How Does Aerodrome V1 Work?
Aerodrome V1 is the original AMM (automated market maker) on Base, the Coinbase-backed Layer 2 chain. It uses simple, battle-tested formulas: constant product pools for regular trading pairs and Curve-style stable pools for pegged assets. AERO token holders can lock tokens as veAERO to vote on emission allocation and earn trading fees. The protocol is the dominant DEX on Base but is being merged with Velodrome (Optimism's top DEX) into a unified cross-chain Aero DEX.
TVL
$129M
Sector
DEX
Risk Grade
B-
Value Grade
C+
Core Mechanisms
DEX/AMM/Constant-Product
Variable pools (xy=k) for uncorrelated asset pairs on Base
Standard constant product AMM formula identical to Uniswap V2. Battle-tested mathematical model.
DEX/AMM/Stable
Stable pools using Curve stableswap invariant for pegged assets
Standard Curve-style stableswap for correlated assets. Well-understood mathematical model.
Governance/veToken
veAERO governance with vote-escrowed AERO tokens
Standard ve(3,3) model inherited from Velodrome/Solidly. veAERO holders direct AERO emissions to pools.
Emissions/Gauge
Gauge voting with bribery market for emission allocation
Standard gauge voting with external bribery markets. Bribes incentivize veAERO holders to direct emissions to specific pools.
Incentives/ve33
ve(3,3) tokenomics with anti-dilution rebasing for veAERO lockers
ve(3,3) model from Andre Cronje's Solidly design. Lockers receive rebasing to offset dilution from emissions.
DEX/Router
Optimized swap router aggregating across V1 variable and stable pools
Standard swap router that finds optimal routes across V1 pool types.
How the Pieces Interact
V1 pools will be deprecated as the Aero merger completes. LPs who don't migrate may be stuck in legacy pools with declining trading volume and no emission incentives.
Bribery markets allow highest bidder to capture emission direction. This can route AERO emissions to low-utility pools, reducing organic liquidity depth for important trading pairs.
Past DNS hijacking demonstrates that smart contract security alone is insufficient. Frontend compromise enables phishing attacks and malicious approval requests against V1 users.
V1 operates exclusively on Base (Coinbase L2). A Base chain incident, sequencer failure, or regulatory action against Coinbase directly impacts all V1 liquidity.
What Could Go Wrong
- Aerodrome V1 is the original AMM using Uniswap V2 and Curve stableswap formulas, now being deprecated in favor of the merged Aero cross-chain DEX. Legacy V1 pools may receive less security attention.
- DNS hijacking attack compromised Aerodrome frontend domains, exposing users to phishing. While smart contracts were unaffected, frontend dependency is a real attack surface for this protocol.
- Planned Q2 2026 merger with Velodrome into unified Aero creates migration risk. V1 liquidity providers must migrate to the new system or face potential liquidity fragmentation.
Migration Abandonment and V1 Liquidity Stranding
ModerateTrigger: Aero merger timeline extends beyond Q2 2026 while V1 emission incentives are cut, stranding $50M+ in V1 pools with no migration path and declining utility
- 1.Aero merger delays push V1 deprecation timeline uncertainty beyond 6 months — veAERO voters redirect emissions away from V1 pools toward the new Aero system
- 2.V1 pools lose emission incentives; LP APRs collapse — Active LPs withdraw from V1; remaining liquidity becomes thin
- 3.Trading volume migrates to alternative DEXs on Base — V1 becomes a ghost DEX with illiquid pools and wide spreads
- 4.Remaining V1 LPs face impermanent loss with no fee revenue to compensate — Passive LPs who missed the migration window realize losses when they finally withdraw
Risk Profile at a Glance
Overall: B- (32/100)
Lower score = safer