Liquidity
Providing liquidity means depositing a pair of tokens into a pool so traders can trade against them. In return, the deposit earns a continuous stream of rewards on Aero. Liquidity is accessed through the Liquidity tab within the Aero app. Liquidity providers choose between two reward types: AERO Rewards (directed by Token Operators based on predicted volume) or a portion of trading fees. No single deposit can earn both.
This page covers what providing liquidity is, how it earns, and the risks involved. For step-by-step instructions, see the Liquidity Management guide.
Pool types
Aero offers two pool types for liquidity provision:
- Basic Pools spread liquidity across the entire price curve. Available in Volatile (uncorrelated pairs) or Stable (near-par assets) variants. No range management required.
- Slipstream concentrates liquidity within a price range, offering more capital efficiency but requiring active management. For full mechanics, see Slipstream and Basic Pools.
How LPs are rewarded
A deposit earns Trading Fees or AERO Rewards.
| Reward type | How it works | Fees flow to | Best for |
|---|---|---|---|
| Fee-earning | Deposit keeps a portion of trade fees it generates, in the pool's tokens. Earns no AERO Rewards. | Liquidity Providers | LPs seeking to earn a share of trading fees generated by the pool |
| AERO-earning | Deposit earns AERO Rewards directed by Token Operators via Predictive Allocation. All trade fees flow to Exchange Revenue. | Token Operators | LPs preferring a constant stream of AERO rewards |
AERO Rewards reach each pool through Predictive Allocation. The more Allocation Power Token Operators direct to a pool, the higher its AERO Rewards rate, up to a dynamically updated cap per pool.
Key features
Aero's liquidity system combines several capabilities to optimize returns and reduce friction.
| Feature | What it does | Why it matters |
|---|---|---|
| Dynamic fees (Slipstream) | Trade fee adjusts with how far the pool's price has moved from its recent time-weighted average, up to a cap | Protects LPs during turbulent conditions while keeping fees competitive |
| MEV capture | Trades pay a tax on extractable value, accruing fee rewards | Value that would go to extractors instead benefits LPs and Token Operators |
| One-transaction composition | All liquidity operations route through Metarouter, executing multi-step actions atomically | Reduces gas costs and eliminates approval delays between steps |
What to set when depositing
| Detail | Options / description |
|---|---|
| Pool type | Slipstream (concentrated liquidity with price range) or Basic Pool (full range; Volatile or Stable) |
| Reward type | AERO-earning or Fee-earning (see How LPs are rewarded section). Switch anytime, subject to early-exit forfeit |
| Deposit amount | Token balances to be deposited |
| Price range (Slipstream only) | Narrow ranges concentrate capital but exit range more often; wider ranges earn less per dollar but stay in-range longer. Granularity set by pool's tick spacing |
How liquidity provision works
Managing a deposit
Manage deposits from the Portfolio view in the Dashboard, which shows all active deposits. Rewards can be claimed on-demand from the deposit detail view. Deposits can be closed, adjusted, or switched between reward types, ranges can be adjusted (Slipstream only), and partial withdrawals are supported.
Risks
| Risk | What happens | Mitigation |
|---|---|---|
| Impermanent Loss (IL) | When token prices diverge significantly, a withdrawn deposit can be worth less than simply holding individual tokens would have been | Tighter ranges concentrate capital and intensify IL when prices move outside the range; wider ranges spread capital across more prices and reduce IL exposure |
| Loss-versus-Rebalancing (LVR) | Cost of supplying liquidity against better-informed traders | Aero's Dynamic Fees and MEV capture are designed to offset this cost |
| Out-of-range deposits earn nothing | A Slipstream deposit outside its range is idle until price returns or range is moved | Liquidity Providers can monitor deposit status; adjust range proactively or switch to Basic Pool |
| Early-exit forfeit | Switching out of AERO-earning or withdrawing before the minimum holding period forfeits a portion of accrued AERO Rewards | Liquidity Providers should plan hold duration carefully |
Getting started
Open the Liquidity tab, pick a pair, choose a pool type, set the deposit and (for Slipstream) the range, and then confirm. The deposit appears in the Portfolio and begins earning rewards immediately. For step-by-step instructions including approvals and range setup, see the Liquidity Management guide.
For integrators and developers, the technical documentation lives in Aero's GitHub repositories.