What is Dolomite?
In most DeFi lending platforms, once tokens are deposited, they are immediately lent out, causing users to lose certain benefits such as staking rewards, governance rights, or vesting privileges.
Dolomite is a Decentralized Money Market Protocol built to maximize the efficiency of deposited assets. It introduces a Virtual Liquidity system along with prebuilt strategies that simplify complex DeFi activities.
How does Dolomite work?
Modular Architecture
Dolomite is designed with a two-layer structure.
Core Layer:
The immutable core that enforces security rules and serves as the intermediary connecting smart contracts. It is strictly designed with limited parameter customization, providing a stable and trustworthy foundation for the protocol.
Module Layer:
Adds flexibility to the system by managing daily functions such as deposits, trading, and liquidations. It is regularly updated to introduce new assets and features, allowing the protocol to adapt continuously to user demand.
For example, when making a deposit or opening a trade, these actions are bundled into a Single Operation at the Module Layer, then passed on to the Core Layer for secure execution, while the system itself remains upgradeable.
Virtual Liquidity System
Dolomite uses a Virtual Liquidity system that aggregates all user deposits into a single Dolomite Balance, functioning like a unified account that can be used across all services of the protocol. Instead of transferring tokens on-chain every time, Dolomite records changes internally.
This makes it possible for a single token to serve multiple roles simultaneously such as earning lending interest, acting as collateral for borrowing, and collecting swap fees. All of this can happen at the same time. For example, tokens earning lending interest can also be used to add liquidity and collect swap fees all without moving tokens out of the system.
Behind the scenes, smart contracts update internal balances to reflect these activities. This helps reduce transaction costs, increase capital efficiency, make portfolio management more flexible, and prevent liquidity from being locked during market volatility.
Key Features of Dolomite
Yield Generation
The Dolomite protocol allows users to earn income in multiple ways, including interest from lending, fees from providing liquidity, and returns from leveraged trading.
Thanks to the Virtual Liquidity system, users can capture multiple forms of income simultaneously.
Borrowing
When borrowing on Dolomite, each loan position is isolated. Deposited assets are not automatically used as collateral; users can choose which assets to designate as collateral, enabling better risk management.
Prebuilt Strategies
Dolomite offers prebuilt strategies for borrowing and trading that can be set up with just a few clicks. These are pre-configured positions that allow users to access advanced DeFi strategies such as looping or hedging without having to build them from scratch. They are designed to make complex strategies simple, especially for new users.
Zap (Automatic Swaps within the system)
Zap is a feature that enables direct asset swaps within Dolomite. It connects to DEX aggregators to find the best deals for users, making it easier to swap into harder-to-reach tokens and instantly adjust borrowing positions or portfolio structure.
Dolomite Tokens
DOLO
DOLO is an ERC-20 token and the primary token of the Dolomite network. Its main uses include adding liquidity to lending pools, supporting trading in exchange markets, and being locked to convert into veDOLO. veDOLO can then be used for governance participation and rewards.
DOLO was launched on Berachain through the Lock-and-Mint system, using Chainlink’s Cross-Chain Interoperability Protocol (CCIP), allowing seamless cross-chain transfers.
veDOLO
veDOLO is obtained by locking DOLO tokens for up to 2 years. While locked, holders gain governance power to vote on key protocol matters, receive a share of platform fees, and earn additional liquidity provision rewards.
veDOLO is issued as a transferable NFT, allowing it to be moved or managed like a digital asset. The longer the lock period, the greater the voting power and rewards.
oDOLO
oDOLO is a reward token distributed weekly to liquidity providers. It can be paired 1:1 with DOLO to convert into veDOLO. The conversion comes with a discount, which depends on the lock duration.
This mechanism creates long-term demand for DOLO, supports protocol-owned liquidity, and increases ecosystem stability.
DOLO Token Distribution
Core Team: 20.2%
Airdrop: 20%
Liquidity Mining: 20%
Investors: 14.89%
Other: 24.89%
Maximum supply: 998.85M DOLO
Circulating supply: 264.88M DOLO
Conclusion
Dolomite combines lending, borrowing, and trading into a single DeFi platform, giving users greater control and efficiency. With the Virtual Liquidity model, Modular Architecture, and support for multiple tokens, assets can perform multiple roles simultaneously without losing their inherent benefits.
Additionally, the ecosystem of three tokens DOLO, veDOLO, and oDOLO—creates aligned mechanisms for governance and incentives, encouraging users to actively participate in the protocol’s long-term growth.