Aerodrome APR Explained

Let’s break down how APR (Annual Percentage Rate) is calculated for liquidity providers (LPs) staking in a Metacade ($MCADE) pool on Aerodrome. I’ll keep it clear and simple, focusing on what you need

What is APR?

APR represents the yearly return you earn as an LP, expressed as a percentage of your staked assets. For a Metacade pool (e.g., MCADE/USDC), it comes from two main sources:

1. Trading fees from swaps in the pool.

2. $AERO emissions (Aerodrome’s reward tokens) allocated to the pool.

How is APR Calculated?

Here’s the basic formula for APR:

APR = [(Annualized Trading Fees + Annualized $AERO Rewards) ÷ Total Value Locked (TVL) in the Pool] × 100

Let’s break it down step-by-step:

1. Trading Fees:

   • Every swap in the MCADE/USDC pool generates fees (e.g., 0.3% per trade, typical for AMMs like Aerodrome).

   • These fees are split among LPs based on their share of the pool’s total liquidity.

   • To annualize: Take the daily or weekly fee revenue, multiply by 365 (days) or 52 (weeks), and divide by the pool’s TVL.

   • Example: If the pool earns $1,000 in fees weekly and has $100,000 TVL, the fee APR is:

     ($1,000 × 52) ÷ $100,000 = 0.52 or 52% APR from fees.

2. $AERO Emissions:

   • Aerodrome distributes $AERO tokens to pools based on votes from veAERO holders. Metacade’s $MCADE bribes boost votes, increasing $AERO rewards for the pool.

   • The value of $AERO rewards depends on the token’s market price and the emission rate for the pool.

   • To annualize: Multiply the weekly $AERO rewards (in USD) by 52, then divide by the pool’s TVL.

   • Example: If the pool gets $500 in $AERO weekly and TVL is $100,000:

     ($500 × 52) ÷ $100,000 = 0.26 or 26% APR from $AERO.

3. Total APR:

   • Add the fee APR and $AERO APR together.

   • Example: 52% (fees) + 26% ($AERO) = 78% total APR.

Why Does APR Change?

• Trading volume: More trades = higher fees = higher APR.

• $AERO emissions: More veAERO votes (thanks to $MCADE bribes) = more $AERO rewards = higher APR.

• TVL: If more people stake in the pool, TVL grows, which can dilute APR unless fees or emissions grow too.

• $AERO price: If $AERO’s market price rises or falls, it affects the USD value of your rewards.

When Metacade adds $MCADE incentives, it encourages veAERO voters to direct more $AERO emissions to the MCADE pool. This boosts the $AERO portion of your APR, making the pool more attractive. For example, if Metacade bribes voters with 10,000 $MCADE, the pool might get 20% more $AERO emissions, increasing your APR significantly.

• APR is an estimate and assumes no compounding (unlike APY, which includes reinvesting rewards).

• Check Aerodrome’s dashboard or analytics (e.g., on their site or tools like DefiLlama) for real-time APRs.

• Risks like impermanent loss can affect your actual returns—APR doesn’t account for that.