Aerodrome Finance (AERO)
Aerodrome Finance functions as the central liquidity hub on Base, Coinbase’s Layer-2 network, offering an advanced Automated Market Maker (AMM) for efficient token swaps. It directly addresses Base’s initial liquidity fragmentation problem by creating a unified platform where users can trade with minimal slippage and projects can quickly establish liquidity pools.
Since launching in August 2023, Aerodrome has achieved remarkable traction, capturing approximately 56% of all DEX volume on Base and accumulating $700M in Total Value Locked (TVL)—outperforming even Uniswap’s Base deployment. This dominance stems from its innovative vote-locked token model, which allows AERO holders to direct liquidity incentives where needed.
Aerodrome’s primary strength lies in its “first-mover” position on Base and its hybrid approach combining features from established DEXs like Uniswap and Curve. However, investors should note its inflationary tokenomics, with continuous token emissions potentially applying downward pressure on price.
For those bullish on Base’s growth potential, AERO represents a strategic investment in the network’s DeFi infrastructure. Watch our analysis video and read the full report to understand why Aerodrome could become a cornerstone holding for Base ecosystem investors.
Strategic Positioning & Market Footprint
Aerodrome Finance has rapidly established itself as the central liquidity hub on Base, Coinbase’s Layer-2 network. Launched in August 2023, it addresses Base’s initial lack of deep, unified liquidity with a vote-escrow tokenomics model. The protocol’s market adoption has been impressive – Base’s TVL roughly doubled following Aerodrome’s launch, and the platform now handles approximately 56% of all DEX volume on the network. With $700M in TVL, Aerodrome has outpaced Uniswap’s Base deployment ($483M) to become the network’s dominant exchange.
This success stems from addressing a genuine market gap. Before Aerodrome’s arrival, Base’s liquidity was fragmented and shallow, hindering broader DeFi growth. The protocol solved this through aggressive incentives paired with a governance model that lets stakeholders direct liquidity where needed. This approach has attracted both users seeking efficient trading and projects requiring quick liquidity bootstrapping.
Team & Technology Foundation
Behind Aerodrome stands a team with proven experience – notably Alexander Cutler and other core contributors from Velodrome Finance (Optimism’s leading DEX). This pedigree lends credibility, as they’ve successfully executed a similar playbook before. The team demonstrates strong security practices and community engagement, responding promptly during critical events like the November 2023 DNS attack, which they managed with transparency and limited damage to approximately $250k.
Technologically, Aerodrome is built on Base using Solidity contracts derived from Velodrome V2. While the contracts weren’t independently audited for Aerodrome, they inherit Velodrome’s Spearbit-audited codebase. The protocol features both stable and volatile swap pools with a gauge system for liquidity mining. The roadmap includes concentrated liquidity pools (“Slipstream”), veNFT marketplace integration, and gradual decentralization of monetary policy control.
Tokenomics Structure
AERO’s supply model is inflationary by design, starting with 500 million tokens at launch with 90% immediately locked as veAERO (vote-escrowed AERO). The initial distribution favored community stakeholders: 40% was airdropped to veVELO holders, while the team received 14% with 2-4 year vesting periods. As of March 2025, circulating supply has grown to approximately 802 million tokens, with a total supply around 1.55 billion, reflecting significant emissions since launch.The emission schedule began at 10M AERO weekly, increased by 3% weekly for 14 weeks, then entered a decay phase of -1% per week. Once weekly emissions fall below 9M, governance will control future emissions via the “Aero FED” mechanism, with bounds between 0.52% and 52% annual inflation.
AERO’s utility centers on governance and liquidity incentives. By locking AERO as veAERO, holders gain voting power over emission allocation and earn trading fees plus external bribes. This governance yield aspect gives the token economic value beyond mere speculation.
Competitive Landscape & Strategic Execution
In Base’s ecosystem, Aerodrome has effectively outcompeted Uniswap despite the latter’s superior technological efficiency. Aerodrome’s edge lies in its ve-token model, which creates stickier liquidity through direct incentives. Against other major DEX tokens like Curve (CRV) and PancakeSwap (CAKE), Aerodrome occupies a unique position by combining elements of both models while maintaining a focus on Base.
Aerodrome’s key differentiator is its veAERO governance model paired with chain-specific focus. The protocol also dedicated 25% of initial governance power to Base ecosystem public goods, positioning itself as ecosystem-friendly. Its rapid listing on Coinbase and other CEXs improves accessibility compared to many DEX tokens that remain primarily on-chain.
Market Liquidity & Risk Profile
AERO enjoys robust liquidity both on-chain and on centralized exchanges. On-chain, Aerodrome provides around $60M in liquidity for AERO pairs, with daily volumes often reaching tens of millions. On CEXs, Coinbase listed AERO in February 2024, providing a regulated venue with substantial daily volume often exceeding $20M. Additional listings on KuCoin, Gate.io, MEXC, and others ensure broad market access.The primary investment risks include dilution from ongoing emissions, dependence on Base’s growth trajectory, and potential regulatory uncertainties given its DeFi status with U.S. exposure via Coinbase. Governance concentration remains a concern as well, as large holders could potentially dominate decision-making over time.
Verdict: Cautiously Optimistic with Chain-Specific Exposure
Aerodrome presents a compelling but high-risk opportunity. The protocol has demonstrated strong product-market fit, established dominance within Base’s ecosystem, and built liquidity depth that suggests staying power. Its team has executed efficiently, and the token design encourages long-term alignment.
For those bullish on Base’s growth potential as a leading L2, AERO represents a natural proxy investment. The token offers not just price exposure but also governance yield for those willing to lock tokens. However, the high inflation rate and current fully diluted valuation of ~$800M require careful consideration.
AERO is best viewed as a calculated bet on Base’s continued expansion and the sustainability of the ve-token DEX model. For DeFi-savvy investors, locking AERO for veAERO can generate attractive returns through fees and bribes, while passive holders may face headwinds until inflation moderates. Position Aerodrome within a diversified L2 ecosystem portfolio, sized according to your conviction in Coinbase’s Base strategy.
