You don’t adjust the individual vector3 components for velocity. You just declare the variable:
private Vector3 velocity = Vector3.zero;
…then this variable is passed in the SmoothDamp method as a reference parameter, which means that this variable is assigned a value inside the SmoothDamp method. So, after you call the SmoothDamp method, the velocity variable will hold the newly assigned value, which you can use, as needed.