Aerodrome Finance is a decentralized finance (DeFi) protocol that has been gaining attention as a next-generation automated market maker (AMM). Designed to power liquidity on the Base blockchain, Aerodrome combines efficient token swaps, liquidity incentives, and a governance mechanism that rewards users for participating in the protocol’s ecosystem.
As DeFi continues to evolve, Aerodrome stands out for its unique combination of features, including veTokenomics, native incentives, and seamless integration with the Base Layer 2 chain developed by Coinbase. This guide will take you through every major aspect of Aerodrome Finance to help you understand how it works, its key components, and why it's a powerful tool for liquidity providers and traders alike.
Aerodrome is a decentralized exchange (DEX) that leverages AMM mechanisms to allow token swaps without relying on traditional order books. It operates on the Base network and inherits the efficiency, low fees, and scalability of Layer 2 Ethereum. It also draws inspiration from Velodrome on Optimism, with similar mechanics.
Users can provide liquidity, trade tokens, vote on protocol changes, and earn rewards via staking and governance. This multifaceted utility makes Aerodrome not just a DEX, but a full-featured DeFi platform that enhances yield farming, liquidity management, and decentralized governance.
AERO is the native token of the Aerodrome Finance platform. Users can lock their AERO to receive veAERO (vote-escrowed AERO), which gives them governance rights and a share of protocol fees.
The longer users lock their AERO tokens, the more veAERO they receive, incentivizing long-term engagement and platform stability. veAERO holders can vote on liquidity pool gauges, determining where AERO emissions should be distributed.
Visit the Aerodrome app on your browser and connect a supported Web3 wallet like MetaMask or Coinbase Wallet. Ensure you're on the Base network.
Users can instantly trade ERC-20 tokens available on the Base network through Aerodrome’s AMM interface.
Choose a token pair and deposit funds into a liquidity pool to earn trading fees and liquidity incentives.
After providing liquidity, you receive LP (liquidity provider) tokens. These can be staked in gauges to earn AERO rewards.
Locking AERO grants you veAERO, which allows participation in governance and boosts your staking rewards.
Aerodrome uses a unique voting system where veAERO holders vote on gauge weights to decide which liquidity pools receive emissions. This creates a dynamic economy where LPs must incentivize veAERO holders to vote for their pools, creating a “bribing” market.
This model ensures more efficient allocation of resources and community-driven development of the protocol.
Like all DeFi protocols, Aerodrome carries inherent risks such as smart contract bugs, impermanent loss, and regulatory changes. Users should do their own research (DYOR) and consider only investing what they can afford to lose.
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