Venture firms Spartan Group and Pantera Capital added to their onchain holdings AERO, the native token for decentralized exchange Aerodrome, a dominant player within Coinbase-incubated L2 network Base, which is rising in popularity.
On Monday, Spartan Group (0x770) swapped 460 ETH for roughly 903,000 AERO in two transactions from a single address, while Pantera (0x59c) received about 479,000 tokens from an unknown wallet, data from blockchain analytics firm Nansen shows.
Spartan Group’s acquisition of AERO was the first time the address had been exposed to AERO, but for Pantera’s address, it was the second time in four days as the firm received an initial 474,749 AERO tokens on Oct. 4, per onchain data.
If both entities decide to lock and vote-escrow their tokens, they can vote in governance decisions for the protocol. “Funds are important stakeholders in any DeFi ecosystem and it is very exciting to see them getting increasingly engaged with Aerodrome,” wrote the DEX’s core contributor Alexander Cutler to Unchained.
The price of AERO has seen extraordinary growth, rising nearly 4,410% in the past year and 26% in the last 14 days to trade at $1.20, and yet the two venture firms are currently in the red as the cost basis for their AERO acquisition was around $1.24 and $1.25. Spartan Group and Pantera Capital did not immediately respond to Unchained’s request for comments.
Read More: Coinbase Ventures and US Representative Michael Collins Scoop Up Aerodrome’s AERO Token
The investment companies adding AERO to their holdings come as Aerodrome is breaking its records for trading volume and total value locked. Moreover, year-to-date, the decentralized exchange ranks 7th among all protocols by fees generated at $142 million, outpacing other trading platforms such as liquid staking leader Lido Finance and synthetic dollar issuer Ethena as well as Base, the blockchain Aerodrome is built on, per analytics platform Token Terminal.
Base has seen substantial growth, setting all-time highs last week in daily active addresses and transactions as well as total value locked (TVL) at $2.3 billion, according to data from onchain intelligence platform Artemis.
“A significant driver of Base’s growth is the DEX Aerodrome, which contributes over $1 billion in TVL, up from $120 million in January,” according to a research report published by Wintermute on Monday. “Aerodrome has established itself as the largest protocol on Base and has also surpassed DeFi giants like Uniswap and Aave on Base in terms of total value locked.”
Read More: What Base’s Rapidly Growing Revenue and Usage Means for Coinbase Stock
Tread Carefully
However, despite Aerodrome’s rise and its role in driving activity to Base, its explosive growth has come at a substantial cost, namely the use of AERO token incentives to attract liquidity.
“In 2024, over $355 million worth of AERO tokens were awarded to liquidity providers, resulting in net negative earnings of $195 million for the year. Data shows that Aerodrome spent $2.50 on incentives for every dollar in revenue generated,” according to Wintermute’s report. As a result, “Base’s success, particularly through Aerodrome, raises questions about the sustainability of token-based incentives and user retention.”
At presstime, some liquidity providers can fetch an annual percentage rate of over 700% on multiple pools such as WETH/USDC, USDC/cbBTC, and WETH/USDT, while some memecoins pools such as WETH/BRETT, WETH/DEGEN, and MOG/WETH have four-digit APRs.
On the other hand, the protocol is programmed to decrease the token’s inflation emissions by 1% per epoch, a seven-day period that starts every Thursday and ends every Wednesday.
Additionally, “when emissions programmatically drop under 9M per epoch, approximately Epoch 67, veAERO voters [those who vote-escrow their AERO tokens] will take control of Aerodrome’s monetary policy through the Aero Fed system,” states the protocol documents. At this point, voters will be able to increase, decrease, or maintain emissions each epoch.
Aerodrome is currently at epoch 58, about 11 weeks away from the start of voters controlling the Aero Fed system.
CORRECTION (Oct. 8 05:51 p.m. ET): A previous version of this story incorrectly identified Alexander Cutler as the co-founder of Aerodrome. He is a core contributor. This error has been rectified.
