Aerodrome Finance

Kiringe sold his ETH for AERO because Ethereum's rollup strategy succeeded as a network but failed as an asset—L2s capture 95%+ of profit margins while ETH becomes a commoditized settlement layer. Base dominates as the retail hub, but without its own gas token, that massive economic activity doesn't create structural buying pressure for ETH; instead, value flows to Aerodrome, Base's dominant DEX, which employs ve(3,3) tokenomics to vacuum up fees and protocol incentives as the central liquidity engine.

A1 Research increased its exposure to Aerodrome, a DEX offering 100% revenue share to token holders. The firm highlights Aerodrome as a core holding in its Machines Money portfolio, positioning it as a key yield opportunity for investors seeking direct revenue participation from the protocol.

Kunal compares Aerodrome and Uniswap pool performance on Base's ETH/USDC and cbBTC/USDC pairs year-to-date. Aerodrome incurs roughly 3x higher loss-versus-rebalancing (LVR) on ETH/USDC ($6M vs $2.2M) and 5.3x higher on cbBTC/USDC ($4.7M vs $0.8M), likely due to lower fees attracting larger arbitrage flow. Despite higher LVR, Aerodrome's vote-escrow model generates $1.3M net protocol profit versus Uniswap's potential $289K, and a 2x AERO price would bring LP economics closer to parity.

Felipe argues that identifying lasting competitive advantages, or moats, is essential for token investing. He applies frameworks like Helmer's 7 Powers and Porter's analysis to evaluate whether projects like $UNI and $AERO have defensible positions against competitors.