This is a First Impression on Velix Protocol. Essentially this means we spent an hour looking at the project and these are the conclusions we came to. You can read more about First Impressions here or at the bottom of the page.
What is Velix Protocol?
Or rather what did we get the impression it is? Velix is a LSD (Liquid Staking Derivative) platform on the Metis Network. Their goal is to simplify the process of staking Metis. They look to achieve this through creating a kind of one stop shop for all your staking needs. Their core claim is that you can benefit from great APYs whilst also maintaining liquid access to funds.
How it works
With Velix you stake your Metis tokens with them and in return you receive veMetis (a LSD). Your Metis is allocated to a sequencer for network validation (check out our Metis Deepdive if you don’t know what this means). The upshot is your Metis will earn rewards; these rewards are then auto-compounded by Velix to ensure a much higher APY.
Your veMetis is a liquid asset that can be exchanged on other DeFi platforms, keeping your funds “liquid”. Velix mentions in their docs that veMetis will have “stablepools” available; but don’t really explain what these are.* Additionally they state that your veMetis will be usable for lending, borrowing, and collateral; their docs make no mention of what platforms they are partnering with as of yet.
veMetis can be exchanged for sveMetis; sequencer rewards are then distributed to sveMetis holders.
*There is more on this in the “communication” section.
Things we like
The “one stop shop” nature of veMetis; especially with the auto-compounding. Metis has a lot of long term holders and a medium term “set and forget” option will be very welcome.
Their docs do a good job of explaining key terms in plain English; especially those core to their project.
They are very concise in their aims and scope. Many projects try to include too many facets making them kind of sucky at all of them. Velix has identified a market need and looked to (at least initially) cater specifically to that need.
No useless Token. A ton of projects tack on a token in order to raise funds that is then largely useless. From what we can tell Velix is not doing this.
Things we were unsure on
What the deal with sveMetis is. Is it liquid? If not, how easy is it to switch back to veMetis in order to make your assets liquid? Based on their docs it seems useless holding just veMetis as awards only go to sveMetis holders. Information on how easy it is to unlock the liquidity of sveMetis is hugely important as it is core to their entire USP. Sadly this information was lacking. We would love to see a more fleshed out explanation on this.
Things that need improvement
We would love to see more detailed docs. They do a great job of highlighting the key benefits in an easy to understand way. They do a less good job of highlighting some specifics about sveMetis as listed above. Additionally there is no mention of the risks of LSD de-pegs. veMetis will likely be roughly pegged to the value of Metis minus a few percent in most market conditions; however if the market is dumping hard LSDs often de-peg further as more and more people look to exit their positions. We believe it is important to be upfront about all risks.
Communication
We started this process by skimming the docs and assembling questions we had. This set of questions was posted in both their discord and Telegram. Neither was answered within the hour time frame we set for research. Having good communication is key to building a great community. We will note that as Velix is not doing a token sale (that we could tell) the importance of a “great community” is less than it might be for other projects.
**A note on communication; the Velix team did eventually get back to us. Their explanation of how veMetis would stay pegged to Metis is that there would be a liquidity pool with these as a pair. If you don’t understand liquidity pools then simply understand that this is at best a woefully insufficient explanation. They then did a full 180 on this take and said that of course it wouldn’t be pegged and that “stablepool” just means that it will start as a 1/1 ratio and might change over time (it will).
Teams becoming defensive when confronted with confusing aspects of their projects is something we feel there is too much of in crypto. We hope the Velix team will do a better job of this moving forward.
Conclusion (TL;DR)
Velix seems like a generally solid addition to the Metis ecosystem in theory. Their team seem to hold the same inhospitable and elitist attitude that is prevalent throughout crypto; we fear this may hold them back. We’d love to see a more accessibility driven approach from them moving forward and look forward to seeing how their documentation develops. We also congratulate them on winning their recent sequencer node vote and can’t wait to see what they have in store for the Metis ecosystem.
