Tokenomics
1) Analyzing Tokenomics in DeFi​
💡 Aerodrome is a top AMM-DEX protocol deployed on Base, an Ethereum Layer-2 Blockchain. Its incentive architecture traces back to Curve Finance’s vote‑escrow (ve) system, was revamped as ve(3,3) by Solidly, and then refined by Velodrome before reaching its latest large‑scale implementation in Aerodrome. In this design, AERO is the central fly‑wheel asset that sustains the protocol’s incentives.
Your first tokenomics challenge consists of performing a comprehensive breakdown of the tokenomics behind Aerodrome. The following aspects must be covered:
- Initial distribution of AERO: initial supply and qualitative allocation.
- Supply schedule and future emissions: Current levels and expected timeline.
- AERO → veAERO mechanics: locking and voting mechanisms.
- Bribes mechanism: how external incentives empower the system.
After completing the breakdown, answer the following questions with supporting evidence:
- Who controls AERO emissions?
- What is the strategy to maximize gains in AERO?
- What is the strategy to maximize gains in USD value?
- Opinion: Is the AERO system well-designed? Justify your answer.
2) Consensus meets money printing​
💡 Terra is a Cosmos‑based Layer‑1 blockchain. Its native token LUNA secures the network through Proof‑of‑Stake and simultaneously serves as collateral and an absorption buffer for minting the algorithmic stablecoin UST.
Your second tokenomics challenge is to dissect Terra’s on‑chain monetary mechanics. The protocol hard‑codes one‑click convertibility between LUNA and UST, forging an enticing yet risky relationship between a volatile staking asset and a nominally stable one. The following aspects must be covered:
- Initial distribution of LUNA and UST: initial supply and qualitative allocation.
- Luna staking economics: inflation, rewards and slashing mechanisms.
- LUNA ⇄ UST mint‑burn convertibility: process flow, exchange rules and seigniorage fees.
After completing the breakdown, answer the following questions with supporting evidence:
- Which peg incentives and arbitrage loops kept UST at its target value?
- Who controls the UST oracle?
- Opinion: In your view, why did the UST/LUNA system fail?
How to Submit Your Work​
- All work for your chosen challenge must be committed to the GitHub repository assigned to you during onboarding.
- Include diagrams/charts to illustrate key points.
- Maintain a technical focus throughout.
- No need to delve extremely deep into the underlying systems—focus on tokenomics, and wisely manage your time.
- Structure your commits clearly, with meaningful messages that outline the progress of your work, see Git Practices for reference.
- Ensure your final submission is well-organized, with supporting files, diagrams, or models included as needed.
Helpful Resources 🎓​
A quick knowledge boost before you dive in: