Aerodrome (AERO) Crypto Overview: The Liquidity Layer of Base

Aerodrome (AERO) Crypto Overview: The Liquidity Layer of Base

this video is an overview of Aerodrome
finance and the aerot token Aerodrome is
the leading decentralized exchange on
base coinbase is ethereum layer 2 and in
today’s video I’m going to show you what
Aerodrome is how to use it we’re going
to talk about the risks and
opportunities associated with Aerodrome
and then we’ll talk about the tokenomics
of Aerodrome aerot token welcome back to
D mod defi my name is Patrick as a
reminder nothing in this video is
financial advice this is solely intended
to be for educational purposes now let’s
get into it to start what exactly is
Aerodrome and if you’re into crypto why
should you care about it Aerodrome calls
themselves the central trading and
liquidity Marketplace on base another
way to think about them is that they are
the leading decentralized exchange on
base and Bas if you’re not familiar is
coin bases chain it’s technically an
ethereum layer too so it settles onto
ethereum and it uses eth as gas however
it functions similar similarly to
another chain you have to add another
chain to your wallet to use it uh but
why aerod Drome I think is is
interesting right now is it’s not just
the leading decentralized exchange but
actually the leading defi application
period on base and again base coinbase
is chain so coinbase is already starting
to push a lot of people to base they’re
making it easy to withdraw from coinbase
directly onto the base Network and
they’ve said that eventually people will
be able to buy tokens on base directly
from coinbase and Aerodrome is an
obvious benefici iary of that as the
leading decentralized exchange to give
you a sense of how that’s played out so
far since the start of 2024 the amount
of deposits in defi on base has grown
from around $440
million 4X to over
$1.6 billion and nearly half of that is
on Aerodrome Aerodrome right now has
nearly $800 million in deposit and if
you just look at that since the start of
the Year those deposits on Aerodrome
have grown from around 120 million to
nearly 800 million currently at 761
million as of the time that I’m making
this video so that’s just tremendous
growth and I think it’s without a doubt
that Aerodrome has been a major
beneficiary of coinbase pushing base and
the other thing I’ll say is that
Aerodrome has its token we’ll get to the
more details in the token later but it
has its aerot token and I think because
base doesn’t have a token but people
want to speculate on Bas growing
naturally a lot of people are going to
the largest application and they’re
saying okay this application acts kind
of as a proxy for the entire ecosystem
and so that’s resulted in a lot of
people a lot of people investing in
Aerodrome other thing I’ll note is that
Aerodrome is a decentralized exchange
the volume is very important the volume
peaked back in March about a month ago
at this point however however it’s still
much higher than it was prior to
starting to run up in February so
recently Aerodrome has been processing
around 20 to $50 million a day in volume
if you go back to February January it
was processing more like two to 5
million a day so it’s still done a 10x
in volume even after even after
retracing now and you can see this if
you look at for example the weekly or
monthly volume charts it’s it’s still up
a lot although it’s not quite where it
was at its peak in
March and so what exactly sets aerod
Drome apart though besides the fact that
it’s the leading decentralized exchange
on coinbase well there’s a few things so
Aerodrome is ultimately it’s a fork of
Vel Drome which is a leading exchange on
optimism uh but ultimately velodrome is
also a fork of a protocol known as
solidly which was popular on Fantom back
in 2022 with some changes to correct
some of solly’s issues and these solidly
Forks they’re also called v33 dexes
they’re distinguished by a few things so
first is they align incentives between
token holders and liquidity providers so
they have this methodology here where as
a Trader you pay fees those fees go to
token holders who are staking their
Arrow token and then new Arrow emissions
go to liquidity providers and then
incentives go to protocols uh but the
part of this I really want to focus on
is that the the V Aro voters they want
they vote on um which LPS the emissions
are going to go
to and then they collect fees from the
LPS that they vote for their emissions
to go to and so the result of that is
that they’re incentivized to provide
emissions to liquidity pools that are
likely to have the highest fees and what
that results in is less slippage for the
pairs that Traders ultimately want to
trade
on another thing that sets apart these
sorts of v33 dexes is that pools are
divided into stable pools and volatile
pools stable pools would be something
like usdc to usdt or eth to St eth some
sort of stake eth and those stable pools
are basically designed to have stability
Less Price fluctuation as you’re as
you’re trading between those tokens
because they’re assumed to have a
relatively steady Peg whereas the
volatile pools will will the price will
change much easier as it ought to when
you’re buying and selling tokens that
whose prices are in theory unrelated and
so that’s what Aerodrome is in a
nutshell and on top of that the rates
are actually extremely good for
providing liquidity right now and a big
part of that is because volume has been
up the price of Arrow has been way up
and so as you can see here for example
one of these volatile pools eth usdc eth
absolute Blue Chip right usdc major
stable coin this pool has a lot of
deposits $152 million of deposits and
yet the APR is still
33.5% on this pool I mean that’s
extremely high right if you want to
provide liquidity on aerrow dromes aot
token itself
185% this pool is a stable pool so it’s
DOA a smaller which does mean riskier
but smaller stable coin and then us
DBC that is almost 38% and if you want
to try out aerody Drome for yourself
here’s how you can do it first thing
you’ll need to do is get some funds onto
base and to do that you will need a base
compatible wallet and you’ll need to
make sure that base is added to it
metamask or other ethereum compatible
wallets will work with with base and
best place to add new chains to your
wallet is always going to be chain
list.org
that’s what I use you can type in any
network that’s ethereum compatible like
Bas and if your wallet’s connected you
just click on add to metamask and it’s
going to add it as a chain it’s it’s
really that straightforward you’re not
making a transaction or anything you are
literally just adding the chain to your
wallet and once you’ve done that you’ll
have to deposit some funds to base and
you’ll need to make sure you deposit
some eth because you use eth for
transaction fees uh but there’s a few
different places you can do it if you
have money on coinbase you can actually
withdraw directly from coinbase to base
now I can’t vouch for how that is in
every country but I know that in the
United States at least that works and I
imagine it does in at least some other
countries as well so you can withdraw
directly from coinbase or if you don’t
have a coinbase account or you only have
money on chain you can also bridge to
base and base has their own bridge at
bridge. b.org you can use to
deposit or you can use something like
dbridge and I I’ve been using dbridge
recently because they have an upcoming
airdrop it’s already announced they have
a points program so I figure why not
qualify for the airdrop when I’m
bridging to base and so yeah you can you
can use dbridge to actually actually uh
Bridge there and qualify for the airdrop
at once and that’s what I’m doing and so
once you’ve got some eth on base you are
ready to use Aerodrome first thing
you’ll want to do is connect your wallet
it may look something like this I’m
going to click on browser wallet and so
my browser wallet is now connected to
base uh that’s simple and you can see
here that in this particular wallet I
have some eth right so that’s what you
need eth because eth is going to be used
to pay for transaction fees and the
first thing that you can do is you can
swap tokens on base so for example I can
swap let’s say
0.02 eth I can swap that to
USC it’s going to look something like
this it’ll search for a quote
and then once it finds it you can just
click on swap eth for usdc to actually
convert it and you’ll have to confirm
the transaction and just for reference
this particular transaction is costing
me about 5 cents so um you know pretty
pretty low pretty low transaction fees
and look that it was basically instant
right this this chain is extremely fast
um and then yeah and so then next thing
I’m going to do is I’m going to convert
some of this eth to rap
eth let’s do 0.02 again WAP eth for w
and I’m going to do this so that I can
deposit wrapped eth and usdc into that
wrapped eth usdc pool that we saw a few
minutes ago and once again that went
through and so now I’m all ready to
deposit some liquidity going over here
to the liquidity section I see this pool
there 3
3.62% pretty good rate for what it is
and you can see here that um I actually
could have kept the original native eth
instead of instead of wrapping it but it
was good for
demonstration and I’m going to deposit
wde and
usdc first you’ll have to give
permission to use both tokens and if
you’ve done transactions on chain before
this probably is straightforward to you
right you’ve probably done something
similar but if you haven’t then that’s
why we’re doing the tutorial right this
I try to cater to all skill levels on
this
channel so we have to allow the
transaction again and now that the
transaction the contract I’ve gave it
permission in my wallet to basically
access my funds I’m ready to deposit so
I click the big blue deposit
button and I have to confirm the
transaction in my wallet this particular
transaction is costing 6 cents again
pretty cheap in note there’s one more
step here you have to make your deposit
and then you also have to press a second
button to stake it and if for some
reason your stake button disappears like
mine did a second ago then what you’re
going to do is you go to the dashboard
here at the top and you see I have my
deposited and staked liquidity those are
two separate things I have my 0.02
wrapped eth and my 6282 usdc and it’s
deposited but it’s not staked so in
order to start receiving those rewards I
have to stake it
so I’m going to click this stake button
right
here loading on chain data I have to now
allow this deposit liquidity pool token
v amm v stands for
volatile I’m approving the transaction
once
more and then once this is approved I
will have the option to stake it so I’m
going to press that Big Blue Stake
button and confirm the transaction it’s
a lot of steps right it’s it’s not
necessarily
the most user friendly I’m not going to
lie uh that being said that being said
if you are into defi then I think this
is a pretty good opportunity because
this is right now one of the I would say
fastest growing and honestly one of the
largest protocols at this point it’s the
largest on base and it’s relatively
large in the scheme of things compared
to other protocols and you can earn 33%
on Blue Chips uh so that’s that’s not
bad although understand that any
liquidity pool in crypto carries risk
you have risk of impermanent loss you
have Smart contract
risk so it’s not certainly not risk-free
but in terms of the tokens themselves
you know Ethan usdc are relatively low
risk as far as far as crypto goes but
anything in crypto is
risky um now that that that speech is
over uh if you want to unstake you just
go to the same thing at the top
dashboard click the unstake button and
you’re just going to undo everything we
just did you could you could also
unstake 50% but uh just a demonstration
I’m going to
unstake the
50% and then I’m going to click on
withdraw deposit so again two steps to
deposit two steps to
withdraw allow the transaction
approve and then I’m going to click on
withdraw and I confirm the transaction
again and then in just a minute these
tokens should appear back in my wallet
let’s go back to the swap section and we
can see I’ve got the usdc again and I’ve
got the rapde so just like we deposited
it now we were able to withdraw it now
that we’ve talked about what aerod Drome
is and how to use it let’s dive into the
tokenomics for aerod dr’s arot token the
ticker is Arrow AE r o and as of the
time I’m making this video the market
cap is
67 million with a fully diluted
valuation of $1.46 2 billion
and so that although the F diluted
valuation is decently larger than the
market cap just over twice as big a good
portion of the tokens are already in
circulation right um we know that
Aerodrome is inflationary because that’s
where the yields on Aerodrome are coming
from however
42% in circulation for a new token
really isn’t isn’t that bad so I would
say that the the tokenomics are uh not
ideal you know you do have to worry
about about more inflation in the future
but it’s pretty standard for a new token
that’s that’s in its first year of
existence as far as the market cap
itself where it stands it’s currently
rank 140 and if we look at the
decentralized exchange category how it
looks compared to some peers that places
it below osmosis the leading decentral
ized exchange on Cosmos but ahead of woo
and curv DOW and radium which is the
leading decentralized exchange on on
Solana and one thing I’ll note like I
mentioned before is I believe that part
of the reason why
aerodromes value I think has been has
gone up so much is because of the fact
that it’s acting almost like a proxy
token for the base Network since there’s
no base token for people to buy
themselves as far as the utility for the
aerodrome token like I mentioned at the
start of the video you can stake it to
earn fees so if you if you lock up your
arrow for V Arrow then you’re going to
receive Fe fees from people who who
um who trade on pools and then
Additionally you can receive incentives
from protocols in exchange for voting to
send Arrow emissions to their pools so
you can stake arrow and you can you can
earn pretty good yield that way and or
of course you could go to liquidity
pools like we talked about before you
could pair it with a stable coin or with
eth and you could earn
185%
APR 159% APR depending on the pool that
you’re in so there’s also some good
opportunities to use arrow in Defi and
so what about the risks and
opportunities associated with arrow
first we’ll talk about the opportunities
I think the main opportunity is that
base could potentially get a lot more
users just for comparison if we look at
BSC binance smart chain binance’s main
chain which they were supporting similar
to how coinbase is supporting base even
after several years I mean it’s really
been three years since binance smart
chain binance smart chain was really
having its moment where it was the thing
that everyone was talking about it’s
still the third largest chain by tvl
head of
salana just behind Tron which has its
own reasons for being that high and of
course behind behind ethereum but if you
look at for example the incredible runup
in terms of deposits and activity that
binance smart chain had back in 2021
then it really went from you know almost
nothing it went from a few hundred
million dollars to over $21 billion at
its peak in May of 2021 in a very short
time frame and so when I talk about 3
years you know this is the period I’m
talking about and so the upside of
Aerodrome is well if base is able to
execute something similar with their
chain then aerod Drome is going to
benefit enormously it’s going to become
a massive protocol with billions of
dollars of tvl probably hundreds of
millions if not billions of dollars of
volume on a daily basis and that is of
course best case scenario there’s also
various uh interim scenarios where for
example maybe coinbase is just able to
get base to Max to match binance smart
chain where it is today uh but in that
case that’s still billions of dollars of
more liquidity that’s flowing into base
another opportunity is that coinbase
themselves have mentioned that people
will eventually be able to buy tokens on
base directly from coinbase well which
exchange is that going to go through if
they’re buying onchain tokens then a lot
of those onchain tokens are currently
listed on Aerodrome so that’s going to
be a lot more volume that’s being pushed
to
Aerodrome and as far as the risks of it
I would say one risk even though the
inflation isn’t bad for a token that’s
relatively new you do still have to look
for some inflation on the medium and
long term so I would consider that to be
a risk another risk is that let’s be
honest the price is up a lot already
it’s up from under 10 cents a couple
months ago to $145 now so there’s a lot
of people who are sitting on a lot of
money and if the market really started
to turn or cool down then some of those
people might start to cash out so you
have to be mindful of that the other
thing to be the other risk to be aware
of is uh well you know I said what if
coinbase
executes on base and it’s able to get as
big as BSC that’s great but what if they
don’t right what if what if coinbase for
whatever reason isn’t able to execute
now I tend to think they’re more likely
than not to make base a success but
coinbase has had products that failed
before uh there’s no guarantee and so so
if that happens then of course Aerodrome
is not going to is unlikely to do well
if Bas doesn’t do well right right now
Aerodrome success is very much tied to
that of BAS and then the final risk that
I’ll say is these tokenomics Aerodrome
has they are phenomenal for making price
go up when deposits and volume goes up
it can also work in Reverse so any
flywheel that works in a positive way
can also work in a negative way and so
in the event that Fe volume tvl starts
to really drop then that’s of course
going to affect the arrow token
negatively and if you want to learn more
about the latest trends on chain anal is
and new launches in crypto be sure to
check out my Weekly Newsletter at
dynamod def. substack
docomo defi

Free Newsletter: https://dynamodefi.substack.com/
Twitter: https://twitter.com/Dynamo_Patrick

Aerodrome: https://aerodrome.finance/
Chainlist: https://chainlist.org/
Base Bridge: https://bridge.base.org/deposit
Debridge: https://app.debridge.finance/r/6393

This video is a full overview of Aerodrome, the leading decentralized exchange on Coinbase’s Base network, and the AERO token.

0:00 Intro
0:26 What is Aerodrome
6:40 How to Start Using Aerodrome
9:51 How to Deposit and Remove Liquidity on Aerodrome
13:37 AERO Tokenomics
16:17 Risks & Opportunities of Aerodrome

#defi #crypto #cryptocurrency