VELO emissions are a fundamental part of the Velodrome protocol. They incentivize liquidity and attract rewards for veVELO voters, who "pay" for the liquidity with dilution. This is why veVELO voters have a strong incentive to maintain a healthy balance of sustainable emissions.
VELO emissions are regulated by a simple set of rules. If weekly emissions drop below 5M (which is approximately 0.3% of the total supply), the VELO FED will automatically replace the existing schedule. This will happen according to a simple set of rules, with veVELO holders voting each epoch on one of three options: increasing emissions by 0.01% of total supply, decreasing emissions by the same amount, or maintaining fixed emissions.
This process will allow the protocol to adjust to exogenous factors such as economic conditions or ecosystem growth. It also ensures that only long-term stakeholders can have a meaningful influence on monetary policy.
By providing this level of flexibility and control to its users, Velodrome is pioneering a new way of managing decentralized exchanges. This innovative approach could revolutionize the DeFi sector and set a new standard for other protocols.
