What is Aerodrome Finance (AERO)?

Deep Dive

1. Purpose & Value Proposition

Aerodrome serves as Base’s primary liquidity layer, combining an automated market maker (AMM) with a liquidity incentive engine. It solves fragmented liquidity in decentralized trading by concentrating incentives for providers (LPs) and protocols. Traders benefit from low slippage, while LPs earn $AERO emissions and fees. Over 44% of Base’s chain activity flows through Aerodrome (Aerodrome Docs).

2. Tokenomics & Governance

The protocol uses two tokens:
- $AERO: Distributed to LPs as rewards.
- $veAERO: Governance NFTs earned by locking $AERO (up to 4 years). Locking amplifies voting power and grants a share of 100% of protocol fees from the prior week.

Emissions start at 10M $AERO weekly, decreasing over time. Holders vote weekly to direct emissions to specific liquidity pools, aligning incentives between protocols and voters. This model reduces inflation risks while sustaining liquidity (Aerodrome Mechanics).

3. Key Differentiators

Aerodrome inherits Velodrome V2’s battle-tested code but adds Base-specific optimizations:
- Auto-Max Lock: Simplifies long-term participation by auto-extending lock durations.
- Rebase mechanism: Compensates $veAERO holders for dilution caused by new emissions.
- Coinbase integration: Direct access to millions of users via Coinbase’s app, enhancing liquidity utility (Coinbase Partnership).

Conclusion

Aerodrome Finance is Base’s economic engine, merging efficient trading, community-driven governance, and institutional-grade liquidity infrastructure. Its success hinges on balancing emissions, voter participation, and Coinbase’s growing ecosystem. Can Aerodrome sustain its dominance as Base scales?