What is Aerodrome Finance (AERO)?

Summary

Aerodrome Finance is a decentralized exchange and automated market maker built on Base, Coinbase’s Ethereum Layer-2 network. It uses AERO rewards and vote-escrowed veAERO tokens to coordinate liquidity incentives, governance, and fee distribution. AERO is available to buy and sell through iTrustCapital’s tax-advantaged Crypto IRAs* and Premium Custody Account for everyday investing.

What is Aerodrome Finance?

As the Base network began gaining momentum, developers quickly realized that a thriving Layer-2 ecosystem can't grow without deep, efficient, and well-aligned liquidity. Ethereum's Layer-2 scaling solutions have enabled faster and cheaper transactions, but liquidity remains one of the biggest bottlenecks. It is often scattered across protocols or unable to support real DeFi adoption.

These challenges created the need for a new kind of decentralized exchange. This new DEX needed to coordinate liquidity, governance, and economic incentives across an entire ecosystem. One project that's rising to meet that challenge is Aerodrome (AERO), a primary liquidity engine fueling Base.

Aerodrome Finance is a decentralized exchange (DEX) and automated market maker (AMM) built specifically for the Base blockchain. The protocol was launched in August 2023 by the team behind Velodrome on Optimism. It adapts the successful ve(3,3) model (a tokenomics design where users lock tokens to receive voting power and a share of protocol revenue, aligning long-term incentives) and upgrades it for the growing needs of the Base ecosystem.

Although Aerodrome Finance is a DEX, it's far more than a simple place to swap tokens.

Think of Base as a growing city and Aerodrome Finance as its central water system. Instead of water, it manages liquidity, making sure every neighborhood (project) has enough flow to function.

Aerodrome directs this liquidity efficiently across the entire ecosystem, ensuring that token holders, liquidity providers, and the protocol all benefit from the same aligned incentives.

Governance participation works like a city council, where those who contribute long-term (veAERO holders) earn a share of the system's "revenue," encouraging them to stay engaged. New projects can even "campaign" for more resources by offering incentives, or "bribes," to council members, asking them to direct more liquidity their way.

Altogether, Aerodrome behaves less like a typical DEX and more like the infrastructure that keeps the Base economy running as the core liquidity engine powering the network's sustainable growth.

Aerodrome Finance Key Facts

Attribute	Details
Launch Date	August 2023
Blockchain	Base (Coinbase Layer-2)
Token Symbol	AERO
Governance Token	veAERO
Protocol Type	DEX / AMM
Origin	Forked from Velodrome on Optimism
Tokenomics Model	ve(3,3)

How Does Aerodrome Work?

Aerodrome operates through a structured process that aligns incentives between liquidity providers, token holders, and the protocol:

Liquidity providers deposit assets into pools – Users contribute token pairs to liquidity pools, enabling trading on the platform.
Users lock AERO to receive veAERO – By locking AERO tokens for up to four years, users receive veAERO, an NFT-style voting and revenue-sharing token.
veAERO holders vote weekly on emissions distribution – Each week, veAERO holders vote to determine which liquidity pools receive AERO emissions.
Voters earn trading fees from pools they support – veAERO holders receive a share of trading fees generated by the pools they vote for, creating a direct economic incentive.

The History of Aerodrome

Aerodrome launched in August 2023 to replicate Velodrome's success on Optimism, but tailor it to Base's unique growth trajectory. Velodrome had already proven that the ve(3,3) model could create sticky liquidity, strong governance participation, and sustainable incentives. Base was the perfect ecosystem for its next evolution.

Early Growth

Aerodrome quickly attracted significant liquidity and emerged as one of the leading decentralized exchanges within the Base ecosystem. Its tokenomics and emissions attracted liquidity providers, while projects entering the Base ecosystem began competing for governance votes through "bribes," creating a dynamic liquidity marketplace.

The tight integration with the Base ecosystem, which received support and attention from Coinbase, helped bring in new users and tokens. As Base expanded, every new project needed deep liquidity, and Aerodrome became their primary gateway.

Protocol Evolution

By mid-2024, Aerodrome had cemented itself as Base's core liquidity protocol, supporting:

Stablecoin pairs
Token launch liquidity
Governance token pairs
Bridged assets
Yield-bearing tokens
Lending market integrations

Its governance model became increasingly active, with veAERO holders directing weekly emissions and shaping which pools grow. As Base continued its rapid adoption, Aerodrome evolved into the default liquidity destination, powering everything from consumer apps to institutional DeFi infrastructure.

AERO: The Native Token

AERO is the native utility token of the Aerodrome ecosystem, and it plays a central role in how the protocol functions and grows. Aerodrome operates using a dual-token model: AERO, the liquid reward and utility token, and veAERO, an NFT-style voting and revenue-sharing token created by locking AERO for a set period of time.

This structure encourages long-term alignment within the ecosystem. Users who lock AERO not only gain meaningful governance power but also earn a share of trading fees, giving them a direct stake in the protocol's long-term success. Together, these mechanics help position Aerodrome as an influential DeFi hub on Base.

AERO Token Use Cases

Rewards – Liquidity providers earn AERO emissions based on weekly governance votes. This creates a competitive marketplace where pools vie for emissions through bribes and incentives.
Locking and Governance – AERO holders can lock their tokens for up to four years to receive veAERO. veAERO provides voting power over emissions and access to eligible fees and incentives associated with supported pools. A longer lock generally produces greater voting power.
Governance – veAERO holders vote weekly on how AERO emissions are distributed across liquidity pools. This process determines which pools receive additional incentives.
Revenue Sharing – A unique aspect of Aerodrome's model is that veAERO holders receive a share of the trading fees from pools they vote for, creating an economic feedback loop between governance and revenue.

Tokenomics & Supply

Aerodrome uses an inflationary emission schedule designed to incentivize new liquidity, enable sustainable growth, and keep long-term token holders engaged. Over time, emissions adjust based on governance dynamics, making veAERO holders essential to the system's economic stability.

Aerodrome vs. Similar Protocols

Feature	Aerodrome	Velodrome	Uniswap	Curve
Blockchain	Base	Optimism	Ethereum (multi-chain)	Ethereum (multi-chain)
Governance Model	ve(3,3) with veAERO	ve(3,3) with veVELO	UNI token voting	veCRV voting
Fee Structure	Fees to veAERO voters	Fees to veVELO voters	Fees to LPs	Fees to veCRV holders
Tokenomics	Dual-token (AERO/veAERO)	Dual-token (VELO/veVELO)	Single token (UNI)	Dual-token (CRV/veCRV)
Primary Focus	Base ecosystem liquidity	Optimism ecosystem liquidity	General DEX trading	Stablecoin swaps

Buy & Sell Aerodrome Finance (AERO) at iTrustCapital

If you're interested in buying and selling Aerodrome (AERO), you can do so in a secure Premium Custody Account or tax-advantaged Crypto IRA* at iTrustCapital.

Click here to open an account today!

*Some taxes may apply.

Frequently Asked Questions

What blockchain is Aerodrome Finance built on?

Aerodrome Finance is built on Base, an Ethereum Layer-2 blockchain incubated by Coinbase. Base processes activity away from the Ethereum mainnet while settling transactions back to Ethereum. This structure can offer faster transactions and lower fees than using Ethereum mainnet directly.

What is the AERO token used for?

AERO is Aerodrome Finance’s transferable incentive and utility token. Liquidity providers may receive AERO emissions based on the weekly votes cast by veAERO holders. AERO can also be locked for up to four years to create veAERO and participate in protocol governance.

What is veAERO?

veAERO is an ERC-721 voting-escrow token created by locking AERO for a selected period. It gives holders voting power over how weekly AERO emissions are distributed among eligible liquidity pools. Voters may also receive fees and incentives associated with the pools they support. Aerodrome’s official disclosures confirm that these benefits belong to locked veAERO rather than liquid AERO.

How can users earn rewards through Aerodrome Finance?

Liquidity providers can deposit eligible token pairs into Aerodrome pools and may receive AERO emissions based on governance votes. veAERO holders can vote for pools and may receive the fees and incentives associated with those pools. Both activities involve risks, including token volatility, impermanent loss, smart-contract vulnerabilities, and changing reward rates.

What is the difference between AERO and veAERO?

AERO is a transferable token that can be bought, sold, or used within the Aerodrome ecosystem. veAERO is created by locking AERO and cannot function like an ordinary liquid token during the lock period. veAERO provides governance rights and access to eligible voting-related fees and incentives.

Is locking AERO the same as staking cryptocurrency?

Locking AERO for veAERO is sometimes described informally as staking, but it is more accurately a token-locking and governance process. Aerodrome does not use AERO locking to validate the Base blockchain or secure its consensus mechanism. To avoid confusion, “locking” is used instead of “staking” when discussing veAERO.

How does Aerodrome differ from Velodrome?

Aerodrome was developed from Velodrome’s model but operates on Base rather than Optimism. Both protocols use vote-escrowed tokens and weekly voting to direct emissions toward liquidity pools. Aerodrome is designed around liquidity on Base, while Velodrome primarily serves the Optimism ecosystem.

Can I use Aerodrome without locking AERO?

Yes. Users can swap eligible tokens or provide liquidity without locking AERO for veAERO. Locking is only required for users who want veAERO voting rights and access to eligible fees and incentives connected to governance participation.

Can I buy AERO in an IRA?

Yes, you can buy and sell Aerodrome Finance (AERO) through a tax-advantaged Crypto IRA at iTrustCapital. A Crypto IRA allows you to add AERO to your retirement portfolio while benefiting from the tax advantages associated with your specific IRA type. Some taxes and conditions may apply.

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