What is Aerodrome Finance?

Aerodrome Finance is the leading decentralized exchange (DEX) and liquidity protocol built on Base Chain, Coinbase's Ethereum Layer 2 solution. As a fork of Velodrome on Optimism, Aerodrome combines the best features of Solidly-style exchanges with the growing Base ecosystem, offering traders and liquidity providers an optimized platform for decentralized finance (DeFi) activities.

Concentrated Liquidity

Capital-efficient liquidity provision inspired by Uniswap V3 with customizable price ranges.

Advanced veTokenomics

Vote-escrow model aligns long-term incentives between all protocol participants.

Base Native

Built specifically for Base Chain with ultra-low fees and fast transactions.

Dual Incentives

Earn both trading fees and AERO token emissions for providing liquidity.

Governance Focused

veAERO holders direct emissions and shape protocol development.

Ecosystem Aligned

Deep integration with Base's growing DeFi ecosystem and Coinbase products.

Aerodrome Finance Interface

Aerodrome's intuitive trading interface with concentrated liquidity features

Key Features and Benefits

Aerodrome Finance offers several innovative features that set it apart from traditional DEXs:

Concentrated Liquidity

Unlike traditional AMMs that spread liquidity across all price ranges, Aerodrome allows LPs to concentrate their capital within specific price ranges:

  • Higher capital efficiency (up to 4000x more than standard AMMs)
  • Customizable price ranges for optimal fee generation
  • Multiple positions per pool for sophisticated strategies
  • Better price execution for traders with tighter spreads

Fee Structure

Aerodrome implements a multi-tiered fee system:

  • Standard pools: 0.01% - 1% (set by pool creator)
  • Protocol fee: 50% of trading fees distributed to veAERO holders
  • LP fee: 50% of trading fees go to liquidity providers
  • No deposit or withdrawal fees for LPs

Smart Routing

Aerodrome's advanced router finds the optimal path for trades:

  • Automatically splits trades across multiple pools
  • Finds the best price considering both liquidity depth and fees
  • Supports multi-hop routes for illiquid pairs
  • Minimizes price impact for large orders
Concentrated Liquidity Diagram

How concentrated liquidity provides deeper markets at specific price ranges

The AERO Token: Powering the Ecosystem

AERO is the native utility and governance token of Aerodrome Finance with multiple functions:

Token Utility

  • Governance: veAERO holders vote on emission distribution and protocol parameters
  • Fee Sharing: Earn 50% of all protocol trading fees
  • Liquidity Incentives: Distributed to LPs in selected pools
  • Protocol Ownership: Represents stake in Aerodrome's success

Token Distribution

Initial supply of 500M AERO allocated as:

  • Liquidity Mining: 45%
  • Ecosystem Fund: 25%
  • Team & Advisors: 15% (vested over 2 years)
  • Initial Liquidity: 10%
  • Airdrops: 5%

Emission Schedule

AERO emissions follow a decreasing schedule:

  • First 6 months: ~8M AERO/week
  • Months 7-12: ~4M AERO/week
  • Year 2: ~2M AERO/week
  • After Year 2: 1% annual inflation
AERO Token Distribution

AERO token allocation and vesting schedules

The veToken Model: Aligning Incentives

Aerodrome's vote-escrow (ve) tokenomics create powerful alignment between all participants:

How veAERO Works

  1. Lock AERO tokens for up to 4 years to receive veAERO
  2. Longer locks grant more voting power and higher rewards
  3. veAERO holders vote weekly on which pools receive emissions
  4. Earn protocol fees proportional to your veAERO share
  5. Boost your LP rewards up to 2.5x with veAERO

Benefits of the veModel

  • Long-Term Alignment: Encourages holders to think long-term
  • Protocol Control: Puts governance in hands of committed users
  • Emission Efficiency: Directs liquidity where it's most needed
  • Value Accrual: veAERO captures protocol revenue
  • Reduced Sell Pressure: Locked tokens can't be immediately sold

Calculating veAERO

Your veAERO balance is calculated as:

veAERO = AERO locked × (lock time in weeks / 208 weeks)

Where 208 weeks represents the maximum 4-year lock period.

veToken Model Diagram

The veToken ecosystem and incentive flows

Frequently Asked Questions

Why use Aerodrome instead of Uniswap on Base?

Aerodrome offers several advantages including concentrated liquidity for better capital efficiency, AERO token incentives for LPs, fee sharing for veAERO holders, and deeper integration with Base's ecosystem. The veToken model also better aligns long-term incentives between all participants.

What are the risks of providing liquidity?

Main risks include impermanent loss (especially in volatile pools), smart contract vulnerabilities, and potential losses if your concentrated liquidity position moves out of range. Stablecoin pools and proper range management can mitigate these risks.

How do I maximize my AERO earnings?

To maximize earnings: 1) Provide liquidity to pools with high emissions (voted by veAERO holders), 2) Lock AERO for veAERO to boost your rewards, 3) Actively manage your concentrated liquidity positions, and 4) Participate in governance to direct emissions.

Can I withdraw my locked AERO early?

No, veAERO locks are irreversible until they expire. This ensures commitment to the protocol's long-term success. Always consider your investment horizon before locking.

How does Aerodrome compare to Velodrome?

As a fork of Velodrome, Aerodrome shares similar technology but is optimized for Base Chain. Key differences include Base-specific integrations, modified tokenomics, and a focus on serving Coinbase's growing ecosystem of products and users.

Is Aerodrome affiliated with Coinbase?

While Aerodrome is the leading DEX on Coinbase's Base Chain, it operates independently as a decentralized protocol. The team has no official affiliation with Coinbase, though deep integration with Base's ecosystem provides natural synergies.