Aerodrome Finance (Base) and Velodrome Finance (Optimism) are the dominant decentralized exchanges on their respective chains. Both use the ve(3,3) model — a hybrid of Curve's vote-escrow governance and Olympus DAO's (3,3) game theory — to align LP incentives with protocol growth.
The ve(3,3) Model
Traditional DEXes face a bootstrapping problem: LPs need volume to earn fees, but volume requires liquidity, which requires LPs. Ve(3,3) solves this by creating a flywheel:
- AERO/VELO token: emitted weekly to liquidity pools (gauges). LPs stake LP tokens in gauges to receive emissions.
- veAERO/veVELO: lock AERO/VELO for up to 4 years to receive voting power (non-transferable NFT)
- Gauge voting: veToken holders vote each week to direct emissions to specific pools
- Bribes: Protocols wanting liquidity bribe veToken holders to vote for their pool's gauge
- Fee revenue: veToken holders receive 100% of swap fees from pools they vote for
The key innovation: fees don't go to LPs — they go to voters. LPs earn only emissions. This makes active governance (voting and collecting bribes) more profitable than passive LP provision.
Aerodrome on Base
Aerodrome launched on Base in August 2023 and became the largest DEX on Base within weeks. It controls the majority of on-chain liquidity for major Base trading pairs: USDC/ETH, cbETH/ETH, and key DeFi token pairs.
Why Aerodrome dominates Base: Base launched with Aerodrome as a preferred DEX partner (Coinbase connection). Projects launching on Base often seed initial liquidity on Aerodrome and bribe for gauge votes to maintain it.
Pool types:
- Stable pools: for same-value assets (USDC/DAI). Uses Curve-style StableSwap math.
- Volatile pools: for uncorrelated pairs. Uses standard xy=k AMM.
- Concentrated liquidity (CL): Uniswap v3-style concentrated positions with active range management.
Velodrome on Optimism
Velodrome is the predecessor and the dominant DEX on Optimism. It holds the majority of TVL for Optimism-native tokens and major pairs.
The architecture is identical to Aerodrome (they share codebase). The difference is the chain and the native token (VELO vs AERO).
How to Earn Yield
As an LP (passive):
- Go to aerodrome.finance, connect your wallet
- Select a pool, deposit both tokens
- Stake LP tokens in the gauge to earn AERO emissions
- APY depends on how many votes the gauge received this epoch
As a voter (active):
- Lock AERO for veAERO (1–4 year lockup, NFT received)
- Vote weekly for gauges you want to support (or that bribe you)
- Collect swap fees from voted pools + bribe rewards from protocols
The voter strategy is generally more profitable per dollar than LP, especially during high-bribe-demand epochs.
Finding the Best Bribes
Bribe marketplaces show active incentives:
- Velodrome/Aerodrome app: native bribe display in the vote UI
- Opus Gauge Tracker: aggregates bribe/vote data for both protocols
High-APY gauge voting depends on finding pools with high bribe-to-vote ratios (bribes per veToken vote). This changes weekly as projects adjust incentives.