Dolomite: Virtual Liquidity in DeFi

What Dolomite Is and Why It Matters

Dolomite is a decentralized money market designed to make deposited tokens work harder. The protocol tracks balances internally, allowing a single deposit to do multiple things at once. Your assets can earn yield, be used as collateral, and still be available for trading—all without needing separate on-chain transactions. This improves capital efficiency and gives you more flexible ways to manage your funds in DeFi.

How Dolomite’s Design Balances Safety and New Features

Dolomite uses a two-layer system: a stable core and a flexible module layer.

• The core handles security and fundamental operations. It is designed to be highly secure and rarely changed, which protects the integrity of the protocol.

• The module layer manages everyday actions like deposits, trades, and liquidations. This layer can be easily updated to add new assets or features.

Together, these layers allow Dolomite to evolve and add new functionality without risking its foundational security.

How Actions Are Executed

When you deposit funds or open a position, the module layer bundles all the required steps into one transaction. The core executes this transaction according to its fixed security rules. This approach makes the user experience simpler while keeping risk controls predictable and centralized

What Virtual Liquidity Is and How It Works

Instead of moving tokens on-chain for every action, Dolomite uses an internal ledger to track a single, unified balance for each user. This "virtual liquidity" means one deposit can perform several jobs simultaneously: earning interest, securing a loan, and collecting trading fees. Because there are fewer on-chain transfers, users pay lower gas fees, and their funds aren't locked up during busy market periods.

Practical Benefits for Users

• Lower transaction costs due to fewer external transfers.
• Ability to earn multiple income streams from the same asset.
• Improved flexibility when rebalancing or managing positions.

Core Features: Earn, Borrow, Strategies, and Swaps

Dolomite makes common DeFi functions easy to access through its core features, all powered by the virtual ledger.

Earning Across Activities

Deposited tokens can earn income from multiple sources at the same time, including lending interest, liquidity rewards, and fees from trades on the platform. This overlap allows a single deposit to capture several revenue streams at once.

Controlled Borrowing with Isolated Positions

When you borrow, each position is isolated. This means you choose exactly which assets act as collateral for each specific loan. If one position gets liquidated, your other positions are not automatically affected, giving you more precise control over your risk.

Prebuilt Strategies

For users who want simplicity, Dolomite offers ready-made strategies for tasks like managing leverage or hedging. These templates save time and make advanced tactics more accessible to everyone.

Integrated Swaps (Zap)

The platform includes a built-in swap tool called Zap. It finds efficient trading routes and lets you swap tokens without leaving the protocol. Zap is integrated directly into borrowing and managing positions, so you can make adjustments quickly in fewer steps.

The Tokens That Power Dolomite

Dolomite uses three different tokens that work together to manage liquidity incentives and governance.

DOLO: The Base Utility Token

DOLO functions as the protocol's primary token. It supplies liquidity to markets, supports trading activity, and can be converted into the governance token. DOLO is built as a standard token compatible with common smart contract ecosystems.

veDOLO: Voting Power and Rewards

veDOLO is obtained by locking DOLO for a chosen period, typically up to two years. Locked tokens grant governance rights and a portion of platform rewards. The longer you lock, the more voting power and rewards you receive. veDOLO is also a transferable token.

oDOLO: Incentives for Liquidity Providers

oDOLO is given out as a weekly reward to users who provide liquidity. It can be combined with DOLO to get veDOLO at a better rate, encouraging users to provide liquidity for the long term.

How the Tokens Create a Balanced System

The three tokens create a feedback loop:

1. Liquidity rewards (oDOLO) drive demand for DOLO.

2. DOLO is locked to gain governance power and rewards via veDOLO.

3. veDOLO holders vote on proposals and receive a share of platform fees.

Distribution and Market Availability

DOLO was released through community distributions and is listed on multiple exchanges. These listings helped establish initial liquidity and allow users to trade DOLO on several markets.

What It Means for DeFi Users

By combining its virtual ledger, modular design, and multi-token system, Dolomite helps you get more value from your deposited assets. It's an attractive option for users who want to earn simultaneous yields, use isolated borrowing for better risk management, or enjoy the convenience of built-in swaps. The protocol's architecture focuses on security while still allowing for new features, making it a useful tool for both active traders and passive liquidity providers.