What is Aerodrome Finance? DeFi Protocol Guide

Overview

Aerodrome Finance is a decentralized exchange operating on the Base blockchain that merges multiple AMM approaches into a single platform, serving as a focal point for trading, liquidity support, and governance in the Base ecosystem.

Launched on August 28, 2023, the protocol integrates concepts from a range of AMM designs — including Uniswap V2 and V3, Curve, and Convex — to act as Base’s principal liquidity venue. The platform supports token swaps, accrues trading fees, and rewards liquidity providers through AERO token emissions. Participants can lock AERO to obtain veAERO, which conveys governance authority and a portion of protocol fees.

Created by the team behind Velodrome on Optimism, Aerodrome adapts elements of the Solidly protocol for use on Base, an Ethereum Layer 2. In the absence of a native Base token, AERO functions as the principal incentive and governance asset. Coinbase Ventures engages with the protocol by locking AERO and casting votes on emissions, underscoring Aerodrome’s strategic position in the Base ecosystem.

Flight School

Flight School is Aerodrome’s recurring incentive initiative that awards additional veAERO to users who initiate new token locks. Eligibility requires locking at least 2,500 veAERO during a four-week period known as a "class." At the class’s conclusion, bonus veAERO is distributed proportionally based on each participant’s share of the qualifying veAERO total. Coinbase One subscribers receive a 1.3x weighting applied to their locks for bonus calculations. Since its inception, Flight School has issued over 42.6 million AERO in veAERO form.

AERO Fed

The AERO Fed is a governance framework that enables veAERO holders to influence the rate at which AERO tokens are emitted. Emissions originally followed a predetermined schedule, decreasing by 1% each week. Beginning at epoch 67 (December 4, 2024), control moved to a smart contract-driven mechanism that permits veAERO voters to increase, decrease, or maintain the weekly emission rate within prescribed bounds.

The purpose of the AERO Fed is to match emissions policy with market realities and the needs of the ecosystem. Weekly emissions can be set as high as 1% of total supply (52% annualized) or reduced to as little as 0.01% (0.52% annualized). During the initial rollout, emissions are programmatically reduced while the community adjusts to the new process; after the transition period concludes, veAERO holders will exercise full authority over emission changes through on-chain voting.

Slipstream

Slipstream is Aerodrome’s proprietary concentrated liquidity implementation aimed at raising capital efficiency and trade execution quality on Base. It claims up to 10 times higher trading volume per unit of TVL versus conventional clAMM pools by offering configurable tick spacing, refined fee tiers, and a bespoke fee calculation algorithm. As Aerodrome captures a larger portion of Base’s trading activity, veAERO voters stand to gain from increased fee distributions, reinforcing the protocol’s liquidity incentives.

ALM V2

ALM V2, introduced by Mellow and incorporated into Aerodrome in January, modernizes Automated Liquidity Management for liquidity providers. The upgrade includes strategies with dynamic parameter adjustment, streaming reward mechanisms, vault caps to limit security risk and exposure, and enhancements for liquid staking and restaking assets. These changes aim to simplify participation in Slipstream and boost the overall efficiency of liquidity provisioning.

Pool Launcher

The Pool Launcher is a permissionless tool that lets anyone create liquidity pools for tokens on Aerodrome. It provides a guided workflow to establish either standard or concentrated pools, accept paired or single-sided liquidity additions, and natively lock liquidity to signal long-term commitment. Newly listed or emerging tokens can be tagged in the interface to increase their visibility for traders and depositors.

Pools created through the Pool Launcher retain all swap fees directly, with the platform taking no share, enabling creators to capture trading revenue or finance incentive programs. Additionally, pools that meet specified criteria can automatically become emission-eligible pools, joining Aerodrome’s incentive framework without requiring a migration. This approach blends usability with mechanisms for discoverability, fee capture, and scalable liquidity management.

AERO

AERO is an ERC-20 token used to reward liquidity providers on Aerodrome Finance. While it can be traded or deposited into liquidity pools, its primary purpose is to be locked to align incentives and enable governance participation. All AERO tokens held by the Aerodrome Foundation are locked, and there are no liquid vesting allocations for contributors or team members, placing those holdings on the same footing as other participants.

veAERO

veAERO is an ERC-721 non-fungible token that represents locked AERO used for governance on Aerodrome Finance. Users may lock AERO for up to four years to receive veAERO, with voting influence scaling linearly with the lock duration. For instance, locking 100 AERO for four years yields 100 veAERO, whereas locking the same 100 AERO for one year results in 25 veAERO. Additional AERO can be deposited into an existing veAERO NFT, and those locked tokens are used to engage in governance decisions.