Aerodrome DEX Liquidity Incentives
Summary
I propose allocating ~52.7M currently unallocated WELL tokens to be used to incentivize an Aerodrome (DEX) liquidity pool for the WELL token on Base. This allocation will be used to incentivize veAERO holders to vote for this new WELL-WETH pool on Aerodrome, increasing AERO emissions for the pool and boosting useful liquidity for the token on Base.
What is Aerodrome?
Aerodrome is a decentralized exchange (DEX) that is launching on Base on August 28th. It aims to be Base’s “central AMM and liquidity layer”. Aerodrome follows in the footsteps of its sister protocol Velodrome on Optimism, which is far and away the most popular AMM on the network, currently holding $203M of the network’s $748M TVL, or Total Value Locked.
How Does Aerodrome Work?
Aerodrome functions differently than traditional Uniswap v2 or v3 AMMs. Instead of directly adding incentives to a pool, incentives are used to encourage veAERO holders to vote for a specific pool. The more veAERO holders vote for a pool, the higher the AERO emissions (rewards) will be for that pool. AERO can be locked for veAERO and voting takes place on a weekly basis, known as an “epoch”.
By leveraging this mechanism, the Moonwell community can effectively steer AERO emissions toward this newly established WELL-WETH pool, stimulating liquidity and aligning incentives. This not only attracts more liquidity providers but ensures a more dynamic and responsive liquidity environment for the WELL token on Base.
For more information regarding Aerodrome mechanics, please visit the Velodrome (sister protocol) documentation page or watch this explainer video.
Motivation
By creating and incentivizing an Aerodrome liquidity pool for the WELL token, we can encourage LP participation and boost useful liquidity for the token on Base. This initiative aligns with the goals of:
- Increasing exposure and utilization of the WELL token on Base.
- Creating additional opportunities for Moonwell community members and WELL token holders.
- Those providing WELL liquidity to the pool will receive AERO emissions, which can be locked for veAERO and used to vote/direct more AERO incentives to the WELL pool.
- Decreasing slippage for those looking to swap the WELL token on Base.
- Leveraging the opportunity to become an Aerodrome launch partner ahead of their August 28th launch date, enhancing Moonwell’s standing in the Base ecosystem.
- Velodrome, the sister protocol of Aerodrome on Optimism, is far and away the most popular AMM on the network. There is a good chance that Aerodrome rises to a similar level of prominence on Base.
- By creating a pool in time for their Aug 28th launch date, Moonwell will be able to participate in comarketing and be incorporated into their launch announcements.
Implementation Details
- Allocation: As pointed out in 0xrobinhood’s recent snapshot proposal, 1.05% of the WELL token supply (52,725,802.60 WELL) is currently unallocated, following public sale refunds.
- Utilization: This unallocated 1.05% of the WELL token supply will be utilized to incentivize veAERO holders to vote for the WELL-WETH pool on Aerodrome.
- This will in turn increase AERO emissions (rewards) on the pool, boosting LP participation and liquidity.
- Incentives Management: An additional Snapshot proposal will be required to appoint an Aerodrome liquidity manager(s) from the Moonwell community or contributor pool.
- This person(s) or entity will be tasked with both managing WELL token incentives on Aerodrome, as well as keeping the Moonwell community informed of performance levels and any distribution changes.
Voting Options
- Yes: A “Yes” vote signifies your support for the creation of a WELL - WETH pool on Aerdodrome and the allocation of ~52.7M WELL tokens to be utilized as incentives for this new pool.
- No: A “No” vote indicates your preference for the status quo; no changes should be made.
Conclusion
This proposal marks a significant and timely opportunity for the Moonwell community, laying the foundation for further growth and an expanded presence in the Base ecosystem. By acting quickly to both establish and incentivize a new WELL-WETH pool on Aerodrome, we can strategically align ourselves with the anticipated Aerodrome launch on August 28th. This alignment should not only increase exposure to Moonwell but also foster greater community engagement. By leveraging Aerodrome’s unique mechanisms, we can bolster useful liquidity of the WELL token, create new opportunities for WELL holders, minimize slippage for those looking to swap, and fortify our standing within the rapidly evolving Base ecosystem.