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