Aerodrome and Velodrome Unite to Create New Exchange: Aero

Holders of Aerodrome will receive 94.5% of the new AERO token supply, while Velodrome holders will receive 5.5%, showcasing the significant difference in total value locked (TVL) between both protocols.
The new exchange, Aero, integrates Velodrome V2’s vote-lock governance model with Aerodrome’s advanced emissions engine, paving the way for an expansive decentralized exchange (DEX) across multiple Layer 2 rollups.

Key Takeaways

Holders of Aerodrome will receive 94.5% of the new AERO token supply, while Velodrome holders will receive 5.5%, showcasing the significant difference in total value locked (TVL) between both protocols.
The new exchange, Aero, integrates Velodrome V2’s vote-lock governance model with Aerodrome’s advanced emissions engine, paving the way for an expansive decentralized exchange (DEX) across multiple Layer 2 rollups.

In a significant advancement for decentralized finance (DeFi), Aerodrome Finance and Velodrome have merged under the banner of Dromos Labs to launch a new cross-chain decentralized exchange known as Aero. This merger combines the leading trading protocols on Base and Optimism, with the goal of integrating governance, liquidity, and incentives across various Layer 2 networks.

Aerodrome and Velodrome merge to form 'Aero'

A Strategic Yet Uneven Merger

Reports indicate that Aerodrome (AERO) holders will hold 94.5% of the newly issued tokens, in stark contrast to Velodrome (VELO) holders, who will have only 5.5%. This ratio reflects the significant disparity in the current market weight of each platform. Data from DefiLlama shows Aerodrome with about $479 million in total value locked, while Velodrome has a much smaller figure of $55 million.

Initially, the merged Aero platform will operate on Base, Optimism, and the OP Superchain, with plans to extend its operations to the Ethereum mainnet to enhance liquidity. The integration of Circle’s Arc network will also come into play, utilizing USDC’s impressive $73 billion circulation for streamlined fiat-to-crypto transitions.

Technical Enhancements and Future Plans

Aero capitalizes on the governance model of Velodrome V2 while utilizing Aerodrome’s emissions framework to optimize token rewards and streamline voting processes. An important upgrade in this merger is the introduction of “Slipstream V2,” a concentrated liquidity model akin to Uniswap V3, aimed at minimizing slippage and improving capital efficiency.

By merging liquidity pools from both Base and Optimism, Aero intends to capture 10-15% of the overall Layer 2 DEX transaction volume, which could translate to over $2 billion in trading each month.

A Positive Contrast to Recent Challenges

The successful integration of Aero sharply contrasts recent complications experienced by the Fetch.ai, SingularityNET, and Ocean Protocol collaboration, which crumbled due to disagreement over $100 million in FET tokens, resulting in a significant price drop. Unlike that scenario, Aero appears to be transitioning smoothly, with a coordinated approach under one development team, at least for now.

Importance of the Merger

The merger into Aero signifies a new era of consolidation in the DeFi space, where collaboration and compatibility are becoming essential to avoid fragmented ecosystems. As Layer 2 networks grow and liquidity becomes more adaptable, Aero may set the stage for a large-scale DEX that effectively merges on-chain trading across multiple rollups. As a side note, recent TradingView data indicates that Velodrome [VELO] was trading around $0.042, reflecting a decline of over 13%, while Aerodrome [AERO] was trading at about $1.1, with a drop exceeding 3%.