The First: 100% Return to Token Holders, How Aerodrome Solves Liquidity Dilemma

In the DeFi Summer of 2018, UNISwap emerged, abandoning the traditional architecture of general digital trading platforms. Instead of using order books, it uses the "constant product market maker model" to support users to trade directly without intermediaries, bringing high decentralization and anti-censorship capabilities , thus opening the curtain of (DEX) decentralized exchanges.
Nowadays, DEX platforms are emerging one after another. Not only UNISwap is constantly innovating, but also more decentralized exchanges are blooming. In this highly volatile market environment, DEXs have not only experienced technical challenges, but also faced increasing competitive pressure. Aerodrome Finance is the fourth-generation decentralized finance (DeFi) ecosystem. The platform combines advanced automated market makers (AMMs) with liquidity generation functions, providing unique opportunities for traders.
On October 24, 2024, The First launched Aerodrome Finance and listed its ecological token $AREO in the spot area. As the next generation of automated market makers (AMM), what surprises can Aerodrome Finance bring us? What upgrades does it have in terms of operating logic compared to other DEXs? What different things can it bring to users? Let's enter the decentralized world of Aerodrome Finance together.
What is Aerodrome Finance?
Aerodrome Finance is a next-generation automated market maker (AMM) designed to serve as a liquidity hub for the Base, combining a powerful liquidity incentive engine, voting lock governance model, and user-friendly experience. Through its native token AERO, it adopts a unique incentive structure to attract liquidity to the Coinbase blockchain Base.
Aerodrome Finance inherits the advanced technical features of Velodrome V2 and further optimizes and innovates on this basis. Users can stake their tokens into NFTs, participate in voting to decide the distribution of token rewards, and also enjoy incentives and transaction fees generated by the protocol. Within 24 hours of the official launch of the Aerodrome protocol, it attracted nearly $200 million in TVL, and the uncompounded annualized mining income of its native token $AERO liquidity mining is close to 1000%. As the central liquidity hub of the BASE blockchain economy, Aerodrome plays a crucial role and now has over $17.20 billion in TVL (total locked value).
How does Aerodrome Finance work?
Aerodrome is mainly composed of two parts: Swap and Liquidity. Swap is the main function of Aerodrome as a DEX, allowing users to trade between different cryptocurrencies without relying on traditional centralized exchanges. Swap is implemented through smart contracts to ensure transaction security and transparency.
In the Liquidity section of the Aerodrome platform, users can provide liquidity to DEXs to earn rewards and transaction fees. Aerodrome includes Liquidity Providers (LPs) and Liquidity Pools.
Among them, Liquidity Providers (LPs) ensure smooth transactions and reduce slippage (the difference between transaction prices and expected prices) by depositing tokens into the liquidity pool. As the total value (TVL) in the liquidity pool is higher, the slippage is lower, and the trading experience is better, the platform encourages users to become LPs through various rewards. LPs can receive rewards for platform tokens AERO and transaction fees, while veAERO locks can receive transaction fees and have the right to vote on the most efficient liquidity pool.
Features of Aerodrome Finance
Aerodrome is an innovative decentralized trading platform that integrates the automated market maker (AMM) mechanisms of Uniswap V2, Uniswap V3, and Curve, providing traders with an efficient and low-slippage token exchange environment. The following are the main features and advantages of the Aerodrome platform.
Low slippage token exchange:
By integrating multiple AMM styles, Aerodrome is able to provide traders with a diverse range of token exchange options, enabling automated trading with minimal slippage.
Whether it is a stable cryptocurrency or a volatile cryptocurrency, traders can enjoy low fees and an efficient trading experience on Aerodrome.
Inspire voters to participate in governance.
Aerodrome encourages decentralization and community participation, and holders of locked AERO tokens can participate in voting on key decisions such as the amount of liquidity pool rewards.
In return for voting, voters will receive 100% of the agreement incentives and fees from the specific funding pool they support, which further enhances community members' participation and sense of belonging.
Liquidity Lock NFT:
Holders of locked AERO tokens will receive veAERO tokens, which exist in the form of NFTs and are unique and tradable.
The veAERO token can be freely traded and transferred on the NFT market, while retaining the voting custody positioning of each holder, providing additional incentives and flexibility for liquidity locking.
Unlicensed fund pool and indicator settings:
Aerodrome allows anyone to become a liquidity provider and create liquidity pools on the platform without a license.
Liquidity providers can also set metrics for staking liquidity and incentives for pools, which can help attract more customer engagement and provide liquidity.
Anti-dilution reconstruction protects voting rights.
To protect voting rights from the impact of time dilution, veAERO token holders will receive a reconstruction of AERO emissions based on the veAERO and AERO supply ratio.
This mechanism ensures that the voting rights of veAERO token holders do not weaken over time, and also incentivizes new AERO holders to lock up tokens to participate in governance.
Self-optimizing liquidity flywheel:
Aerodrome encourages holders to provide liquidity to the pool through the creation and staking of unlicensed liquidity pools.
This will start a cycle of increased liquidity, attracting more traders to the platform, resulting in more fees and rewards for liquidity providers.
Aerodrome Finance Token Economics
Aerodrome Finance uses two types of tokens to manage its utility and governance functions.
$AERO is a utility token based on ERC-20, mainly used to distribute liquidity providers (LPs) as rewards. LPs will receive $AERO token allocation (emissions) based on the cumulative voting ratio of the liquidity pool in each cycle.
$veAERO is a governance token (NFT form) based on ERC-721. Any $AERO holder can vote to lock their $AERO (vote-escrow) and receive $veAERO (also known as veNFT) in exchange. The maximum voting lock-up period can be up to 4 years, and the $veAERO received by $AERO holders is proportional to the lock-up time. For example, $AERO locked for 4 years will receive $veAERO, while $AERO locked for 1 year will receive 25 $veAERO.
Regarding initial token distribution, regarding AERO tokens:
AERO token: 500M, of which 450M is allocated as voting lock ($veAERO) token.
The weekly issuance starts from 10M $AERO (2% of the initial supply). The issuance plan is divided into three stages.
Take-off phase: During the first 14 cycles, the issuance will increase by 3% per week to promote agreement activities and partner participation.
During the cruising phase, after the 14th cycle, the additional issuance will be reduced by 1% per cycle to ensure that the total supply expansion rate gradually decreases as the agreement matures.
During the Aero Fed phase, when the issuance per cycle drops below 9M (approximately the 67th cycle), veAERO voters will control the Monetary Policy of Aerodrome through the Aero Fed system.
Analysis of the market value of $AERO
As a key component of the Base ecosystem, Aerodrome is actively expanding its influence in this field by relying on the huge client base and development potential of the Base chain. As a mature and widely used blockchain platform, the Base chain provides solid underlying technical support and broad market space for Aerodrome Finance.
With the continuous development and maturity of the cryptocurrency market, Aerodrome Finance is well aware of the importance of maintaining competitiveness. Therefore, the platform is committed to continuously optimizing and upgrading its Automatic Market Maker (AMM) technology to respond to the rapid changes in the market and the diverse needs of users. Through continuous technological innovation, Aerodrome Finance aims to improve transaction efficiency, reduce transaction costs, and enhance transaction security, thereby providing users with more high-quality and efficient Financial Services.
In addition to continuous technological innovation, Aerodrome Finance is also committed to further developing the use cases of AERO tokens to empower the community. By expanding the application scenarios of AERO tokens, Aerodrome Finance hopes to inspire the enthusiasm and creativity of community members, and jointly promote the development and growth of the platform.
Looking to the future, with the continuous advancement of technology and the continuous changes in the market environment, Aerodrome Finance is expected to become an important participant in the decentralized finance field. The platform will continue to adhere to the principle of user first, continuously optimize products and services, and provide users with richer and more efficient Financial Services
In the past year, Aerodrome Finance has generated over $100 million in revenue and distributed it all to token holders. AREO will log in to The First trading platform at 16:00 (UCT + 8) on October 24th. If users want to participate in Aerodrome Finance and receive holder benefits, The First will be a very suitable trading location.