> For the complete documentation index, see [llms.txt](https://docs.openxswap.exchange/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.openxswap.exchange/the-open-x-project/opxvelo-optimism/collateralization.md).

# Collateralization

The collateralization model is unique to veVELO mechanics. It ensures that no opxVELO can *ultimately* come into existence without being over-collateralized, but also involves strategies that include *locking* value. This under-collateralizes the circulating supply until returns - which are structured to outperform the target APR due to these mechanics - replenish the liquid backstop. 

A majority of VELO is vote-escrowed and thus illiquid, meaning it cannot preserve the peg. This however will be used to accumulate a basket of assets for the liquid backstop. veVELO veNFTs receive rebases, increasing the VELO to opxVELO collateralization rate; only note that this VELO is returned to veNFT, max-locked, and thus cannot be counted as part of the backstop. 

VELO collected from trading fees is added to the liquid backstop or veVELO position as needed. 

**There is no max supply of opxVELO, but minting can be paused if necessary.** No opxVELO enters circulation without 1 VELO being permanently bonded to our project. opxVELO is removed from circulation when diluted (under peg) for the cost of < 1 VELO using the liquid backstop.&#x20;

This allows the **tokenized** value of the OpenX's Project veVELO position to be and remain liquid.


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