What is AERO used for?

AERO is the native utility token of Aerodrome, a next-generation Automated Market Maker (AMM) designed to serve as Base’s central liquidity hub, serving as the backbone of the protocol's trading and liquidity operations. AERO plays a crucial role in the protocol’s incentive structure. Liquidity providers (LPs) earn AERO emissions proportionally based on the votes their pools accumulate, incentivizing active participation and ensuring a vibrant liquidity ecosystem. Beyond these functions, AERO is integral to governance, allowing holders to lock their tokens into veAERO NFTs, thereby gaining voting rights to influence future emission distributions and protocol policies.

What is veAERO?

veAERO is an ERC-721 governance token in the form of a non-fungible token (NFT) that represents vote-escrowed AERO tokens. By locking AERO for a specified period, users receive veAERO, which grants them voting power within Aerodrome’s governance framework. The voting power is directly proportional to both the amount of AERO locked and the duration of the lock. veAERO holders have the authority to vote on the distribution of AERO emissions across different liquidity pools each epoch, allowing them to guide the protocol’s liquidity allocation and reward mechanisms. This system ensures that those with a vested interest in the platform’s long-term success have a significant influence on its development and operational decisions. Additionally, veAERO holders benefit from rebases that reduce vote power dilution, maintaining their influence even as the total AERO supply grows.

What are the benefits of holding AERO?

Holding AERO offers multiple advantages within the Aerodrome ecosystem. Firstly, liquidity providers earn AERO emissions as rewards, enhancing their passive income from contributing to various liquidity pools. This rewards structure not only incentivizes liquidity provision but also ensures the platform remains liquid and efficient. Secondly, by participating in governance through veAERO, holders can influence key protocol decisions and the allocation of emissions, ensuring the platform evolves in a community-driven manner. Furthermore, AERO holders benefit from the protocol’s low slippage and low trading fees, making their trading activities more cost-effective and efficient. The structured emission schedule, which includes phases like Take-off and Cruise, ensures a sustainable and predictable growth of AERO supply, while the Aero Fed system allows veAERO voters to influence monetary policy once emissions stabilize. Additionally, the anti-dilution rebases for veAERO holders protect their governance rights from dilution, maintaining their influence and maximizing their rewards over time.