# Arcadia Rewards

Arcadia's reward system focuses on incentives that drive participation and usage.

## Lenders

The protocol tracks all lending rewards through ERC4626 yield-bearing tokens that represent your share of the lending pool. These tokens continuously accrue value:

* Rewards accumulate automatically in real-time
* Rewards are auto-compounding on your lending position

#### Interests

When users borrow assets from [Arcadia's lending pools](/introduction/concepts/lending-pools.md), they pay interest based on utilization. Unlike many protocols that take a fee, Arcadia passes all of these rewards to lenders:

* 100% of borrower interest payments flow to lenders
* No hidden Arcadia fees, what you deposit is what you can minimally withdraw

The protocol uses a dynamic interest rate model that responds to market demand. Interest rates automatically adjust based on pool utilization to maintain optimal liquidity levels. This curve ensures that lenders earn more as demand increases, while borrowers maintain access to reasonably priced loans during normal market conditions.

#### Liquidation Rewards

When Borrowers get [liquidated](/protocol/liquidations.md), up to 50% of liquidation penalties get distributed to Lenders

#### AAA Emissions

Besides all the rewards mentioned earlier Arcadia might decide to incentivise their USDC, wETH or cbBTC pools with additional AAA emissions.

#### Extra Rewards

Beyond base protocol rewards, Arcadia works with partners to provide additional earning opportunities:

* Extra incentives from partner protocols.
* Special rewards during ecosystem promotions (like Superchain rewards).

## Accounts

#### Liquidity Provision

When providing liquidity on DEXs, accounts earn multiple reward streams:

* Trading fees from standard liquidity positions.
* AERO tokens when using staked Slipstream positions.

For example:

* A margin account user might provide ETH-USDC liquidity on Aerodrome Staked Slipstream with borrowed funds, earning AERO instead of trading fees plus MERKL incentives
* A spot account user could do the same strategy without leverage, accessing more exotic pairs that aren't available as collateral. For example, liquidity positions using popular AI, meme and community tokens like VIRTUAL, AIXBT, TOSHI can be created

Both account types can optimize their positions and claim rewards through the same mechanisms, with rewards automatically collecting during position adjustments or rebalancing.


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