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
Search for "iAERO/AERO" pool
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
Approve iAERO spending (if needed)
Approve AERO spending (if needed)
Wait for confirmations
Step 5: Add Liquidity
Click "Supply"
Review terms and price impact
Confirm transaction
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
Go to Aerodrome Finance Dashboard
Find iAERO/AERO position
Stake LP tokens
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 =
Trading Fees (0.3% of volume)
Plus: Emissions (if staked in gauge)
Plus/Minus: IL (from price changes)
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
Go to your liquidity positions
Select iAERO/AERO position
Choose % to remove (25%, 50%, 100%)
Click "Remove"
Receive both tokens proportionally
If Staked in Gauge
First unstake from gauge
Then remove liquidity
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.
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