Keynote by Alex Cutler - Aerodrome & Velodrome Finance

Hello. Good to be with you guys. All right, we've got slides. All right, so we just had a big event in New York and what you're going to see me do here today is distill what was a full day's worth of content into a very short deck. So consider this my own test of a lightning talk.

So who are we? Uh I'm the CEO of Droo Labs. Uh, Droos Labs is the development company behind two of the largest exchanges on Ethereum. Uh, Veladrome on the super chain and aerodrome on base. Uh, our core belief right the thing that animates us is that shared systems should create shared value.

And so we are the builders of infrastructure that delivers back uncommon value to all the users of it. And our general thesis is probably not controversial. The world is coming on chchain. And we think the best piece of evidence for this is just looking at the growth between the early internet and the onchain economy. And you can see here that the onchain economy is growing at an even faster pace.

And Brian Armstrong recently predicted that over the next 5 years 10% of global GDP will come on chain. And this would represent an order of magnitude increase over the size and scale of our industry today. And because it's the stable summit, I just want to show an example of why onchain systems matter so much. Um so this is the rate that you can get on Wells Fargo, Chase and even Wise which is one of the best sort of traditional uh startups uh working on global payments and right now today on base you can get a fee that is up to 300 times better on aerome and base making this sort of transfer and of course because it's onchain the settlement time is virtually instant. So this is the promise of onchain systems and it's happening right now.

Uh why do onchain systems win? Well, they're just better. This is not something new. You don't have to be ideological about it even though many of us are. This is just better technology.

[snorts] And we think the core thing that differentiates onchain systems is that it allows you to basically distill the entirety of traditional firms into code. Right? You don't need all these people. You don't need this whole coordination layer. We distill that down to code and you have a hyperefficient system.

But [snorts] that means that there is a new competitive mode. There's only one mode in these new onchain systems and that is maximum value distribution to your users. And our thesis here is that any onchain or any traditional firm, right? And these are all the businesses, companies, institutions you already know that is heavy, weighty and extracts value or even any onchain firm that extracts value out of the system will fall to a system that maximally captures and redistributes value to all of its users. So this is important uh to set up but basically we think the onchain economy is a bit misunderstood.

Uh you'll see over here this is the traditional structure of the economy. The economy we all know and maybe have mixed feelings about but it's defined by macro structures. The governments establish the property rights the things that sort of underly all these markets. And the next layer up is the liquidity layer because there is no economy without the ability to exchange uh all of this stuff for other stuff. Right?

So liquidity and macro structures are the foundation of the traditional economy. That's what everything else is built on top of. And the onchain economy is no different. Uh there the macro structures are defined by the chains themselves. These are what establish consensus between participants.

But without liquidity and liquidity networks, um none of the other amazing cool stuff we're building on chain works. There is no onchain economy. So more concise way to say this is that the liquidity layer is as essential as the chain itself. um they must be treated like an open network just like chains are. So the evolution in history of dexes is basically they started as simple two-sided marketplaces places connecting traders and liquidity providers.

And what we learned over the evolution is liquidity providers will just go wherever the reward is highest. So Sushi Swap began this innovation. We're going to add a token here. It's going to become a three-sided economy. Curve made that token actually useful.

It began to align incentives kind of like you see at a network token level. Um but really there's only one ultimate solution to this, right? DEXs are not two-sided marketplaces. Uh they are three-sided economies and they basically have to maximally solve for three stakeholders. Traders only care about one thing.

They don't care about your decks. They don't care about anything. They just want the best execution. Token operators need to be rewarded for coordinating the network and liquidity providers want the best reward. So you have to do the best job for all three.

And this is just to emphasize this. Um Gauntlet did a report, Uniswap commissioned it and it basically said, look, if you cut rewards at all to liquidity providers, they leave. It becomes a death spiral, right? Less rewards means less liquidity, which means worse execution, which means less revenues, etc., etc.

So this is why you have to maximally reward all three stakeholders. So uh what have we been building? Um we call it the metadex and uh it's basically an onchain immutable framework. It treats the liquidity layer like you would treat a uh chain network. Um but more simply we just call it a dex operating system.

Uh so what is the metadex? It combined all the best primitives that came before into a single design. Um, it maximally solves for all three stakeholders by one capturing and distributing 100% of the revenue it creates. There's no leaks, no middlemen. It rewards only active participants.

So, it takes all that value, gives it to those providing active liquidity that traders need. And in doing so, it aligns the incentives of all three groups. How does it do that? Well, um, it pulls together multiple revenue streams, right? So, all of the trading fees that happen on the decks, uh, liquidity payments, incentives on top of that, and things like launch payments that have traditionally gone to, uh, centralized exchanges and it takes that wrapped value in the form of the token and injects it directly into the active tick liquidity.

So, this is how medexs are able to reward LPS, give the best execution, make more revenue, higher rewards, etc. you see the flywheel. Um, and this is pretty crazy, right? Uh, we haven't seen something like this since the very like advent of, uh, UniV3 liquidity. Anywhere a metadex competes with legacy dexes, uh, it wins about 34s of the overall market.

Uh, it is totally dominant and it does this by aligning those incentives. And just to emphasize it a little bit more, Aerodromeome over the past year was the fifth uh highest revenue generating protocol in existence in DeFi. Um it is the top revenue generating DEX by a massive margin. Uh but of course we did follow the news about the fee switch on unis swap and we did some back testing and modeling based on the high end of the estimates and even with the fee switch the metadex would remain number one today. Uh so when we think about this, this is market opportunity meets right to win.

We know the model works. Uh we know it's only servicing right now about 1/5if of EVM volume. So what are we going to do? What happens when right to win meets an opportunity? Well, we just announced uh the newest version of our DEX model and it is called animation building.

There you [clears throat] go. Metadexo3. So Medexo3 is the biggest jump forward we'd ever made on this model. Metadexo2 is already dominant. Um and it's bringing Veladrome and Aerodrome together as a single exchange we call Arrow.

Um Arrow will now for the first time extend this dominance that the Metadex has onto mainet Ethereum. Uh it's also going to be launching on uh circles arc. Uh but the goal is very much to be the single liquidity layer for all of Ethereum. So how are we going to realize that? Well, we're going to treat it all as one liquidity network.

We're going to abstract a bunch of stuff away. These are a bunch of the features that are in it. Uh you know, won't have time to hit too much of them, but one key thing we've done is we've internalized even more value into the DEX model. Um and that is 2.8 2.

8 times more. So this is already taking the leading model in the ability to reward liquidity providers and multiplying it and we're able to drop the inflation in the new model by about 85%. So a lot more value coming into this model to reward operators, liquidity providers, a lot more leaving in terms of inflation. So this is like a huge huge upgrade. Bunch of charts illustrating it.

But, you know, if you were a business and you said, "Hey, we're going to drop costs by this much, 85%, we're going to increase revenues." You know, that would be a record-breaking quarter. So, let's just show you real quick what this looks like and the problems it solves. Well, it begins with trading. Uh, continues with earning and then launching.

So, let's just talk about trading. Trading sort of sucks today. Uh, let's imagine you're looking for a token. You go to unis swap on mainet. Put in the token address.

You don't see it. Uh can't find it on the aggregator either. Let's keep going. Well, you found it. It's on base.

So, you got to go over to a bridge. Which bridge do you use? Looking around. You finally get it over. Well, You didn't actually bridge any gas.

So, you got to go back. Do it again. All right. Finally, you're there, but you got killed by slippage. You missed it.

So, Arrow makes this or fixes this because we have fully abstracted um bridging, swapping, and cross-chain aggregating all in one place. So, if you see like a rudder on base, but you only have gas on mainet Ethereum, no problem. Uh everything's happening on the back end. All you see is a swap executed. So, this is three levels of product all into one.

Makes it super easy to integrate. Uh we don't care about owning the front end. Some people make a business out of that. We want aggregators to plug into us, Coinbase to plug into us. If we talk about earning, it's the same problem, right?

Uh you want to lock some tokens, participate, you got to go to one product. Well, you might need to go to another one. And then if you want it automatically optimized, you got to go to another one. And maybe you just say like these VE tokens governance stuff isn't for you. So you go to unis swap.

But you don't even see all the rewards here. you got to go to another product and another one and these guys are taking some fees out on top. So it's kind of a crummy experience. Why don't we fix that as well? Uh so Arrow [snorts] best place to earn.

It's already the best place to earn because we are bringing in value from every bit of ecosystem around dexes wrapping it in the token as I explained but we're also just going to make it super easy right if you're just somebody coming on chain want to earn yield oneclick zap in whether you're going to add liquidity have your ranges managed autocompound in if you want to lock participate as a token operator um everything streamlined oneclick yield participation in these onchain systems and yeah makes for a great mini app as Well, and then the last one I will just hit on here, launching sucks. Tokens have to give up like 10% of their supply to centralized exchanges, market makers. Uh when you go on chain, you try to launch like a a new custom V4 pool, you won't see it on the uh front end. And you know, if you really have to dig down deep and go over to pump is not kind of the coolest place to be launching something. So, we're going to fix this, too.

Best place to launch. Um, three ways to launch permissionlessly with air launch. So, you can deposit liquidity, earn back the fees. You don't need to burn your position. Um, unlike you would on Uniswap.

Ignition is basically like a Binance Alpha but entirely onchain and 10x more efficient um than what you get on Binance Alpha. All the discovery happens on chain and arrow verified. And this is for uh institutional grade pools where you need some sort of KYC element. We're just going to make it easy to launch in all of these ways. What brings this all together?

Well, it's the arrow token. Um and we see the liquidity layer of the onchain economy as actually being the value acrruel. Um that we see the size of exchanges, the fees and revenue they're doing today being larger than even the settlement layers, the chains themselves. So if we just look at what we're servicing today about 275 million from fees uh this is the size of the total market all dexes um and we are going to take all those adjacent services aggregators fees we're going to internalize me at the AMM level liquidity management all this which are multi-million dollar markets we're also going to wrap it in the token that's an additional $2 billion market so if you add this all up what is the TAM of being the exchange of the onchain economy, 7.5 billion.

And the cool thing about this is with all of the economic and technological upgrades we've added to metadexo3, this is already the leading model that uh multi-billion dollar incumbents with all the biggest backers have had no success penetrating. They cannot beat it. And what we are doing is adding massive new revenue streams to the model while we are decreasing inflation significantly. So this is a massive like net value creating uh tool. Uh the other cool thing about us is that uh Dromos Labs is just one of the contributing groups lading up to this.

Uh we're joined by Wonderland uh hometown team here in Argentina. some of the most respected developers in the global Ethereum world. Vending machine, Hyperlane, Melo, and our token model allows us to basically uh go out, acquire, bring in more and more contributors because our goal truly is not just to go win mainet Ethereum, but connect uh the entire onchain economy. [snorts] This will launch in Q2. Some of the stuff's already live today on Veladrome and Aeromes.

If you haven't already, please do check it out. And that's it. I think I hit the time perfectly. So, thank you everybody. Again, this was a whole day in New York.

If you want the long form version, it's online.