Aerodrome has rapidly become the largest protocol by total value locked (TVL) on Base, Coinbase's Layer 2 blockchain. Designed to serve as the network's central liquidity hub, it has attracted significant attention and capital since its launch. This article explores how Aerodrome works, its core mechanics, and its role within the Base ecosystem.
Understanding Aerodrome’s Origins and Purpose
Aerodrome draws inspiration from Velodrome, the leading liquidity protocol on Optimism. Velodrome itself was a fork of Solidly, a project initially developed by DeFi pioneer Andre Cronje on the Fantom blockchain. Although Solidly was discontinued, its concepts lived on through Velodrome, which refined the model and became Optimism’s dominant liquidity provider.
Aerodrome applies this proven model to Base, aiming to become the primary automated market maker (AMM) and liquidity incentivization platform for the ecosystem. While it was developed in partnership with Velodrome, Aerodrome operates as an independent protocol with its own tokenomics and governance.
How Aerodrome Works: Core Mechanics
Aerodrome functions as an automated market maker, enabling users to swap tokens and provide liquidity. Its unique value proposition lies in its incentive structure, which encourages long-term participation and deep liquidity.
The AERO Token and Vote-Escrow Model
The native utility and governance token of Aerodrome is AERO. Holders can lock their tokens for up to four years to receive a veAERO NFT, which represents their locked position and voting power. The voting power is determined by both the amount of AERO locked and the duration of the lock—longer locks grant more influence.
veAERO holders receive weekly rebases to counteract emissions dilution and earn 100% of the trading fees from liquidity pools they vote on. This creates a strong alignment between long-term stakeholders and the protocol’s success.
Liquidity Pools and Emissions Voting
Each week, veAERO holders vote to direct AERO emissions to specific liquidity pools. Emissions are distributed proportionally based on these votes, incentivizing liquidity providers to participate in high-yield pools.
External protocols can also incentivize specific pools by offering “bribes” or additional rewards to voters. This mechanism allows projects to attract more liquidity and votes without directly providing liquidity themselves. Studies suggest that for every dollar spent on bribes, protocols can generate more than a dollar in liquidity—a highly efficient capital mechanism.
👉 Explore advanced liquidity strategies
Current Status and Offerings
Aerodrome currently supports over 100 liquidity pools and 31 tokens. Users can swap tokens, provide liquidity, lock AERO for veAERO NFTs, and participate in the weekly voting process. The bribe system is also operational, allowing protocols and users to incentivize specific pools.
Aerodrome Tokenomics and Distribution
Aerodrome was designed with a fair launch—no pre-sale or external investors were involved. The total supply is capped at 500 million AERO tokens, with 450 million allocated to veAERO distributions.
- 40% to VELO Lockers: Awarded to veVELO holders on Optimism, recognizing their contributions to the Velodrome ecosystem.
- 21% to Ecosystem Pairs and Public Goods: Supports growth and development within the Base ecosystem.
- 14% to the Team: Locked for two to four years to ensure long-term alignment.
- 10% to Protocol Grants: Funds initiatives that benefit the Aerodrome and Base communities.
- 5% to AERO Liquidity Pools: Ensures sufficient liquidity for the native token.
- 8% to Voter Incentives: Matches protocol incentives and attracts votes to critical pools.
- 2% to Genesis Liquidity: Paired with USDC at launch.
Emissions Schedule
Weekly emissions started at 10 million AERO, increasing by 3% per week for the first 14 weeks to accelerate growth. After week 15, emissions decay by 1% weekly to curb inflation. By week 67, emissions are expected to drop below 9 million per week, transferring control of monetary policy to veAERO voters. From that point, voters can adjust emissions by ±0.01% per week.
The Role of Aerodrome in the Base Ecosystem
Aerodrome is poised to play a critical role in the growth of Base by providing deep liquidity, efficient swaps, and robust incentive mechanisms. Its fair launch and community-focused distribution model have already attracted substantial TVL, making it a cornerstone of the Base DeFi landscape.
Frequently Asked Questions
What is Aerodrome?
Aerodrome is an automated market maker and liquidity hub built on Base, Coinbase’s Layer 2 blockchain. It uses a vote-escrow model to incentivize long-term liquidity provision and governance participation.
How does the veAERO system work?
Users lock AERO tokens for up to four years to receive veAERO NFTs. These NFTs grant voting power, which is used to direct emissions to liquidity pools. In return, voters earn trading fees and bribes from the pools they support.
What are bribes in Aerodrome?
Bribes are additional incentives offered by external protocols to encourage voters to direct emissions to their liquidity pools. This helps protocols attract liquidity and visibility without directly providing capital.
How is AERO distributed?
AERO has a total supply of 500 million tokens, with the majority allocated to veVELO holders, ecosystem incentives, and protocol grants. There was no pre-sale or investor allocation.
Can I participate in Aerodrome?
Yes, users can swap tokens, provide liquidity, lock AERO for veAERO, and vote on emissions. The platform is open to all participants.
What makes Aerodrome different from other AMMs?
Aerodrome’s unique vote-escrow and bribe mechanics create a highly efficient liquidity incentive model, aligning long-term stakeholders with protocol growth and sustainability.