Research Summary
The report discusses the evolution and performance of decentralized exchanges (DEXs), focusing on Uniswap, Curve, and Aerodrome. It highlights the innovative protocol designs and token incentive systems that have driven the success of these platforms. The report also provides an in-depth analysis of Aerodrome’s unique model and its potential for growth.
Key Takeaways
Uniswap’s Dominance in the DEX Space
- Uniswap’s Success: Uniswap has facilitated trillions of dollars of volume on-chain, demonstrating a strong product-market fit for decentralized exchange of assets and value in crypto. Its non-custodial, decentralized transaction model has been widely adopted.
Curve’s Innovation in Liquidity Pools
- Curve’s Unique Approach: Curve, another major DEX, focuses on liquidity pools of similar assets to minimize impermanent loss and fees. It has popularized vote-escrow tokenomics, giving more voting power to users who lock their CRV tokens for longer.
Aerodrome’s Novel Incentive System
- Aerodrome’s Model: Aerodrome combines aspects of traditional DEXs like Uniswap and Curve. Users that lock their AERO earn 100% of trading fees for the pool(s) they vote for each epoch, and liquidity providers get paid in new AERO token emissions over time, dependent on how many votes their pool gets from veAERO voters.
Profitability for Aerodrome Participants
- Profitability for veAERO Voters and LPs: The report indicates that both veAERO voters and liquidity providers (LPs) can expect to earn significant returns. veAERO voters can earn a combined fees + bribes APR ranging from 33% to 64%, while LPs can earn triple-digit percent ROI on dollars used to bribe veAERO voters.
Aerodrome’s Potential for Growth
- Aerodrome’s Future Prospects: Currently trading at just over $1 Billion FDV and seeing a slow grind up in volume, Aerodrome seems to have a lot of room to grow. Its success is also tied to the growth of the underlying blockchain, Base, which has the potential to be a massive success.
Actionable Insights
- Monitor Aerodrome’s Performance: Given its innovative model and potential for growth, it would be beneficial to keep a close eye on Aerodrome’s performance and developments.
- Understand the Impact of Blockchain Success: The success of DEXs like Aerodrome is closely tied to the success of the underlying blockchain. Understanding this relationship can provide insights into potential growth trajectories.
- Consider the Role of Token Incentive Systems: The report highlights the effectiveness of innovative token incentive systems in driving the success of DEXs. This could be a key factor to consider when evaluating other DEXs or blockchain platforms.
