Aerodrome, developed through a partnership between Velodrome and Base developers, aims to serve as a “business development protocol” within the Base ecosystem. Its primary goals are to assist projects during their launch, facilitate the onboarding of new projects and tokens, and contribute to the overall liquidity of the ecosystem.
The inspiration for Aerodrome comes from Velodrome’s notable success as one of the most utilized platforms on the Optimism network. Also, it has more than $288 million in total locked value. Much like Velodrome, Aerodrome will reward users with its AERO tokens for participating in activities such as providing liquidity, conducting swaps, and engaging in governance.
Developer documentation indicates that AERO tokens have a total supply of 500 million. Of these 450 million of them will remain locked for a duration of four years. At the time of launch, the only liquid AERO tokens available will be the initial 50 million tokens. These are further reserved for voter incentives and to establish initial liquidity.
Understanding How Aerodrome and AERO Tokens Work
Decentralized exchanges often face a challenge where rewards are linked to total liquidity rather than trading volume, which generates protocol fees. To further address this issue, products like Aerodrome introduce a solution where holders of their native token, AERO, can lock their holdings for various durations, ranging from one week to four years. In return, they also receive veAERO, a vested AERO token.
The amount of veAERO a user receives increases with the duration of their lock, granting them greater voting power in governance decisions. This mechanism mirrors the one employed by Velodrome.
These locked veAERO tokens are represented as NFTs (non-fungible tokens) and can also be traded on various NFT marketplaces. Other users can purchase these NFTs to gain direct exposure to the ecosystem without needing to buy tokens, lock them up, and manage their positions.
Holders of veAERO tokens can actively participate in platform governance and play a crucial role in determining the reward levels for the available trading pools. As a reward, these voters receive 100 percent of all fees and incentives generated by the specific pools they support.
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