Gauges

A gauge is a contract that turns Token Operator allocations into AERO Rewards for a specific pool. Token Operators allocate a share of the constantly streaming AERO rewards through their selections. These rewards then stream to LPs that choose AERO-earning when depositing their liquidity.

The gauge calculates the pool's reward rate based on total Allocation Power directed to it relative to all other pools, and distributes those emissions continuously to AERO-earning deposits. Each gauge also enforces a per-pool cap on total emissions to prevent excessive allocation to any single pool relative to its revenue contribution.

This page covers gauge lifecycle and activation, how gauges convert Token Operator allocations into reward rates, how revenue is distributed to LPs and Token Operators, and the mechanics of real-time settlement.

What it is

Gauges as backend infrastructure

Gauges are not a user-facing interface or something Liquidity Providers or Token Operators directly manage. Instead, gauges operate as the backend system connecting allocation decisions to reward distribution. Liquidity Providers and Token Operators interact with gauges indirectly through two UI surfaces: when providing liquidity, Liquidity Providers choose AERO-earning vs. fee-earning in the Liquidity tab (which determines if their deposit receives gauge rewards); when allocating, Token Operators direct Allocation Power in the Markets view (which determines how much a gauge pays out).

Gauge activation and lifecycle

A gauge progresses through distinct states from creation to active operation:

Activation is a one-time event that confirms the pool's tokens meet the requirements for AERO Rewards. Once activated, a gauge directs AERO Rewards to the pool. The Governor contract can set a gauge cap to zero, which stops new AERO Rewards emissions.

Pool type interaction

Gauges operate with the same activation framework across all pool types, but each pool's gauge cap is set independently based on its projected revenue. Reward distribution differs depending on the pool's design.

Both pool types share the same gauge interface and cap logic. The difference is how rewards are distributed within that gauge based on each pool's structure. A Basic Pool distributes to every deposit equally by size. A Slipstream pool distributes only to deposits whose price range covers the current trading price. Slipstream pools use different tick spacings, which set how narrow a deposit's range can be. Only AERO-earning liquidity whose range covers the current price earns.

Gauge and reward distribution

Allocation to reward rate

A gauge's emissions are determined by Allocation Power, not a fixed schedule. Token Operators direct rewards to the pool through Predictive Allocation, and it is turned into a per-second reward rate that changes as Allocation Power shifts.

The gauge acts as the central hub connecting Allocation Power decisions to actual reward distribution. When Token Operators direct Allocation Power to a pool, the gauge converts that Allocation Power into a per-second emission rate for that pool, which is computed as:

Gaugevote / totalVoteWeight x minterRate

The conversion happens in real-time. If more Allocation Power flows to a pool, its reward rate increases immediately. If Allocation Power is withdrawn, the rate decreases. This continuous model means LPs and allocators see the effects of their decisions instantly.

Revenue collection and distribution

The gauge serves as the collection point for all revenue flowing to the pool. Trade fees from the pool, Launch Payments, MEV capture, and Liquidity Payments directed to that pool all flow through the gauge. The gauge then routes this revenue to the appropriate recipients: AERO-earning deposits receive AERO tokens based on their share of active liquidity, and Token Operators receive the trading fees based on their proportional Allocation Power.

Gauge caps

A gauge cap is a ceiling on the AERO Rewards a single pool can emit. A Gauge Cap does not guarantee emissions by itself as emission distribution is still handled by Token Operators. Therefore gauges are not guaranteed to receive their cap.

The goal of gauge caps, in cooperation with Token Operators, is to hold each pool's reward value to a multiple of its projected revenue. Emissions value distributed will be targeted to achieve 1.2x the realized trading fees of the pool over longer time frames.

In order to achieve this, the Gauge cap is determined by calculating a projection of the pool fees, liquidity payments, and MEV-capture for a following time period and multiplying by a Policy Multiplier. As a general rule, this formula for gauge caps will be calculated and then converted into an equivalent dollar value of AERO tokens to set the maximum reward rate for a gauge:

gauge cap = (projected time period fees (trading fees + mev tax revenue) + scheduled 48h incentives) x policy multiplier

Short term variance between the projected fees and realized fees is expected and depending on a pool's Token Operator allocation, can cause a cap to be too high or too low. In order to minimize over or under payment, the formula used to project fees and the policy multiplier will be continuously optimized.

For example, the policy multiplier will be a multiple of a pool's projected revenue (e.g. 1.4x). This multiplier can be adjusted with market conditions. Individual pool multipliers can be adjusted for competitive considerations or all caps can be adjusted due to idiosyncratic events that cause fees to rise or fall considerably. Similarly, fee projections formulas will be continuously optimized to reduce error.

Healthy gauge caps will show that the value of a pool's reward rate reliably falls around the 1.2x target or 1.1-1.4x the actual realized trading fees over an adequate time frame.

Reward scenarios and cap behavior

In practice this creates several scenarios for gauges. Most relevant, excess Allocation Power directed to a pool already at its cap does not add to its AERO Rewards (unless a cap raise is justified based on accruing fees). In this scenario, the Gauge Cap clips emissions at the current value of the projected fee-justified ceiling.

If a pool reaches its Cap, more votes do not increase its emissions. Unused capacity is never minted, permanently reducing token emissions (see Economics). Gauge caps are updated dynamically based on its pool's projected revenue to keep rewards in a healthy range relative to realized fees.

Cap status is visible in the Markets view, so Token Operators can see when a pool is at its ceiling and more Allocation Power would not increase its AERO Rewards.

Gauges handle multiple reward scenarios by prioritizing based on cap status and Allocation Power.

The key principle: a gauge always pays the lower of what Allocation Power would send and what the cap allows. Anything above the cap is never minted. This creates a predictable ceiling on emissions per pool, still allowing Allocation Power to flow freely.

How gauges work

Continuous settlement

Rewards stream continuously. The gauge settles a deposit's accrued amount whenever it is updated (a claim, a deposit, or a withdrawal). This means Token Operators and LPs do not wait for epochs or scheduled payouts: rewards are calculated and available immediately.

Real-time rate adjustment

The gauge converts Allocation Power into per-second emission rates in real-time. As Token Operators adjust their allocations through Predictive Allocation, the gauge recalculates the pool's reward rate instantly, with no lag or batch processing.

Getting started

A gauge is created automatically when a pool is created. The gauge starts in an inactive state. To activate a gauge and enable AERO Rewards for a pool, the pair must pass the gauge verification. Once listed, the gauge activates and begins distributing AERO Rewards based on Token Operator allocations.

For Liquidity Providers: When depositing into a pool with an active gauge, choose AERO-earning in the Liquidity tab to earn a share of the gauge's AERO emissions. Choose Fee-earning to keep a portion of trading fees instead.

For Token Operators: Direct Allocation Power to a pool with an active gauge in the Markets view. The gauge converts that allocation into a per-second reward rate and distributes it to AERO-earning deposits in that pool.

For new pool creators: See Pool Creation for how to create a pool.

See also

• Providing Liquidity
• Predictive Allocation
• Slipstream
• Basic Pools
• Pool Creation