> For the complete documentation index, see [llms.txt](https://docs.iaero.finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.iaero.finance/getting-started/key-concepts-and-how-to.md).

# Key Concepts

## What Problem Does iAERO Solve?

Aerodrome's veAERO model creates a dilemma: lock your AERO for up to 4 years to maximize voting rewards, or keep it liquid and earn nothing. Most users end up somewhere in between - locking for shorter periods and getting suboptimal rewards, or forgetting to vote and missing out entirely.

iAERO eliminates this trade-off by pooling user deposits into a protocol-managed vault that maintains maximum voting power while giving users liquid tokens they can trade anytime.

## How It Works: The 30-Second Version

1. **You deposit veAERO NFTs or AERO** into the vault
2. **Vault locks it permanently** in veAERO for maximum voting power
3. **You receive iAERO tokens** (95% of deposit after 5% fee)
4. **You receive bonus LIQ tokens** (governance/rewards token)
5. **Stake your iAERO** to earn 80% of all voting rewards
6. **Vault votes automatically** every week using optimal strategy
7. **Trade iAERO anytime** if you need liquidity

## Your First Deposit: Step-by-Step

### Prerequisites

* AERO tokens or veAERO NFT in your wallet
* ETH for gas fees (Base network)
* Connected wallet (MetaMask, Rabby, etc.)

### Step 1: Connect Your Wallet

Navigate to [iaero.finance](https://iaero.finance) and connect your wallet. Make sure you're on Base network.

### Step 2: Choose Deposit Type

**Option A: Deposit AERO**

* Best for: Fresh AERO holders
* Process: Simple one-click deposit
* You get: iAERO + LIQ tokens

**Option B: Deposit veNFT**

* Best for: Existing veAERO holders
* Process: Transfer your veNFT to vault
* You get: iAERO + LIQ based on locked amount

### Step 3: Enter Amount

* Minimum: 1 AERO
* Maximum: 10,000,000 AERO per transaction
* Fee: 5% (goes to protocol treasury)

### Step 4: Approve & Deposit

1. Approve the vault to spend your AERO
2. Confirm the deposit transaction
3. Receive your iAERO and LIQ tokens

### Step 5: Stake Your iAERO

Don't leave your iAERO idle! Stake it immediately to earn rewards:

1. Go to the "Stake" tab
2. Enter your iAERO amount
3. Confirm staking transaction
4. Start earning automatically
5. Receive stiAERO receipt token

## Understanding the Tokens

### iAERO - Your Liquid Staking Token

* **What it represents**: Your share of the vault's veAERO
* **Exchange rate**: 1 AERO = 0.95 iAERO (after 5% fee)
* **Utility**: Stake for rewards, trade on DEXs, use as collateral (coming soon)
* **Supply**: Uncapped, minted on deposits

### LIQ - Bonus Governance Token

* **What it represents**: Governance rights and protocol ownership
* **Emission rate**: Starts at 1 LIQ per iAERO, halves every 5M
* **Utility**: Stake for protocol revenue share, governance voting
* **Supply**: Capped at 100M total

## Rewards Explained

When you stake iAERO, you earn from multiple sources:

### Weekly Aerodrome Rewards

* Voting bribes from protocols
* Trading fees from gauges
* AERO emissions

### Distribution Breakdown

Total Rewards ├── 80% → iAERO stakers (you!) ├── 10% → Protocol treasury └── 10% → Peg defense fund

### Claiming Rewards

* Rewards accumulate automatically
* Claim anytime with no penalty
* Multiple tokens (AERO, USDC, ETH, etc.)
* Auto-compound by restaking

## Common Questions

**Q: Can I get my AERO back?** A: No, deposits are one-way. But you can sell iAERO on the open market anytime.

**Q: How often are rewards distributed?** A: Weekly, after each voting epoch. Keepers harvest and distribute automatically.

**Q: Is there a lock period for staking?** A: No! Stake and unstake iAERO instantly with no cooldown.

**Q: What happens to my voting power?** A: It's pooled with everyone else's and voted optimally by the protocol.

## Risk Considerations

* **Smart Contract Risk**: Contracts are unaudited (audit pending)
* **No Redemption**: Cannot convert iAERO back to AERO
* **Price Risk**: iAERO may trade below intrinsic value
* **Centralization**: Voting controlled by protocol multisig

## Next Steps

✅ **Completed first deposit?** Great! Now:

1. [Stake your iAERO](/user-guides/staking-iaero.md) for rewards
2. [Add liquidity](/user-guides/providing-liquidity.md) to iAERO/AERO pool
3. [Learn about LIQ](https://github.com/iaeroProtocol/iaero/blob/main/getting-started/tokenomics/liq-token.md) tokenomics