Estimate Velodrome/Aerodrome CLP Fee Returns Through Metrix Finance

In this guide we are going to cover two relevant DEX’es: Velodrome and Aerodrome so we can learn how they work, how they relate and most importantly: How to find the best parameters to maximize your results as a Liquidity Provider on those platforms with the help of Metrix Finance, the best tool for analyzing and fine tuning your strategies in the DeFi space!

What is Velodrome/Aerodrome?

Velodrome is a decentralized exchange built on the Optimism Network to allow traders as well as liquidity providers to easily interact with smart contracts. In essence it offers a practical way for crypto investors to swap assets in their wallets or even become liquidity providers to the platform and earn fees in exchange for that.

It also provides a system for protocols to incentivize liquidity providers so they keep their liquidity in the platform which means traders get more consistent trades and providers get extra rewards.

Aerodrome was created by the same team responsible for the original Velodrome project but it operates on the Base Network which means they get different kinds of incentives but they are part of the same Superchain so they are basically the same dApp available on different networks.

The Velodrome Interface

Both Velodrome and Aerodrome use the same user interface so this guide will refer to Velodrome by default but everything mentioned here applies to both platforms.

Once you click on the Liquidity option on their dApp you’ll be presented with a long list of possibilities you can provide liquidity for, but where to start?

You can start with these three actions:

1.    Use the search bar to find the coin you want (ETH in this example)

2.    Click on the asset type bar to select the kind of pairs you’re looking for (Volatile as an example)

3.    Sort the results by your favorite criteria (Fees in this example)

These steps might help you but won’t do nearly a fraction of what Metrix Finance can do for you. Metrix Finance allows you to achieve more with less effort because it provides a rich set of tools with better information about what really matters for investors besides allowing you to simulate multiple scenarios based real historic data with quick and intuitive controls.

How to find liquidity pools with Metrix Finance

Go to the Metrix Finance website and follow these steps:

1.    Click on Discover at the top of the page.

2.    Select the Velodrome Exchange.

3.    Select the network (Currently Velodrome only provides services on the Optimism network).

4.    Optional Step: Sort by Fees/TVL to find pairs with high volume relative to liquidity.

Once you have your list of pools it’s up to you to decide which one you want based on your personal criteria. Here are a few tips:

•     Careful with low TVL pools! Slippage and transaction volume might diminish your profit.

•     Pay attention to price volatility to make sure what your choice suits your risk tolerance.

•     When in doubt between pairs with different fee rates, volume can help you decide.

Finally, by clicking on Pool you can further refine your list by searching for pairs containing specific coins (ETH is used in this example).

Simulating Liquidity Pool Strategies is easy!

Let’s go with a classic WETH/USDC pair which seems to also include a nice Reward APR for this example so now all that’s left to do is to click on Simulate to get things started.

Now you might feel a bit overwhelmed by the simulation interface if you’re seeing it for the first time so let’s break it down.

1.    This main area shows you how much you can make every hour, month or year based on a initial deposit of $1000 USD which you can also change.

2.    This graph shows you where the price is mostly concentrated relative to all CLPs.

3.    The Calculation Range lets you select data from past days (30 days by default). The Current Price lets you simulate your pool at different prices (current price by default). The Min Price and Max Price let you decide which price range your liquidity pool will be collecting fees.

In this example the initial investment is set to $5000 and the range roughly between 3668 and 3964 USDC per ETH so based on the last 14 days it would yield about $450 every month.

Tips/Specifics

Notice how at the top of the page there is an option to simulate a Staked or Unstaked position. That’s because Velodrome/Aerodrome offer Liquidity Mining as an option which means you can get $VELO (or $AERO) native tokens as incentive to stake your positions.

Finally, Velodrome/Aerodrome protocols like to prefix pool names with a few codes:

s = Stable, v = Volatile, AMM = Automated Market Maker, CL = Concentrated Liquidity.

Example: vAMM-WETH/OP = Volatile ETH/OP pool using the Automated Market Maker.

Wrapping it Up

Velodrome and Aerodrome allow you to provide liquidity for trades on the Optimism and Base networks respectively with the option to stake your position to earn extra tokens provided by protocols and you can easily simulate your positions based on real historic data all thanks to the advanced simulation tools available at Metrix Finance!