Aerodrome Finance (AERO): The Truth About Tokenimics ‼️

WAGMI TV
9 May 202413:17

TLDRThe video from wagm TV dives into the tokenomics of Aerodrome Finance (AERO), clarifying misconceptions and emphasizing the protocol's complexity. It outlines the ecosystem's players, including traders, liquidity providers, protocols, and veAero holders, who have significant influence over token emissions. The video explains the token's emission schedule, starting with 10 million ARO tokens weekly, increasing by 3% each week for 14 weeks, and then entering a decay phase of 1% per week. The ultimate goal is to reach the 'Arrow Fed' phase, where veAero holders can vote on emission adjustments. The discussion highlights the importance of projects using Aerodrome as a liquidity hub, which drives demand for the ARO token and increases the ecosystem's value. The summary acknowledges the protocol's innovative approach to aligning incentives among different stakeholders and its potential for growth, making it a project to watch.

Takeaways

  • 🔒 The average lock duration for veAERO holders is typically for the maximum of 4 years, indicating long-term commitment to the protocol.
  • 🌐 Aerodrome's ecosystem involves Traders, Liquidity Providers, Protocols, and veAERO token holders, each playing a distinct role.
  • 💡 veAERO token holders have the power to decide the distribution of new token emissions, influencing the token supply dynamics.
  • 📈 The majority of veAERO holders are protocols that lock AERO tokens to incentivize liquidity provision and efficient swaps for their tokens.
  • 🚀 The value of AERO increases as more protocols use Aerodrome as a liquidity hub, driving demand and reducing supply in the market.
  • 📊 The emission schedule starts with 10 million AERO tokens per week, increasing by 3% each week for 14 weeks, then entering a decay phase of 1% per week.
  • 🌿 The 'Arrow Fed' phase begins once weekly emissions hit 9 million AERO tokens, where veAERO holders vote on emission adjustments.
  • 🔑 After week 67, the protocol governance will be handed over to major players in the ecosystem to decide on emission limits and incentives.
  • 📈 The growth of locked AERO tokens and the increasing number of projects involved in the ecosystem reflect its maturation and success.
  • 🔑 Projects aim to accumulate and lock up AERO tokens to gain control over the yield they can offer to their liquidity providers.
  • 📉 The tokenomics are designed to balance incentives between traders, projects, token holders, and liquidity providers, discouraging inflationary practices.

Q & A

  • What is the significance of the average lock duration for veAERO holders?

    -The average lock duration indicates how long veAERO holders are committing to lock their tokens, with a maximum lock period of 4 years. It shows their long-term commitment to the protocol, as most projects are locking their AERO tokens for the maximum duration.

  • What is the role of Traders in the Aerodrome ecosystem?

    -Traders are essential participants in the Aerodrome ecosystem as they engage in swapping tokens on the decentralized exchange, buying and selling tokens which contribute to the liquidity and overall functionality of the platform.

  • How do Liquidity Providers (LPs) contribute to the Aerodrome ecosystem?

    -Liquidity Providers offer the liquidity needed for traders to execute swaps on the decentralized exchange. They play a crucial role in facilitating smooth and efficient trading experiences within the ecosystem.

  • What does it mean to be a veAERO token holder?

    -veAERO token holders are those who have locked their AERO tokens for a certain period, ranging up to four years. This action removes the locked supply from the market and gives veAERO token holders the right to decide the allocation of new token emissions to specific liquidity pools.

  • Why do protocols lock AERO tokens?

    -Protocols lock AERO tokens to incentivize emissions towards their own liquidity pools, aiming to attract more liquidity providers and facilitate more efficient swaps for their tokens, thus enhancing their project's performance within the Aerodrome ecosystem.

  • What is the 'takeoff phase' in the AERO tokenomics?

    -The 'takeoff phase' is an initial period after the launch of the AERO token during which the emissions increase by 3% each week for 14 weeks, reaching a peak of around 15 to 16 million AERO tokens emitted per epoch to liquidity providers.

  • What happens during the 'cruise phase' of AERO tokenomics?

    -In the 'cruise phase', the emissions of AERO tokens decay by 1% per epoch. This phase continues until the emissions reach a stable rate of 9 million AERO tokens per epoch, known as the 'arrow fed phase'.

  • What is the 'arrow fed phase' in the context of AERO tokenomics?

    -The 'arrow fed phase' is a stage in AERO tokenomics where the emissions have stabilized at 9 million AERO tokens per epoch. At this point, veAERO token holders or protocols that have locked up supply can vote on the future direction of emissions, either to increase or decrease them within certain limits.

  • How does the involvement of more projects in the Aerodrome ecosystem affect the token price?

    -The involvement of more projects drives demand for the AERO token, as these projects buy and lock up AERO tokens, reducing the supply available in the market. This, in turn, can increase the value of the AERO token and the overall ecosystem, attracting more participants and further increasing token value.

  • What is the incentive for projects to lock up AERO tokens for the maximum duration?

    -Locking up AERO tokens for the maximum duration allows projects to have a greater say in the allocation of new token emissions and to secure a higher yield for their liquidity providers. It also signifies their commitment to the long-term success of the Aerodrome protocol.

  • How does the Aerodrome protocol ensure that the AERO token is not excessively inflated?

    -The protocol has a structured system with veAERO token holders having the power to vote on emission rates, within a capped range of a maximum 52% annual increase or a minimum 0.52% annual decrease. This, along with the involvement of various stakeholders, aligns incentives to prevent excessive inflation.

Outlines

00:00

🔒 Understanding Aerodrome Tokenomics and Locking Mechanism

The first paragraph introduces the topic of Aerodrome tokenomics and the importance of understanding the various players within the ecosystem. It emphasizes the complexity of the protocol and the importance of not oversimplifying it. The paragraph explains the concept of veArrow token holders, who have the power to decide the allocation of new token emissions by locking their tokens for up to four years, thus reducing the supply in the market. The majority of veArrow holders are protocols that buy and lock the tokens to incentivize more liquidity providers to their pools. The paragraph concludes by highlighting the significance of more protocols using Aerodrome, which increases the number of veArrow token holders and further reduces the supply available, driving the value of the ecosystem.

05:03

📈 Emission Schedules and the Role of veArrow Holders

The second paragraph delves into the specifics of the emission schedule for the Aerodrome token. It outlines the initial phase where 10 million tokens were emitted in the first week, followed by a 'takeoff phase' where emissions increased by 3% each week over 14 weeks, reaching 15 to 16 million tokens per epoch. The current 'cruise phase' sees a 1% decay in emissions per epoch, with a projected decrease to 9 million tokens per epoch, marking the beginning of the 'arrow fed phase'. At this point, veArrow holders or protocols that have locked tokens can vote on the emission rates, within a cap of 52% maximum and 0.52% minimum. The paragraph also discusses the gradual maturation of the ecosystem, with an increasing number of projects locking tokens for the maximum duration, indicating long-term commitment. It concludes by emphasizing the importance of projects using Aerodrome as a liquidity hub, which drives demand and value for the AOT token.

10:05

🚀 The Future of Aerodrome: Tokenomics and Market Dynamics

The third paragraph discusses the tokenomics mechanism of Aerodrome, addressing concerns about the potential for inflation due to the protocol's infinite max supply. It highlights that the protocol has been designed to align incentives among traders, projects, token holders, and liquidity providers (LPS) to prevent the token from being inflated away. The paragraph also mentions the learning from previous projects like Uniswap and Curve, and the involvement of Coinbase as a sign of credibility. It emphasizes the protocol's growth and the importance of the number of projects using the Aerodrome ecosystem. The paragraph concludes by expressing optimism about the project's future and invites feedback from the audience on their thoughts about Aerodrome and its tokenomics.

Mindmap

Keywords

💡Aerodrome Finance (AERO)

Aerodrome Finance (AERO) refers to a decentralized finance (DeFi) platform that focuses on providing liquidity solutions. In the video, it is discussed how the platform's tokenomics work and how they affect the price of the AERO token. It is a key subject of the video as the hosts delve into the details of its ecosystem and the role of different participants within it.

💡Tokenomics

Tokenomics is the study of a cryptocurrency's distribution, utility, and value within its ecosystem. In the context of the video, the hosts are analyzing the tokenomics of Aerodrome Finance to understand how the token's value is influenced by the behavior of different participants such as traders, liquidity providers, and protocol holders.

💡ve (locked) AERO tokens

ve stands for 'vetoken,' which represents AERO tokens that have been locked up for a certain period, typically up to four years. Locking tokens reduces the supply available in the market, which can influence the token's price. In the video, it is mentioned that most projects are locking their AERO tokens for the maximum duration, indicating a long-term commitment to the protocol.

💡Liquidity Providers

Liquidity providers are participants in a decentralized exchange who supply assets to facilitate trading. They earn fees for providing this service. In the context of the video, they are crucial for the functioning of the Aerodrome Finance platform, and the tokenomics are designed to incentivize their participation.

💡Protocols

In the DeFi context, protocols are the underlying rules and algorithms that govern how a platform operates. In the video, it is mentioned that most ve AERO token holders are protocols that are using Aerodrome Finance as their liquidity hub, and they are incentivized to lock their tokens to influence the token's emissions.

💡Emissions

Emissions refer to the release of new tokens into the market. In the video, the hosts discuss the emission schedule of AERO tokens, which starts with a high rate during the initial phase and then enters a 'cruise phase' where emissions decay by 1% per epoch until it reaches a steady state known as the 'Arrow Fed phase.'

💡Epoch

An epoch, in the context of blockchain and DeFi, is a period of time during which certain conditions or events occur. In the video, the emission of AERO tokens is discussed on an epoch basis, with changes in the rate of emission happening every epoch.

💡AOT Token

The AOT token is the native token of the Aerodrome Finance ecosystem. The video discusses how the tokenomics of AOT are structured to incentivize holding and locking tokens, which in turn affects the token's supply and demand dynamics.

💡Decentralized Exchange (DEX)

A decentralized exchange is a platform that allows users to trade cryptocurrencies without a central authority. In the video, the DEX is where traders are swapping tokens, and liquidity providers are offering their assets for trading, which is a fundamental part of the Aerodrome Finance ecosystem.

💡TVL (Total Value Locked)

Total Value Locked refers to the total amount of value that is locked in a DeFi protocol. It is an indicator of the protocol's size and the confidence investors have in it. The video discusses how the growth in the number of projects using Aerodrome Finance as a liquidity hub contributes to an increase in TVL.

💡Incentive Mechanism

An incentive mechanism in DeFi is a system of rewards and penalties designed to encourage certain behaviors, such as locking tokens or providing liquidity. In the video, the incentive mechanism of Aerodrome Finance is highlighted as a key factor in attracting more projects to use the platform.

Highlights

The average lock duration for Aerodrome tokens is typically for the maximum amount of time, indicating long-term commitment from projects.

Aerodrome's tokenomics are complex and require a deeper understanding to grasp the bullish thesis behind the protocol.

Key players in the Aerodrome ecosystem include traders, liquidity providers, protocols, and veArrow token holders.

veArrow token holders have the power to decide the direction of new token emissions and influence liquidity pools.

Protocols are major veArrow token holders, often locking Aerodrome tokens to incentivize emissions towards their own liquidity pools.

The value of Aerodrome increases as more protocols use it as a liquidity hub, driving demand and reducing supply.

The emission schedule starts with 10 million ARO tokens and increases by 3% each week for 14 weeks during the takeoff phase.

After the takeoff phase, the cruise phase begins with a 1% decay in emissions per epoch until it reaches 9 million ARO tokens per week.

In the Arrow Fed phase, protocols that have locked tokens can vote to increase or decrease emissions by 0.01%, up to a cap of 52%.

After week 67, the Aerodrome team will hand over protocol control to major players in the ecosystem.

The ecosystem's growth is critical, with an increasing number of projects using Aerodrome as their liquidity hub.

Aerodrome's dashboards show a strong increase in locked veArrow holders and a growing total supply versus locked supply.

Currently, 27 projects are involved in the Aerodrome ecosystem, with each accumulating voting power.

The incentive mechanism is working, with more projects joining and locking up ARO tokens for control over yield distribution.

The tokenomics are designed to align incentives between traders, projects, token holders, and liquidity providers to prevent inflation.

Aerodrome's protocol is built on learning from others' mistakes, with a focus on innovation and bolstering systems.

The ecosystem's growth and the number of projects involved are key drivers for the value of the ARO token.

Aerodrome's unique approach to tokenomics aims to find a balance between inflationary and deflationary mechanisms.

The protocol is designed to be LP forward, focusing on rewarding liquidity providers and creating a game-like dynamic between protocols and LPs.