Liquidity providers deposit funds into Velodrome and stake their LP tokens to receive VELO tokens in proportion to their share of the votes (token incentives).

Velodrome is a non-custodial exchange protocol built on Optimism. Velodrome was founded by veDAO members and launched in 2022.

VELO tokenholders own and govern the protocol. They vote which pools they wish to earn trading fees from (revenue), while the pools' unstaked liquidity providers earn the remainder of the trading fees (supply-side fees).

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Velodrome

# Velodrome Token incentives Methodology

## 1. Overview

The Velodrome token incentives metric measures the daily USD value of VELO token rewards distributed to liquidity providers through Velodrome's gauge system on Optimism. This metric tracks when liquidity providers claim their earned VELO rewards from liquidity mining programs, providing insight into the platform's incentive distribution and liquidity provider engagement across different trading pairs.

## 2. Data sources

The calculation relies on several key data sources from the Optimism blockchain:

- **Velodrome reward claim events**: Parsed `Gauge_ClaimRewards_event` logs from Velodrome V1 and V2 gauge contracts that capture when liquidity providers claim VELO token rewards
- **Gauge creation events**: Parsed `Voter_GaugeCreated_event` logs that establish the mapping between gauge contracts and their underlying liquidity pools
- **Pool creation events**: Parsed pool creation event logs including `PairFactory_PairCreated_event` (V1), `Factory_PoolCreated_event` (V2), and `CLPoolFactory_PoolCreated_event` (V3) that identify trading pairs and their token compositions
- **Token metadata**: Token symbols, decimals, and other metadata for creating readable pool names and handling decimal precision
- **End-of-day price feeds**: End-of-day VELO token price data for USD conversion

## 3. Step-by-step calculation

### Component A: Liquidity incentive events extraction
- **Purpose**: Captures all VELO token reward claims from Velodrome gauge contracts
- **Logic**: Extracts `Gauge_ClaimRewards_event` logs from both Velodrome V1 and V2 protocols on Optimism. Each event contains the timestamp, transaction hash, log index, gauge contract address, and claimed reward amount. The component distinguishes between protocol versions using different VELO token contract addresses: V1 uses `0x3c8b650257cfb5f272f799f5e2b4e65093a11a05` and V2 uses `0x9560e827af36c94d2ac33a39bce1fe78631088db`. All events are classified under the 'Exchange AMM' business line within the 'exchanges' market sector and 'dex' business segment.
- **Key fields**: `block_timestamp` for timing, `account_address` for the gauge contract, `amount` for VELO tokens claimed, `chain` and `version` for protocol identification

### Component B: Account mapping and enrichment
- **Purpose**: Maps gauge addresses to their underlying trading pairs and creates readable pool names
- **Logic**: First joins the incentive events with gauge creation data from `Voter_GaugeCreated_event` logs to map each gauge address to its corresponding pool address. Then joins with pool creation events to identify the token pairs (token0 and token1) that comprise each pool. Finally enriches the data by joining with token metadata to obtain token symbols and decimals, creating readable pool names by concatenating token symbols with hyphens (e.g., 'USDC-ETH'). This process spans multiple Velodrome versions, handling different event schemas for V1, V2, and V3 pool creation events.
- **Key fields**: `incentive_account_address` (gauge), `exchange_account_address` (pool), `account_name` (readable pool name), `token0_address`, `token1_address`, and token decimals

### Component C: Currency conversion and decimal correction
- **Purpose**: Converts raw VELO token amounts to USD values with proper decimal handling
- **Logic**: Applies the `convert_to_usd_and_correct_decimals` macro to transform raw token amounts into USD values. This process corrects for VELO token decimals (typically 18) to convert from wei-like units to actual token amounts, then multiplies by end-of-day VELO token prices to get USD values. The conversion uses end-of-day pricing to ensure consistent valuation across all transactions within each day.
- **Key fields**: `token_incentives` converted to USD-denominated values with proper decimal precision

### Final aggregation
- **Combining components**: All enriched incentive events are combined with their corresponding pool information and USD-converted values in a single dataset
- **Currency conversion**: VELO token amounts are converted to USD using end-of-day VELO token prices, with proper handling of token decimals (18 decimal places)
- **Time aggregation**: Timestamps are truncated to day boundaries using `timestamp_trunc` function to enable daily aggregation of incentive distributions
- **Final calculation**: The `finalize_metric_token_incentives` macro standardizes the data schema, validates business line identifiers, applies a zero-fill strategy for missing data points, and ensures consistent metric formatting. Chain availability filters are applied to ensure data completeness across supported networks.

*This methodology was automatically generated by Token Terminal's methodology analyzer.*

Value of native tokens distributed as incentives.

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Token incentives

Token incentives

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Chain breakdown