Aerodrome Finance (AERO): The Truth About Tokenimics βΌοΈ
TLDRThe video from wagm TV provides a detailed analysis of the tokenomics of Aerodrome Finance (AERO), a decentralized finance protocol. It explains the various roles within the ecosystem, including traders, liquidity providers, and protocol participants who hold veArrow tokens. These veArrow token holders have the power to direct the distribution of new tokens, influencing the protocol's incentives and token supply. The video outlines the emission schedule, starting with 10 million ARO tokens weekly, increasing by 3% each week for 14 weeks, and then entering a 'cruise phase' with a 1% decay per week. The ultimate goal is to reach a stable 'Arrow Fed' phase where stakeholders can vote on emission rates. The discussion emphasizes the importance of projects adopting Aerodrome as their liquidity hub, which increases demand for the ARO token and drives the ecosystem's value. The summary highlights the protocol's unique approach to balancing incentives among different parties to prevent inflation without a burn mechanism, and the growth and maturation of the ecosystem over the past eight to nine months.
Takeaways
- π The average lock duration for Aerodrome (AERO) tokens is typically for the maximum period of four years, indicating long-term commitment from projects.
- π The ecosystem of Aerodrome consists of traders, liquidity providers, protocols, and veAERO token holders who play crucial roles in the tokenomics.
- π° veAERO token holders have the power to decide the allocation of new token emissions to specific liquidity pools.
- π The majority of veAERO holders are protocols that buy and lock AERO tokens to incentivize more liquidity to their own pools.
- π The value of AERO increases as more protocols use Aerodrome as a liquidity hub, reducing the supply available on the market.
- π The emission schedule starts with 10 million AERO tokens in the first week and increases by 3% each week for 14 weeks, then enters a decay phase of 1% per epoch.
- π After 67 weeks, the protocol will be handed over to major players in the ecosystem to decide on emission adjustments, with a cap of 52% max and 0.52% min.
- π The number of veAERO holders is rising, reflecting more projects joining the ecosystem and contributing to its growth.
- π There are currently 27 projects involved in the Aerodrome ecosystem, competing for voting power and control over yield distribution.
- π The tokenomics are designed to prevent inflation by aligning incentives between traders, projects, token holders, and liquidity providers.
- π The project's growth and adoption are significant, with a focus on a balanced approach between inflationary and deflationary mechanisms.
Q & A
What is the maximum lock duration for Aerodrome tokens?
-The maximum lock duration for Aerodrome tokens is 4 years.
What is the role of veArrow token holders in the ecosystem?
-veArrow token holders have the power to decide where the new emissions, or the new supply of the AOT token, go to specific liquidity pools.
Why do protocols lock their Aerodrome tokens for the maximum duration?
-Protocols lock their Aerodrome tokens for the maximum duration to incentivize emissions to go to their own liquidity pools, driving more liquidity providers and more efficient swaps for their tokens.
What is the 'takeoff phase' in the emission schedule of Aerodrome?
-The 'takeoff phase' is a period of 14 weeks following the launch of the Aerodrome platform, during which the emissions increase by 3% each week, eventually reaching around 15 to 16 million ARO tokens emitted per epoch.
What is the 'cruise phase' in the emission schedule, and how does it work?
-The 'cruise phase' is the phase after the takeoff phase, during which the emissions decay by 1% per epoch. This phase continues until the emissions reach 9 million ARO tokens per epoch per week, known as the 'arrow fed phase'.
What is the significance of the 'arrow fed phase'?
-In the 'arrow fed phase', the protocols or lockers that have taken supply off the market get to decide how the emissions progress from there, including the opportunity to vote to increase or decrease the emissions rate within certain caps.
How does the involvement of more projects in the Aerodrome ecosystem affect the tokenomics?
-The more projects that are involved in the Aerodrome ecosystem, the more veArrow token holders there are, which in turn takes more supply off the market. This drives demand for the AOT token, increases the value of the ecosystem, and contributes to more TVL (Total Value Locked) for the protocol.
What does the term 'LPs' stand for in the context of the Aerodrome ecosystem?
-In the context of the Aerodrome ecosystem, 'LPs' stands for Liquidity Providers, who provide liquidity on the decentralized exchange for traders to use for swaps.
How does the locking of AOT tokens by projects contribute to the long-term success of the Aerodrome protocol?
-The locking of AOT tokens by projects indicates a long-term commitment to the protocol, reduces the circulating supply, and provides more control over the yield they can offer to their LPs, which can attract more projects and liquidity to the ecosystem.
What is the role of the Dune dashboards in understanding the Aerodrome ecosystem?
-Dune dashboards provide visual representations of various statistics and data points within the Aerodrome ecosystem, such as average lock duration, the number of locked ve holders, and the projects involved, which helps in understanding the growth and maturity of the ecosystem.
How does the gradual progression of emissions in the Aerodrome protocol contribute to its value?
-The gradual progression of emissions, starting from an aggressive phase during the initial launch to a more controlled decay in the cruise phase, ensures a balance between attracting liquidity and not inflating the token excessively. This approach aligns incentives for all parties involved and contributes to the protocol's value.
Outlines
π Introduction to Aerodrome Tokenomics
This paragraph introduces the topic of Aerodrome tokenomics, explaining the importance of understanding the various players in the ecosystem, including traders, liquidity providers, protocols, and veArrow token holders. It emphasizes that the value of the Arrow token is driven by the increasing number of protocols using Aerodrome as a liquidity hub. The paragraph also provides an overview of the emission schedule, starting with 10 million Arrow tokens emitted in the first week, followed by a 3% weekly increase over 14 weeks, and then a 1% weekly decay in the cruise phase until reaching the Arrow Fed phase. The key takeaway is that the more protocols involved, the more veArrow token holders and the more supply taken off the market, driving value for the ecosystem.
π Emissions and Token Supply Dynamics
This paragraph delves into the specifics of the emission schedule and token supply. It explains that the initial 10 million Arrow tokens were emitted in the first week, followed by a 3% weekly increase over 14 weeks, reaching 15-16 million tokens per epoch. The cruise phase then begins, with emissions decreasing by 1% per epoch until the Arrow Fed phase is reached at 9 million tokens per epoch. At this point, veArrow holders or protocols that have locked up supply can vote to increase or decrease emissions by 0.01%, with a cap of 52% max and 0.52% min emission rates. The paragraph also highlights the importance of the number of projects using the Aerodrome ecosystem as a liquidity hub, as this drives demand for the Arrow token and value for the ecosystem. The growth in locked veArrow holders and total supply vs locked supply is shown through Dune dashboards, indicating the ecosystem's maturation.
π€ Aligning Incentives in the Ecosystem
This paragraph discusses how the Aerodrome protocol aligns incentives between different parties - traders, projects, token holders, and liquidity providers (LPS) - to prevent the token from being inflated away. It contrasts Aerodrome's approach with other projects that focus on deflationary mechanisms and token burns. The paragraph emphasizes that Aerodrome is taking a balanced approach by incentivizing all parties not to inflate the currency. The growth and adoption of the protocol, with more projects joining the ecosystem, serve as proof of its effectiveness. The speakers express their bullish outlook on Aerodrome and encourage viewers to share their thoughts and stay tuned for future updates on the project.
Mindmap
Keywords
π‘Tokenomics
π‘ve Arrow
π‘Emissions
π‘Liquidity providers
π‘Decentralized exchange (DEX)
π‘Epoch
π‘Lock duration
π‘Liquidity bootstrapping
π‘Protocol
π‘Token supply
Highlights
The average lock duration for ve (vote-escrowed) AERO token holders is typically for the maximum period of 4 years, indicating long-term commitment to the protocol.
Aerodrome's ecosystem includes traders, liquidity providers, protocols, and ve AERO token holders, each playing a distinct role.
ve AERO token holders have the power to decide the allocation of new token emissions, influencing the direction of liquidity pools.
Protocols are the majority of ve AERO holders, incentivizing emissions towards their own liquidity pools to attract more participants.
The value of AERO increases as more protocols use Aerodrome as a liquidity hub, reducing the supply available in the market.
The emission schedule starts with 10 million AERO tokens in the first week, increasing by 3% each week for 14 weeks during the 'takeoff phase'.
After the takeoff phase, the 'cruise phase' begins, where emissions decay by 1% per epoch until it reaches a steady state.
In the 'Arrow Fed' phase, ve AERO holders can vote to increase or decrease emissions by a capped rate, providing control over token supply.
After week 67, the Aerodrome team will hand over protocol control to major ecosystem players, allowing them to decide on emission limits.
The number of projects using Aerodrome as a liquidity hub is critical for the ecosystem's growth and token value.
Aerodrome's dashboards show a rising trend in the number of ve AERO holders, indicating increasing project involvement.
The locked supply of AERO tokens is growing, which, along with total supply, reflects the ecosystem's maturation.
A leaderboard dashboard details the projects involved in the Aerodrome ecosystem, showcasing their accumulated voting power.
Projects aim to lock up as much AERO as possible to control the yield they can offer to their liquidity providers.
The incentive mechanism of Aerodrome is driving more projects to use the platform, increasing demand for the AERO token.
The tokenomics of Aerodrome are designed to prevent inflation by aligning incentives among traders, projects, token holders, and liquidity providers.
Aerodrome's growth and adoption are evident through its user statistics and the increasing number of projects integrating the platform.
The protocol's unique approach to tokenomics aims to find a balance between inflation and deflation, prioritizing long-term sustainability.