Traditional banking and cryptocurrencies. Imagine a crypto project that aims to bridge the gap between banks and cryptocurrencies, offering fast, cheap, and secure international payments. This is where Velo comes into play!
Velo, also known by the market ticker VELO, is a decentralised payment network that aims to revolutionise international payments and provide financial services to those currently unable to access traditional banking infrastructure.
At its core, Velo has a mission to create a decentralised settlement network which can provide the safe and transparent transfer of value among participants and looks to bridge the gap between traditional banking infrastructure and the ever-evolving digital financial landscape.
But what exactly is Velo, and how does it all work?
What is Velo?
Velo was first launched in 2020 and their current CEO is Mike Kennedy, their Chairman is Chatchaval, and their Vice-Chairman is Tridbodi.
Perhaps most interestingly for the Velo team is in their advisors, which include Jed McCaleb, the founder of Ripple, and co-founder of Stellar.
Velo’s main objective was to establish a trusted decentralised settlement layer on a federated blockchain that connects trusted entities such as banks, remittance providers, and e-wallets.
By doing so, Velo aims to expand the remittance market by simplifying cross-border money transfers between the various types of institutions and service providers.
To achieve this goal, the Stellar blockchain was chosen for issuing VELO tokens with the company citing Stellar’s speed, efficiency, cost-effectiveness, and security.
This makes sense, as compared to other major blockchains like Bitcoin and Ethereum, Stellar can process up to 1,000 transactions per second, which can be sent globally for a fraction of a cent and arrive in seconds.
How does Velo work?
Before we get into how Velo works, I quickly want to clarify what a federated permissioned blockchain actually is.
Typically there are three types of blockchains: public, private, and federated.
Public and private I’m sure don’t need an explanation, but federated likely does.
A federated blockchain refers to a semi-private blockchain. In short, this means only pre-selected participants have permission to run the network.
To clarify, this doesn’t refer to end users, but rather the nodes which run the network itself.
As you might know, blockchains like Bitcoin are public, and anyone can start operating a Bitcoin node to help process transactions and secure the network.
On a federated blockchain, the nodes who confirm the transactions are selected by Velo themselves.
This is partially to solve the issue of trust as Velo wants to become the bridge between traditional and future banking infrastructure. This means that it prefers trusted validators, chosen to ensure everything works as intended.
These are known as their Trusted Partners and are formed by the banks, remittance providers, and e-wallets.
Technically speaking, Velo is a layer-2 application sitting on top of the Stellar blockchain, which provides the layer-1 foundation and deals with transparent ledger accounting, fast and efficient settlement, and high transactional throughput.
This means Velo is also a Proof-of-Stake blockchain that utilises a Byzantine Fault Tolerance-based consensus mechanism. So what really makes Velo unique in the crypto space?
What makes Velo unique?
One of Velo’s unique properties is the Digital Reserve System which is vital in maintaining the stability of digital credits backed by VELO as it manages the number of VELO tokens held as collateral.
In short, the Digital Reserve System will algorithmically rebalance the VELO token Collateral Pools backing the issued digital credit to maintain a 1:1 peg between the digital credit, the VELO token, and the original fiat deposit.
As an example, when a Trusted Partner receives a fiat deposit from a user they use the Velo Protocol to generate a digital credit by locking an equivalent value of VELO tokens through the Velo Protocol.
The Digital Reserve System then tracks these tokens by assigning them to a Collateral Pool that is linked with the digital credit issued. The Digital Reserve System will then adjust the amount of tokens in the pool to maintain the correct value.
At the time of issue, the value of the digital credit will equal the value of the VELO tokens deposited as well as the fiat original deposited with the Trusted Partner.
However, after this period, the price of VELO tokens will begin to fluctuate with the open market.
As a result, the DRS will automatically rebalance the amount of VELO tokens in the Collateral Pool to maintain the 1:1 value link with the value of issued digital credits.
For clarity, this means if the price of the VELO tokens goes up, then VELO tokens will be removed from the Collateral Pool and returned to the Reserve Pool. The same also applies in reverse if the VELO tokens go down in value as opposed to up.
To ensure there is always confidence in Velo as a medium of value transfer, the aim is to keep the token value and the digital credit value as close to a 1:1 ratio as possible.
But how about the Tokenomics?
VELO Tokenomics
The maximum supply of VELO tokens is 30 billion, with currently around 7.3 billion already on the market.
As with most Proof-of-Stake blockchains, VELO can be used for the classics of staking, governance, and payments.
By the end of 2025, all 30 billion VELO tokens will have finished their vesting period and be available for sale on the markets.
By that time, the total distribution will look as follows:
23% will be given to the Development Reserve, 18% towards Community Development, a further 18% to Strategic Partners, 17% to the Reserve, 10% to the Founders, 8% to Early Backers and Advisors, 5% towards Private Placement, and a final 1% towards Exchange Liquidity.
VELO looks to conquer one of cryptocurrency’s biggest potential use cases, which is international remittances.
While there are other competitors in the market, it cannot be denied that there are huge potential rewards for the crypto platform that becomes the crypto platform of choice for international remittances.
Presuming Velo can avoid any major mishaps in management, it has set itself up nicely for the future.
Meaning, if you’re looking for a quick, cheap, and reliable platform to send money internationally, Velo could be the solution you have been looking for.
Though, as always, nothing is ever guaranteed in crypto, of course.
How to create a VELO wallet
Step 1: Visit https://trustwallet.com If you already have a Trust Wallet, skip to Step 5.
Step 2: Download and install Trust Wallet from your mobile app store or your browser.
Step 3: Open Trust Wallet and create a new wallet or import an existing one.
Step 4: Once your wallet is set up, tap on the “Add Token” button.
Step 5: In the search bar, type “VELO” to find the token.
Step 6: Tap on the VELO token and select “Add to Wallet” to add it to your Trust Wallet.
After adding VELO to your Trust Wallet, you will be able to view your VELO balance and perform transactions with the token.
If you want to support the blog, please donate $VELO to this address: 0x926f05Cafd858CA824152dAe62d359cC60e804c5