Aerodrome Finance is the dominant DEX on Base (Coinbase's L2 chain), designed as the canonical liquidity layer for the Base ecosystem. Launched in August 2023, Aerodrome rapidly became Base's largest protocol by TVL, processing over $100M daily in volume. It is a fork of Velodrome — the leading DEX on Optimism — which itself pioneered the ve(3,3) tokenomics model for DEX incentives.
ve(3,3) Tokenomics
The ve(3,3) model, pioneered by Solidly and refined by Velodrome/Aerodrome, is one of DeFi's most sophisticated incentive systems. AERO holders lock tokens for up to 4 years to receive veAERO NFTs (non-fungible tokens representing voting power). Each epoch (week), veAERO holders vote to direct AERO emissions to specific liquidity pools.
Protocols wanting deep liquidity on Base bribe veAERO holders with their native tokens to vote for their pool. This creates a flywheel: more bribes attract more veAERO votes, more votes attract more AERO emissions, more emissions attract more LPs, deeper liquidity attracts more volume, more volume generates more fees, more fees paid to veAERO holders attract more veAERO lock-ups.
Stable and Volatile Pools
Aerodrome supports two pool types: stable pools (StableSwap invariant for pegged assets, 0.01–0.05% fees) and volatile pools (xy=k constant product for standard pairs, 0.3% fees). The pool type is chosen at creation and determines fee structure and slippage behavior.
Base Ecosystem Role
As Coinbase's preferred L2, Base attracted significant institutional interest and Coinbase product integrations (Coinbase Wallet native swap interface). Aerodrome positioned itself as the liquidity backbone — many new Base tokens launch exclusively on Aerodrome and use AERO bribes to bootstrap initial liquidity.
AERO emissions were initially very high to bootstrap liquidity, contributing to AERO's significant supply inflation in 2023–2024. The ve(3,3) model's anti-dilution mechanism (veAERO holders receive proportional AERO rebases) theoretically protects locked holders from inflation.