Fees & Earnings

Users sometimes ask why the protocol takes a “rake” (deposit fee + weekly splits) and whether that’s extractive. This section shows, with formulas and concrete examples, why the design shifts value from short‑term sellers to long‑term aligned users, so that people who stake iAERO and stake LIQ can, in many scenarios, earn more than 100% of a plain veAERO baseline.

The Flows (What Happens to Every Dollar of Rewards)

Let R be the total weekly rewards the vault harvests from the veAERO strategy (bribes/fees/gauge rewards), normalized to a common unit (e.g. USD or AERO):

80% → iAERO stakers (via the Staking Distributor).
10% → TreasuryDistributor → 80% of this (8% of R) → LIQ stakers → 20% of this (2% of R) → Protocol operations.
10% → Peg Defense Reserve (used only when iAERO trades below $0.85 to defend the peg and become buyer of last resort).

Additionally, on deposit, the protocol mints 5% iAERO to the treasury (the depositor gets 95%). That 5% is protocol‑owned iAERO (POI) which we typically stake. As sellers push price below $0.85, peg defense buys more iAERO at a discount, increasing POI.

Policy: The protocol routes 80% of the protocol’s own iAERO staking rewards to LIQ stakers (on top of the 8% base TreasuryDistributor flow).

Bottom line: Sellers fund the protocol’s iAERO stack (via deposit fee + cheap peg buys) → the protocol stakes that iAERO → 80% of that staking income is re‑routed to LIQ stakers. If you are both an iAERO staker and a LIQ staker, you capture value in both streams.

Notation (What Variables Mean)

R – total weekly harvested rewards (normalized).
x – your share of the iAERO staking pool (0–1).
y – your share of the LIQ staking pool (0–1).
P – the protocol’s share of the iAERO staking pool (0–1). (Grows from the 5% mint on deposits and from peg defense buys below $0.85.)
Price threshold: Peg defense only buys when iAERO < $0.85.

Your Weekly Income (Formula)

Your income has two legs:

iAERO staking leg (80% of R): You receive your pro‑rata share:
$I_{\text{iAERO}} = x \cdot 0.80 \cdot R$
LIQ staking leg: It receives:
- Base 8% of R (from TreasuryDistributor), plus
- 80% of the Protocol’s iAERO rewards. Protocol’s iAERO rewards are P × 80% × R; routing 80% of that to LIQ stakers adds 0.64·P·R to the LIQ pool.
So the LIQ pool distributes $(0.08 + 0.64P) \cdot R$, and you get:
$I_{\text{LIQ}} = y \cdot (0.08 + 0.64 P) \cdot R$

Total weekly income to a user who stakes both iAERO and LIQ:

\boxed{I_{\text{total}} = x \cdot 0.80R \;+\; y \cdot (0.08 + 0.64P)\,R}

Key idea: As P rises (more protocol‑owned iAERO from fees + cheap peg buys), the LIQ pool grows non‑linearly via the +0.64 P term. Sellers → more protocol iAERO → more flow to LIQ stakers.

“More than 100%” – What Does That Mean?

When people say “more than 100% of veAERO rewards,” they mean: compared to a plain veAERO baseline where a user with 1% of the veAERO would expect 1% of R each week, a user who stakes iAERO (x) and also stakes LIQ (y) can exceed that simple baseline because they tap two spigots (iAERO and LIQ), and LIQ’s spigot gets boosted by sellers via P.

You’re not minting extra tokens out of thin air; you’re capturing more of the pie because:

Some holders sell iAERO under peg → protocol accumulates iAERO cheaply.
Protocol stakes those tokens → routing 80% of that staking income to LIQ stakers.
If you are a LIQ staker, you get that incremental flow.

Numerical Examples

R = $100,000 weekly.
You stake x = 1% of iAERO; y = 2% of LIQ.
P = 0 (no protocol iAERO yet).

Income:

iAERO: $1\% \times 80\% \times 100{,}000 = \$800$
LIQ: $2\% \times (8\% + 0.64\cdot 0)\times 100{,}000 = 0.02 \times 0.08 \times 100{,}000 = \$160$
Total = $960

Plain veAERO baseline (1% of R) = $1,000. Here you’re at 96% of that baseline. (Reasonable when P=0.)

Example B – Sellers Push Below $0.85 → Protocol P = 25%

Still R = $100,000; x = 1%, y = 2%.
Now P = 25% (protocol accumulated iAERO from deposit fees + cheap peg buys during drawdowns and staked it).

Income:

iAERO: $1\% \times 80\% \times 100{,}000 = \$800$
LIQ: $2\% \times (8\% + 0.64 \cdot 0.25) \times 100{,}000 = 0.02 \times (0.08 + 0.16)\times 100{,}000 = 0.02 \times 0.24 \times 100{,}000 = \$480$
Total = $1,280

Plain veAERO baseline (1% of R) = $1,000. Now you’re at 128% of the baseline. The extra $280 comes entirely from owning LIQ while P > 0.

Example C – Peg Defense Buys at a Discount (Why P Grows Faster)

If the Peg Reserve buys iAERO at $0.80 using its 10% of R budget:

Weekly peg budget ~ 0.10·R = $10,000,
Price $0.80 → it acquires $10,000 / 0.80 = 12,500 iAERO for the same spend,
Those tokens are staked; over time, P rises faster the deeper the discount.

This is why drawdowns help long‑term stakers: sellers fund the protocol’s iAERO bag at a discount, and 80% of that bag’s yield flows to LIQ stakers.

Deposit Fee (5%) Is a Permanent Tailwind for P

On every deposit:

User mints 95% iAERO to themselves,
Protocol mints 5% iAERO to treasury (protocol‑owned),
Total iAERO issued = 100% of AERO deposited.

If both user and protocol stake at similar rates, the protocol’s baseline share of the staking pool starts near ~5% and rises as peg buys accumulate. Even without drawdowns, P trends upward with growth.

What’s the Maximum “Community Capture”?

At the system level, the split is always 80/10/10 of R. We don’t “create” extra rewards.

But for you, if you hold both iAERO and LIQ, you combine:

Your iAERO share of the 80%, plus
Your LIQ share of (8% + 0.64·P).

That’s how your personal capture can be >100% of a plain veAERO baseline, especially when P rises due to sellers.

Edge Cases & FAQs

Q: Does this guarantee >100%? No. It depends on P (protocol iAERO share), your x and y, the weekly R, and market conditions. When there are few sellers and P stays small, your combined capture may sit near or below 100% of a plain veAERO baseline.
Q: Is the peg always defended? The peg reserve buys only below $0.85. It is opportunistic, not a constant market maker.
Q: Why not send 100% to iAERO stakers? The 10% → TreasuryDistributor (of which 8% reaches LIQ stakers) and 10% → Peg Reserve make the system antifragile: sellers subsidize long‑term holders, and there’s capital dedicated to buying at a discount when it matters most.
Q: Isn’t the 5% deposit fee just a tax? It’s a commitment device: it seeds protocol‑owned iAERO that is staked, and 80% of those earnings are recycled to LIQ stakers. Over time, this transfers value from churn to conviction.
Q: Where does my LIQ yield come from? Two places: (i) 8% of weekly R (via TreasuryDistributor), and (ii) 80% of the protocol’s iAERO staking rewards $\Rightarrow 0.64·P·R$ flows to the LIQ pool. When P grows, LIQ yield grows.

TL;DR

Sellers of iAERO → increase protocol iAERO (via peg buys & the 5% deposit fee).
Protocol stakes that iAERO and routes 80% of its staking income to LIQ stakers.
If you stake iAERO (x) and LIQ (y), your weekly income is:
$I_{\text{total}} = x \cdot 0.80R \;+\; y \cdot (0.08 + 0.64P)\,R$
As P rises (especially during drawdowns), LIQ yield accelerates.
That’s how aligned users can exceed a plain veAERO baseline; not by printing new rewards, but by capturing more of the pie that sellers walk away from.

Not financial advice. Actual outcomes depend on markets, vote results, pool composition, and protocol params. The peg reserve only acts below $0.85.

Worked “Quick Calculator”

For a back‑of‑the‑envelope check:

Pick R (weekly rewards in USD).
Estimate your x (share of iAERO staking pool).
Estimate your y (share of LIQ staking pool).
Estimate P (protocol’s share of iAERO staking).
Rough guide: start ~5% from deposits; rises when iAERO < $0.85 and peg defense buys; can be materially higher in stress.

Then compute:

iAERO leg: $x \cdot 0.80 \cdot R$
LIQ leg: $y \cdot (0.08 + 0.64P)\cdot R$
Total = sum. Compare to a plain veAERO baseline of $x \cdot R$.

If $y > 0$ and P is meaningful, you’ll often see Total > $x \cdot R$.

Example Card (Doc Sidebar)

Example: $R=\$100k$ , $x=1%$, $y=2%$, $P=25%$
iAERO: $0.01 \times 0.80 \times 100k = \$800$
LIQ: $0.02 \times (0.08+0.64 \times 0.25)\times 100k = \$480$
Total = $1,280 vs plain veAERO baseline $= 0.01\times 100k = \$1,000$ . You capture 128% of the plain veAERO baseline.

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Last updated 19 days ago