With almost $200m TVL on day 1, Aerodrome is dominating TVL on Base. In this article we'll dive into Base, Aerodrome, high APR's, and how the protocol works.
Prepare for lift-off, pilots.
Aerodrome is built on Base
Base is an Ethereum Layer 2 incubated by Coinbase. It is built on the OP Stack of Optimism. It's essentially a set of tools that simplify L2 deployment.
In just a month, they’ve amassed around $350m in TVL and are already showing signs of becoming a top layer 2 with no shortage of dApps and tokens.
Velodrome
Velodrome is a ve(3,3) DEX which, through skillful strategy, has become the leading protocol in terms of TVL on Optimism.
Aerodrome
Here we have Aerodrome, a fork of Velodrome V2 that has been launched on Base.
If you're unfamiliar with ve(3,3), or wondering why Velodrome (and now Aerodrome) is successful versus other Solidly forks, then continue reading...
$AERO - veAERO
$AERO is the native token of Aerodrome. $AERO can be locked (from 7 days to 4 years) to obtain veAERO. The amount of veAERO received is proportional to the lock duration.
A veAERO position:
- is a transferrable NFT
- grants governance power
During each epoch (week), veAERO holders vote on the direction of $AERO emissions. The amount of $AERO allocated to each pool is proportional to the received votes and the magnitude of emissions for a given epoch.
Protocols can incentivize veAERO holders to vote in favor of their pools.
An incentivized pool attracts more liquidity, thus benefiting from the advantages of deep liquidity.
veAERO holders receive 100% of the fees generated by the pools they voted for. Therefore, they must consider both potential pool-generated fees and incentives when casting their votes.
Supply
$AERO has an initial supply of 500 million tokens, with 450 million to be distributed as veAERO.
veAERO was airdropped to veVELO lockers. The veAERO airdrop is locked for the full 4 years but the NFT can be sold on secondary marketplaces.
Emissions
Emissions will start at 10 million $AERO per epoch and will follow three phases:
- In the first 14 epochs, emissions will increase by 3% per epoch, reaching 15 million $AERO distributed by the 14th epoch.
- Starting from the 15th epoch, emissions will decrease by 1% per epoch.
- At epoch 67 (9 million $AERO per epoch), veAERO holders will have control over Aerodrome's monetary policy (Aero Fed System).
Aerodrome V2
Other features such as concentrated liquidity, dynamic fees, permanent locking, etc. are all on their way.
We assume these articles about Velodrome V2 should shed some light on what is coming to Aerodrome.
What is important to remember is that the incentive layer and liquidity structure are flexible and will create a flywheel for protocols, liquidity providers and veAERO holders.
Main Liquidity Hub
Aerodrome’s ambition is to become the main liquidity layer and reference AMM on Base, also playing a central role in the development of this L2.
It starts from the beginning with a partnership with about twenty projects, as well as part of the supply dedicated to the financing of public goods.
Successful Launch
It seems that the Aerodrome approach was the right one, because in just 1 day the protocol has already accumulated $177m TVL (at time of writing).
This greatly benefited Base, which at the same time saw its TVL increase by more than 60%.
Conclusion
Base is undeniably at the center of attention in recent weeks. Between $BALD & @friendtech, the deployment of blue chips such as Aave & Curve, and now the massive inflow of liquidity, it seems that this is not just a passing trend.
A growing ecosystem, top tier protocols deployed, a solid AMM and an abundance of liquidity... How quickly do you think Base could surpass Arbitrum and OptimismFND in terms of TVL?
Do you think Aerodrome will be a Killer app? Let us know what you think!
Article posted @August 31, 2023
