Overview
What is Vela exchange?
Vela exchange, formerly known as Dexpools, is a decentralized exchange (DEX) built on the Arbitrum network. With the features of a DEX, Vela will provide users with a platform to trade cryptocurrencies in a decentralized way without creating an account or verifying identity like CEX exchanges.
Vela chooses to launch and grow on Arbitrum, thereby enabling fast and low-cost transactions supported by a powerful hybrid on-chain and off-chain architecture. The platform is designed to be user-friendly and offers many features to improve the trading experience for users. Among Ethereum’s Layer 2 solutions, Arbitrum is considered the most prominent.
Vela has closed alpha and successfully launched its open beta on January 31, 2023. The project is on the way to launch its official version in the near future.
Features
Like other decentralized exchanges, Vela allows users to buy and sell cryptocurrencies in a secure and transparent manner. Outstanding features of Vela:
Order book: Vela exchange maintains a real-time order book that displays current buy and sell orders for a particular cryptocurrency. This allows traders to see current market prices and make decisions about their trades.
Liquidity pool: Similar to GMX, Vela operates liquidity pools which are pools of funds used to provide liquidity to the platform. That helps to ensure there is always enough liquidity for users to make their trades, even during periods of high demand.
Decentralized: As a decentralized exchange, Vela operates on Arbitrum and is not controlled by a single entity. This provides users with greater security and privacy than centralized exchanges.
Products
Unlike other common DEXs, Vela supports both spot and perpetual trading, as well as a decentralized peer-to-peer (P2P) over-the-counter (OTC) trading platform for both private and public trading.
Perpetual trading: Vela offers an on-chain order book perpetual option with up to 100x leverage. Vela takes advantage of the network’s high transaction speed and low latency to process transactions faster.
Spot trading: Fully on-chain order book exchange where users can trade assets depending on available spot markets.
P2P trading: A decentralized P2P OTC trading platform which allows users to trade assets publicly or privately to avoid slippage or frontrunning. This was the original product when Vela Exchange was known as Dexpools.
The trading mechanism of DEX Vela is quite similar to GMX. Traders’ profits are extracted directly from the platform’s TVL and on the other hand, the losses (if any) will be shared among the liquidity providers. That is, when the market has a clear trend, uptrend/downtrend, traders often tend to open orders in the direction of the trend, which will be very harmful to the liquidity providers.
Developers and backers
Vela exchange was founded by Travis Skweres and Dan Peng. Both of them have years of experience in technology and consulting. Skewres has been involved in the crypto space since 2012 and founded Portal Finance, which was acquired by Coinbase. Peng and advisors have worked at Balancer, Black Rock, BCG, and Polygon.
The project raised $2.1 million from various rounds. It also has strategic partnerships with Big Brain Holdings, Jade Protocol, Magnus Capital, Orange DAO and Quantstamp.
Transaction fees
Fees on Vela will be a flat 8 bps closing and opening a position. Those who stake VELA/eVELA can earn fee discounts. The discount rate is from 2% – 50% depending on the number of VELA/eVELA tokens staked.
Funding rate has a fixed interest rate of 0.01% per funding interval of 8 hours plus a premium rate that depends on the difference in price between the index price and perpetual market. Thus, if the perpetual price is more than spot price, longs pay the shorts and vice versa.
It also has borrowing fees to ensure sufficient liquidity. Users pay borrowing fees for margin trading upon settlement of their positions. The borrowing fee is calculated on an hourly basis, and is equivalent to the borrowed amount of collateral divided by the total amount of liquidity available in the pool times 0.01%.
Token
Vela exchange tokenomics
VELA is the native token of Vela exchange with a total supply of 100 million. VELA token is currently listed on MEXC or some DEX exchanges such as Camelot, Uniswap or OpenOcean. Another token, eVELA, is non-transferable and can be unlocked by staking into a vesting contract, which unlocks the same amount of VELA tokens on a linear vesting period of one year. eVELA can also be staked to earn protocol rewards.
Allocation
At the time of writing, the protocol’s token is in the form of DXP, which is an ERC-20 token on Ethereum. As Dexpools turns into Vela, DXP holders will be able to claim VELA tokens on Arbitrum on a 1:1 ratio.
Community incentives (35%): Limited to 5% usage per year. These funds will be used for incentives such as rewards for liquidity providers, market makers, beta testers and others.
Growth Fund (25%): Will be reserved for future grants, DEX liquidity, market maker allocation for CEXs, and liquidity provision incentive program.
Marketing (10%): Used for marketing rewards like airdrops, KOL partnerships and other collaborative efforts. These funds are capped at 2% annual usage.
Core team (10%): Goes to the core team and will be on a 6 month cliff with linear vesting for 36 months.
DXP Allocation (7%):
- Private Sale: 4,238,000 DXP; 10% unlocked at launch (TGE), 3 month cliff, 12 months linear vesting
- IDO: 1,000,000 DXP; 25% TGE, 8 months linear vesting
- Copperlaunch LBP: 1,688,000 DXP, no vesting
Team Growth Reserves (5%): Used for recruiting incentives.
Investors (5%): Allocated to VELA’s investment rounds in Q4 2022.
Advisors (3%): Allotted to advisors and are on a 6 month cliff with linear vesting for 18 months.
VELA utility
Governance: VELA holders can participate in the governance of the platform, voting on important decisions such as upgrades and new features.
Staking: VELA holders can stake their tokens to earn rewards for participating in the development of the network.
Liquidity: VELA holders can provide liquidity to the platform’s liquidity pool and earn rewards in VLP tokens (liquidity provider token – LP token).
Transaction fees: VELA can be used to pay transaction fees on the platform.
Premium features: VELA holders can gain access to premium features like advanced trading and analytical tools. However, these features are currently not available in the beta version.
Should invest in Vela
After the collapse of the CEX FTX exchange, 2023 is probably the year of DEX exchanges. Thanks to its decentralized nature, users will face less risk even when CEX exchanges go bankrupt. In early 2023, we saw an explosion of a lot of DEX exchanges’ coins like dYdX or GMX, etc.
As a decentralized derivatives exchange, Vela is offering OTC trading, giving it more advantages over its competitors. Failure to attract liquidity results in slow execution and high spreads on order book DEXs and high slippage on AMM DEXs. Vela exchange makes use of GMX’s GLP incentivized liquidity model as well as offer incentives for market makers, thus ensuring that the protocol can get off the ground running in terms of attracting liquidity. However, unlike dYdX in its current state, VELA is non-inflationary and can be sustained by protocol revenue in the long-term.
It is important to note that the success of Vela will also depend on the success of the Arbitrum network. Arbitrum is attracting a lot of attention, GMX has achieved achievements and become the protocol with the largest TVL currently. Over the past time, Vela exchange’s TVL has also shown positive changes, bringing a lot of promise to users and investors.