Base has been growing exponentially throughout 2024 and I expect it to accelerate more next year. @AerodromeFi is the largest protocol on Base and the best way to be exposed to it. Let's take a deep dive 🧵

1/➣ What's @AerodromeFi? Aerodrome Finance is a next-generation AMM designed to serve as Base's central liquidity hub, combining a powerful liquidity incentive engine, a vote-lock governance model, and a friendly UX. It's a native Base dApp that was launched in August 2023.

2/➣ Architecture The protocol allows token swaps and earns fees by attracting liquidity. Each epoch, liquidity providers (LPs) receive $AERO tokens based on pool votes, with only staked liquidity eligible. Participants can lock $AERO to vote on the next epoch's emissions,… x.com/i/web/status/18512978301...

➣ $veAERO voters earn rewards based on locked amounts, receiving all protocol trading fees from the previous week plus current voter incentives. P.S. An epoch lasts 7 days.

3/➣ Key Features Liquidity and Ecosystem Support: Aerodrome strategically focuses on Base-native assets such as $USDC and staked $ETH tokens (cbETH, rETH). Partnering with DEX aggregators deepens liquidity and enhances trading efficiency, benefiting users and Base eco.

➣ Self-Optimizing Liquidity Flywheel ↓ By redirecting rewards to liquidity-needy pools, Aerodrome reduces slippage and offers sustainable APYs. This self-adjusting model maintains a stable liquidity environment.

➣ Scalability with Optimism Superchain ↓ Aligned with the Optimism Superchain and built on Base, Aerodrome offers enhanced scalability and reduced transaction fees. This structure appeals to liquidity providers by leveraging Base's L2 perks.

4/➣ Tokenomics $AERO: The native utility and governance token used for rewards and voting. $veAERO: A locked version of $AERO that grants governance rights and rewards from trading fees. Initially, $AERO tokens are emitted at a rate of 10 million per week, increasing by 3%… x.com/i/web/status/18512978552...

➣ Aerodrome Finance’s tokenomics relies on the ve(3,3) model. $veAERO holders influence $AERO emissions to liquidity pools and receive 100% of the Total Rewards generated by the DEX. As you can see, the voting incentive efficiency of Aerodrome is through the roof!

➣ This model literally puts stakers on the first place. Aerodrome is currently generating ~$300m in annualized feed and every single $ is going to $veAERO stakers. x.com/AustinBarack/status/1850...

5/➣ Traction Some of the latest stats ↓ - TVL: $1.39b - Volume: $805m yesterday (over $50b cumulative) - Tokenholders: ~200k Aerodrome currently accounts for 53% of Base TVL and 65% of its volume (on the last day).

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