The collateralization model is unique to opxveVELO and veVELO mechanics. It ensures that no opxveVELO 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 mirror the target APR in part - re-collateralize the liquid backstop.
There is no max supply of opxveVELO, but minting can be paused if necessary. No opxveVELO enters circulation without 1 VELO being permanently bonded to our project. opxveVELO is removed from circulation when diluted (under peg) for the cost of < 1 VELO. As the liquid backstop grows, multiple arbitrage opportunities will open on both sides of the peg for our algorithmic process.
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 opxveVELO collateralization rate; only note that this VELO is returned to veNFT and thus cannot be used to preserve the peg until fully vested.
Our project farms VELO to add as collateral for opxveVELO without minting additional opxveVELO. We will also explore options such as lending VELO that would otherwise be illiquid in our reserves.
This allows the tokenized value of the OpenX's Project veVELO position to be and remain liquid.