I would like to share a new DeFi which caught my eye with it's unique concept.
VelotokenVLO is a ERC20 Token that aims to experiment in utilizing velocity as a means of determining token value. In general, it combines the rebasing function of Ampleforth and governance protocol from Compound. Where it differs from Ampleforth is that instead of rebasing based on price, it utilizes the economic principal of velocity to determine it's supply. In simple terms, the amount of times that the VLO token is transacted in a given time period will determine the number of tokens in existence.
What is velocity? Velocity is essentially a measure of how much a currency is actually being used. The following example is taken from the medium post (linked in this post) by the pseudonymous creator SuperMises --after famous Austrian Economist Ludwig von Mises.
“If I use a $10 bill to tip a waiter, who pays a cab driver $10, who then orders a $10 pizza that same night, the total value of that bill for the day amounts to $30.
The velocity of that $10 bill just caused the value of the bill to triple.”
Thus, velocity is a well established economic principal which is intricately tied to the value of a currency. That is to say a principal feature that defines the value of a currency is the ability for it to be transacted between two parties.
Why hasn't velocity been used before? Historically, velocity has only been estimated for any given currency, owing to the impossible task of tracking the activity of every unit of currency in existence. Those paying attention may also notice that this is exactly what blockchains and their immutable ledgers do.
Why use velocity now? It is the opinion of the creator SuperMises that controlling token price by velocity-based rebasing offers a number of advantages (taken from whitepaper, you will find the full WP from discord or telegram):
- Unique volatility footprint that correlates only moderately and time-delayed with the main crypto currencies.
- Inverse and elastic token supply curve with a unique supply momentum and price signaling.
- This results in unique incentives to hold, trade arbitrage and speculate with and on VELO tokens.
How will VLO work? The VLO protocol will measure velocity over a given epoch (12 or more hours).
When the rebasing function is called (at most once per 12 hours) the protocol will determine the velocity and adjust the supply. The greater the velocity, the lower the token supply (and thus the higher the scarcity). By contrast when velocity decreases, the token supply will increase up to a maximum of 100 million tokens. Rebasing will no longer increase the token supply after this point.
Premining, Distribution and Governance? No premine. All tokens will be distributed over an approximately 1 month period using using fair farming with staking pools.
Each VLO transaction does however take a small fee, which is then deposited into a governance fund, which is controlled by voting on proposals with tokens in the same way it is done on the Compound platform and others.
ConclusionsOverall, I found the concept to be new, and potentially will add new value. By the admission of SuperMises himself, it is unknown what the outcome of this little DeFi project will be, but it is certainly interesting from a economic perspective. How will using this previously impossible to implement economic principal translate to token price and value? It's hard to say but for those of you with the same curious heart, you can find out more about Velotoken by following SuperMises at
https://supermises.medium.com/The distribution is happening at: https://velotoken.fi/Currently, Tokens can be obtained by staking LP tokens for ETH/DAI, ETH/USDC, ETH/USD, ETH/WBTC or purchased directly on Uniswap.
