SIP -13: Adding AERO on SONNE FINANCE (Base)

Summary

This proposal advocates for adding Aerodrome Finance ($AERO) support to SONNE FINANCE on the BASE network. AERO is the native token of Aerodrome Finance, a next-generation AMM designed to be the central liquidity hub for the Base network. Integrating AERO will provide several benefits to SONNE users and the overall ecosystem.

Benefits

Access to the Base Ecosystem: AERO (as a proxy to BASE chain) opens the door for SONNE users to participate in the burgeoning Base DeFi ecosystem growth.

Enhanced Liquidity: AERO's role as the core staking and emissions token of Aerodrome Finance signifies its potential to attract significant liquidity. This is also evident by the trading volumes of AERO as well.

Community: From the very beginning of Aerodrome, SONNE Finance has established a strategic partnership with it. Aerodrome serves as the core provider of liquidity for it’s token ($SONNE) on Base. By supporting AERO, SONNE can foster and further strengthen the connection with the active and engaged Aerodrome community.

AERO Tokenomics (as of April 11, 2024)

Circulating Supply: 403 million AERO Market Cap: $752 million Locked in Aerodrome Voting Escrow: 573 million AERO Total Supply: 976 million AERO (Circulating + Locked in Voting Escrow) Emission Rate: 12.5 million AERO per epoch (week), reducing by 1% weekly (more info in docs)

More than 26M AERO is provided as liquidity in Aerodrome.

Information

Aerodrome Website Documentation Developer docs CoinGecko Base AERO Contract Address Number of Token Holders : 41,786 (11.04.2024) AERO/USD Chainlink Price Feeds

Challenges

Market Volatility AERO, being a relatively new token, experiences higher volatility compared to established assets. Smart Contract Risk As with any DeFi protocol, there's an inherent risk associated with potential vulnerabilities in Aerodrome's smart contracts.(see below) Uncapped Supply Unlike many DeFi tokens, AERO has an uncapped total supply. While this can facilitate future growth and protocol needs, it can also lead to inflationary pressures. If the rate of new AERO entering circulation outpaces demand, it could dilute the value of existing tokens over time.

Security Considerations

Aerodrome Finance inherits the contract architecture and full security maintenance from Velodrome V2. Velodrome V2 has been audited and runs a bug-bounty program. The Aerodrome smart contracts (by proxy) have undergone audits by independent firms, but vulnerabilities can still be discovered later. https://velodrome.finance/security Caveat this as well by the knowledge that SONNE houses the protocol owned liquidity for SONNE token on Aerodrome currently.

Proposal

We propose that SONNE FINANCE on BASE integrate AERO support, allowing users to lend and borrow the token. This will enhance the platform's offerings by providing access to the Base ecosystem and fostering deeper user engagement.

Technical implementation

Collateral factor 30% TBD Reserve factor 30% TBD Supply cap $10M TBD Borrow cap $ 3M TBD Interest Rate curve - similar to SNX.OP TBD Incentivisation YES using $SONNE TBD

Roadmap

This SIP is preceded by a period of discussion in the SONNE discord and after minor amendments has been submitted verbatim.