Stargate wants to transfer $1.5 million in protocol-owned liquidity to Layer 2 DEX of Velodrome in exchange for more VELO emissions and a higher APR.
Stargate is proposing to transfer $1.5 million worth of protocol-owned liquidity (POL) to Velodrome, the leading Ethereum Layer 2 DEX, in an effort to broaden its reach. By directing VELO emissions to their liquidity pools and rewarding voters with veVELO tokens or other incentives, Velodrome's voting system enables protocols to draw liquidity. Voters' VELO bribe multipliers from the previous voting round produced a $3.5 VELO payoff for every $1 in bribes.
Under the "Tour de OP" incentive program, Velodrome has pledged to match 40% of Stargate's bribes in an effort to entice Stargate. This has the potential to have a 4X+ impact on STG-liquidity USDC's incentives when paired with the bribe multiplier. The LP can still be used by Stargate's liquidity providers, who can then route it through all aggregators for the same execution. The APR paid, nevertheless, will be greater than what Uniswap is currently providing.
In the event that it is effective, Stargate can move more POL to Velodrome, increasing its liquidity and gaining more VELO emissions. Stargate can drastically reduce the requirement for STG emissions in the future while retaining a strong liquidity layer on Optimism by locking VELO payouts as veVELO. Moreover, locking veVELO will make Stargate eligible for a Lock Bonus, which is normally worth 30% to 40% of the VELO locked and is given in OP.
By promoting Stargate through its ecosystem and onboarding new users to the network, Velodrome will match Stargate with its sizable and active DeFi user base. Following the conclusion of a vote period, VELO emissions will move to Stargate's LP, increasing the APR for its liquidity providers and gradually lowering STG emissions.