TVL is close to US$500 million. How did Aerodrome, the most powerful native DEX on the Base chain, succeed?

Compiled by Alex Liu, Foresight News

@AerodromeFi is a "MetaDEX" that combines elements of various DEXs such as Uniswap V2 and V3, Curve, Convex and Votium. Since its launch, it has become the largest TVL protocol on Base, with a total locked value of over $495 million, double that of Uniswap on Base.

Aerodrome 和 Uniswap 在 Base 上的 TVL 成长曲线

Architecture

Aerodrome’s success can be attributed to its unique architecture - which aligns incentives between different protocol participants, including traders, LPs and investors looking to bring liquidity to the token protocol and achieves this through its Ve governance model.

Participants must lock AERO tokens to receive fees. Locking the token veAERO enables users to direct the protocol’s token emissions to a specific pool, where they will receive 100% of fees and emissions.

Due to incentives, voters direct token emissions to the pools with the highest transaction volume in order to receive the most rewards. This creates a flywheel effect that attracts LPs (liquidity providers), which in turn provides traders with a low-slippage trading experience on popular token pairs. This has brought significant growth to the protocol, which is well reflected in the surge in transaction volume.

Innovation

The latest protocol upgrades include Relay and Slipstream. Relay automates the governance of liquidity providers, allowing them to deposit voting tokens into a vault to optimize voting and automatic reinvestment for reward compounding.

Slipstream brings a centralized liquidity pool to Aerodrome, providing better execution prices for high volume token pairs. Since launching Slipstream on April 22, Aerodrome has gained higher TVL, fee and volume share than Uniswap, at 68%, 51% and 60% respectively.

Ecology

Another big factor in Aerodrome’s success is their bet on Base. The Base ecosystem has experienced phenomenal growth since its launch and currently handles over 3 million transactions per day (excluding known system transactions).

With over 110 million customers, Coinbase’s Smart Wallet will provide a mechanism to bring millions of users directly to Base through a simple user interface reminiscent of Web 2.0 applications.

Base’s total correlation between daily trading volume and the AERO token is 0.86. While it is difficult to prove whether this correlation is statistically significant, it is compelling evidence that AERO will benefit from increased adoption of Base.

Aerodrome has experienced significant growth, but investors must also be aware of potential risks, including competition from Uniswap. You can learn more about this in @_dshap’s latest report.

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