Aerodrome Finance
Aerodrome Finance is an Automated Market Maker (AMM) designed to be the main liquidity hub for Base. It integrates a liquidity incentive mechanism, a governance model based on vote-locking, and a user-friendly interface. Utilizing the latest features of Velodrome V2, Aerodrome NFTs participate in voting for token emission allocations and benefit from the incentives and fees generated by the protocol. Aerodrome aligns with the Optimism Collective vision for public goods, allocating 25% of vote power to Ecosystem Goods to enhance liquidity and support public goods funding. The platform operates using the AERO token. [1]
Aerodrome, in partnership with Velodrome, is the primary hub of the Superchain ecosystems, with veVELO lockers receiving the largest initial veAERO distribution via a launch airdrop, kickstarting the Aerodrome flywheel.[1]
History
On June 7th, 2023, a new initiative with the Base team, was announced, representing the latest in ve(3,3) technology. Aerodrome serves as Base’s central AMM and liquidity layer, featuring Night Ride UI, concentrated liquidity, and a dynamic AERO FED. It supports Base ecosystem projects, onboarding new protocols, and generating liquidity.[1]
Aerodrome Finance was set to launch on Base with around 20 partners, becoming the primary liquidity source and central hub. It leverages the advanced Velodrome v2 technology, offering features like concentrated liquidity, automated voting, and a built-in veNFT Marketplace. Collaborating with the Base Team, Aerodrome integrates a public goods jet engine, reserving 25% of its initial votepower for Ecosystem Goods. This arrangement ensures liquidity for vital assets and channels fees into public goods funding and votepower. Aerodrome also acts as a landing hub for Base protocols, facilitating rapid liquidity formation in a cost-effective manner. Protocols can utilize veAERO to attract liquidity and incentivize voters, creating a self-sustaining system that rewards active participants.
Tokenomics
veAERO Distribution
On August 4th, 2023, the Aerodrome Finance team released a vlog post giving details on veAERO distribution:
- Airdrop for veVELO Holders: veVELO holders, recognized as significant players in DeFi, would receive 40% of the initial veAERO supply based on their V2 veVELO balance, with certain exclusions and eligibility criteria.
- Ecosystem Pairs and Public Goods Funding: veAERO voting power would focus on critical pairs like WETH-USDC, with fees allocated to support Base network development through Public Goods Funding initiatives.
- Team: Aerodrome contributors would receive veAERO vested over 2-4 years, aligning their incentives with the protocol's long-term success.
- Protocol Grants: Select protocols positively contributing to the Aerodrome ecosystem would receive veAERO grants, fostering ongoing collaboration and attracting new projects.
- AERO Pools: A portion of veAERO would be dedicated to voting on AERO token pairs, ensuring perpetual liquidity support. [2]
AERO Distribution
- Voting Incentives: AERO tokens would be strategically used to align with ecosystem partner incentives or to attract more votes to essential liquidity pools.
- Genesis Liquidity Pool: 2% of the initial AERO supply would be paired with USDC and deposited as liquidity to support AERO swaps at launch.
AERO Emissions
Emissions began at 10M AERO per epoch (week) and followed three phases:
- In the first 14 epochs, emissions increased by 3% per epoch, topping slightly above 15M AERO. The gradual increase supported the acceleration of the flywheel while allowing time for the ecosystem to develop and protocols to onboard.
- After epoch 14, emissions decayed at 1% per epoch, ensuring supply inflation decreases as the protocol matures.
Funding
In February 2024, the native token of Aerodrome Finance (AERO) increased by over 140% following an investment by the Base Ecosystem Fund, led by CB Ventures.
Aerodrome holds a 30% market share on the Base network, with over $132 million in total value locked (TVL) according to DeFiLlama. The protocol announced the investment on Twitter, expressing enthusiasm about working with the Base Ecosystem Fund to advance the Base network.
The Base Ecosystem Fund, launched in October, has previously invested in projects like Avantis, BSX, Onboard, OpenCover, Paragraph, and Truflation. The amount invested in AERO was not disclosed.
This investment demonstrated Base's dedication to ecosystem growth. Since its launch in June 2023, Aerodrome has reached $420 million in TVL. Aerodrome's token price increase reflects the community's optimism for the protocol and the Base ecosystem.[4]
The Aerodrome team mentioned in their tweet:
“The Base Ecosystem Fund, led by CB Ventures, was launched to invest in the next generation of on-chain projects building on Base. We’re excited to announce that the Base Ecosystem Fund has market-acquired an AERO position. Together, we’ll build the future of Base.”[3]