Optimizing Capital Efficiency on Velodrome Using Convex Model
To optimize capital efficiency for liquidity providers, Curve deploys a Convex-inspired virtual AMM model. LPs can stake their positions to earn yield without giving up exposure to their pools.
Traditional AMMs lock capital indefinitely. Virtual AMMs like Convex allow LPs to:
Maintain full exposure to their pools while staked – earning all trading fees.
Realize superior capital efficiency – earn staking yield on their position.
Withdraw to exit position at any time – stake doesn't lock funds.
Free up capital for other uses while earning yield on positions.
This innovation stands to attract substantial liquidity migration onto Velodrome. The amplified yields and unlocked capital from virtual staking allow LPs to reduce their risk-adjusted exposure. By adopting the best practices from across DeFi, Velodrome positions itself on the cutting edge of AMM design and capital efficiency.