> 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/user-guides/providing-liquidity.md).

# Providing Liquidity

## Why Provide Liquidity?

Adding liquidity to the iAERO/AERO pool:

* Earns trading fees (0.3% of volume)
* Earns additional AERO emissions (if gauged)
* Helps maintain iAERO peg to AERO
* Supports protocol growth
* earns LIQ community emissions

## Understanding the Pool

### Pool Type: Variable Rate (Volatile)

* Not a stable pool (prices can diverge)
* Standard xy=k AMM formula
* Suitable for correlated but not pegged assets

### Expected Price Relationship

* iAERO should trade near 0.85 AERO
* May trade at premium if high demand
* May trade at discount if low demand

## How to Add Liquidity

### Step 1: Prepare Tokens

You need both tokens in the pair:

* iAERO tokens
* AERO tokens

**Optimal Ratio**: Check current pool ratio on Aerodrome

### Step 2: Navigate to Aerodrome

1. Go to [aerodrome.finance/liquidity](https://aerodrome.finance/liquidity)
2. Search for "iAERO/AERO" pool
3. Click "Add Liquidity"

### Step 3: Enter Amounts

* Enter amount of iAERO
* AERO amount auto-calculates based on pool ratio
* Or enter AERO and let iAERO auto-calculate

### Step 4: Approve Tokens

1. Approve iAERO spending (if needed)
2. Approve AERO spending (if needed)
3. Wait for confirmations

### Step 5: Add Liquidity

1. Click "Supply"
2. Review terms and price impact
3. Confirm transaction
4. Receive LP tokens

## Managing Your Position

### LP Token Benefits

* Represents your pool share
* Automatically earns fees
* Can be staked in gauge for emissions
* Transferable and tradeable

### Staking LP in Gauge

1. Go to Aerodrome Finance Dashboard
2. Find iAERO/AERO position
3. Stake LP tokens
4. Earn additional AERO emissions

## Impermanent Loss Considerations

### What Is IL?

Impermanent loss occurs when token prices diverge from deposit ratio.

### iAERO/AERO Specific Factors

* **Lower IL Risk**: Both tokens tied to AERO value
* **Main Risk**: iAERO depegging significantly from expected ratio
* **Mitigation**: Fees often offset IL for correlated pairs

### IL Scenarios

**Scenario 1: iAERO trades at premium**

* You'll have more AERO, less iAERO
* Good if you're bullish on AERO

**Scenario 2: iAERO trades at discount**

* You'll have more iAERO, less AERO
* Good if you believe peg will restore

## Calculating Returns

### Total Returns =

1. **Trading Fees** (0.3% of volume)
2. **Plus: Emissions** (if staked in gauge)
3. **Plus/Minus: IL** (from price changes)
4. **Plus: iAERO staking** (if you stake remaining iAERO)

### Example APR Calculation

* Pool TVL: $1,000,000
* Daily Volume: $100,000
* Daily Fees: $300
* Annual Fees: $109,500
* Base APR: 10.95%
* Plus emissions: +20-50% APR (varies)

## Removing Liquidity

### How to Withdraw

1. Go to your liquidity positions
2. Select iAERO/AERO position
3. Choose % to remove (25%, 50%, 100%)
4. Click "Remove"
5. Receive both tokens proportionally

### If Staked in Gauge

1. First unstake from gauge
2. Then remove liquidity
3. Two-step process

## Risk Management

### Risks to Consider

* **Smart Contract Risk**: Unaudited protocols
* **IL Risk**: Price divergence between tokens
* **Liquidity Risk**: May face slippage on large withdrawals
* **Opportunity Cost**: Could earn more just staking iAERO

### Risk Mitigation

* Start with small position
* Monitor price ratios regularly
* Consider single-sided staking if unsure
* Keep some dry powder for rebalancing

## Advanced Strategies

### 1. Range Positioning

If using Slipstream (concentrated liquidity):

* Set range around 0.80-1.0 AERO per iAERO
* Tighter range = more fees but more IL risk
* Monitor and rebalance as needed

### 2. Gauge Voting

* Vote for iAERO/AERO gauge with your veAERO
* Increases emissions to the pool
* Higher APR for all LPs

## FAQ

**Q: Which is better - staking or LPing?** A: Depends on risk tolerance. Staking is simpler and safer. LPing potentially earns more but has IL risk.

**Q: Can I lose tokens providing liquidity?** A: You can't lose tokens, but value can decrease from IL if prices diverge significantly.

**Q: How often are LP rewards paid?** A: Trading fees accumulate in real-time. Emissions paid weekly if staked in gauge.

**Q: Should I provide equal dollar values?** A: The pool automatically requires the current ratio. You can't choose arbitrary ratios.