AERO Merges with Velodrome, Paving the Way for 'Fireworks' in DeFi

Introduction

AERO, a decentralized exchange (DEX) protocol, has seen its price jump 16% on Sunday, up from its previous close, before paring gains to trade up 8% over the past 24 hours. The surge in price comes after co-founder Alexander Cutler promised 'fireworks' ahead of the exchange's planned merger with Velodrome.

Background

Aerodrome and Velodrome are currently separate protocols built on the same underlying code. Velodrome launched first on Optimism before Aerodrome followed on Base, Coinbase's chain. The two are merging into a single protocol called 'Aero,' set to go live on October 21 across seven chains, including Base, Ethereum, and Arbitrum.

Merger Logic

According to Cutler, the logic behind chasing that scale is to increase liquidity. 'A DEX is powered by liquidity,' he said. 'If you win liquidity, you win more trades, you win more fees, you win more revenue, and then you can inject that value right back into the system.' Aerodrome currently holds about $402 million in total value locked and $14.49 billion in decentralized exchange trading volume over the past 30 days.

Challenges Ahead

However, launching fresh on six new chains without the same early advantage as Aerodrome's dominant position on Base raises questions. Cutler pushed back, saying Aerodrome never had a head start and that the exchange was not the first to launch on Base. He argued that Aerodrome showed up with a better product, which helped it grow to 60% to 70% of the network's on-chain trading volume over time.

Conclusion

The merger between Aerodrome and Velodrome is set to bring significant changes to the DeFi landscape. With the promise of 'fireworks' and a single protocol launching across seven chains, investors and users are eagerly awaiting the outcome. As Cutler said, 'it's going to be a lot of fireworks.' Only time will tell if this merger will live up to the hype.