K in liquidity with the protocol’s incentives currently directing ~2X as much value to ACX/WETH, following an initial ramping up period and improved market conditions. This uptick in incentive efficiency, complemented by Velodrome’s renewed OP grant program, will continue to provide significant support for the ACX/WETH pool.
A summary of Across Protocol’s pilot program to date can be found here.
Specification & Implementation:
On Velodrome, $VELO emissions are directed to liquidity pools based on votes by veVELO (vote-escrow VELO) holders. Protocols such as Across can use veVELO or voter incentives (bribes) to attract votes and emissions for their liquidity pairs.
Protocols bribing on Velodrome tend to receive $2-$3 in $VELO for every $1 they deposit. Major DeFi protocols such as Lido, Synthetix and Stargate leverage Velodrome’s mechanics to maintain deep liquidity on Optimism in a capital-efficient way.
Across will extend its existing program by 16 weeks and allocate $5K worth of $ACX tokens to deposit as voter incentives for its AXC/WETH pool every week. Once an epoch is completed on Wednesday at 23:59 UTC, $VELO emissions will begin to flow to Across Protocols’ LP.
Across may also be eligible for a share of 4000 OP every week whilst it remains in the Top 15 ecosystem pools by voter incentives as part of the current “Tour de OP” incentive program. This amount will be proportional to all other pools in this category and will be deposited as an extra bribe to boost votes further. Details about the current Tour de OP program below.
Protocol Owned Liquidity (POL)
Across Protocol can also allocate some treasury assets towards a small POL position on Velodrome. Protocols with POL are able to capture and farm a portion of $VELO rewards that are streamed to their pool/s.
With a POL position, Across can lock farmed $VELO as veVELO in order to build a voting position - Protocol Owned Votepower (POV) - that will direct additional emissions in perpetuity, while earning rewards in fees and incentives. Other protocols that are doing this include Stargate, Yearn, Inverse, QiDAO among many others.
Protocols with POV which are tracked in the Velodrome veVELO Leaderboard have the flexibility to decide whether to compound their weekly rewards into [a] building more POV or [b] growing their POL - both of which will reduce reliance on voter incentives over time.
Across DAO could focus on locking all farmed $VELO as veVELO over the 16 weeks in order to accumulate significant POV. A third option that unlocks with having POL is also [c] recycling $VELO emissions as bribes for the following epoch.
The Velodrome team can suggest a comprehensive and optimized strategy utilizing all 3 options should Protocol Owned Liquidity become a possibility.
Velodrome is the single largest protocol on Optimism and the largest DEX on Layer 2 Ethereum with ~150M TVL. Velodrome’s governance community is one of the most active and diverse in crypto, with ~15K veVELO holders participating in Velodrome’s weekly voting epochs.
Incentivizing liquidity on Velodrome will naturally boost exposure for Across Protocol, as veVELO voters and Liquidity Providers will find $ACX near the top of the voting and LP pages respectively.
Velodrome will also actively support Across Protocol’s marketing initiatives during the pilot program which means the community will not only benefit from having the option to provide liquidity and trade $ACX but also generate demand towards Across Protocol’s bridge services.
Liquidity incentives on Optimism can represent an additional expense for Across Protocol. However, this expense can be significantly reduced through Velodrome’s bribe-emissions multiplier, Tour de OP bribe matches, as well as any farmed $VELO emissions (through POL) and the rewards (through POV) described above.
Finally, given this program extension will run for 16 weeks, the DAO may use this time to assess results and decide on whether to continue or suspend its program on Velodrome after this period.
The total cost to maintain liquidity via voter incentives without farming and locking $VELO emissions for $5K every 16 weeks will be USD $80K worth of $ACX tokens (~1.5M $ACX at current prices).
If the DAO would like to go ahead with testing out a more optimized strategy with some POL, the Velodrome team can provide a detailed estimate of net costs. Depending on the size of POL deposited, some partners are able to reduce net cost by 100% or more i.e. when the total value of $VELO emissions farmed is greater than the cost of incentives deposited on any given week.
We call this strategy “Paid by Liquidity” to contrast the legacy “Pay for Liquidity” approach.
Yes - move forward with program extension
No - do not move forward with program extension
Abstain - no vote