Velbastaður is among the oldest villages in the Faroe Islands. At the excavation site, Niðri á Bakka, by the waterfront, archaeologists have found objects from the Middle Ages. In Fossdalur, north of the village, they have also found ruins from ancient settlements.
Velbastaður is an agricultural village. The rich culture has deep roots in Velbastaður. In 1895 the youth association Sólarmagn was founded and the community house was built in 1945. The road was paved in 1924. The village has a school and kindergarten and it is continually growing. The brewery Okkara is in this village and is one of only two breweries on the islands.