# Aave V2 Fees Methodology

## 1. Overview

Fees for Aave V2 are measured as the total value paid by borrowers and flash loan users. These fees are composed of interest paid by borrowers and premiums paid by flash loan users. Interest fees are split between depositors (supply-side fees) and the protocol treasury (revenue) according to reserve factors set by governance. Flash loan fees are collected from users executing flash loans and are allocated to the protocol.

## 2. Data sources

- **Blockchain events**: ERC-20 `Transfer` events representing aToken mints to the treasury, `FlashLoan` and `Withdraw` events from `LendingPool` contracts, `ReserveFactorChanged` and `ReserveInitialized` events from `LendingPoolConfigurator` contracts, and `ReserveInitialized` events from `AMMLendingPoolConfigurator` contracts, covering Ethereum, Avalanche, and Polygon
- **External data**: End-of-day price feeds for the underlying assets and asset metadata

## 3. Step-by-step calculation

### Component A: Market registry and reserve factor tracking

- **Purpose**: Identification of active Aave V2 markets and tracking of their historical reserve factors.
- **Logic**: Active markets are identified using `ReserveInitialized` events from `LendingPoolConfigurator` and `AMMLendingPoolConfigurator` contracts. Historical reserve factors are extracted from `ReserveFactorChanged` events emitted by `LendingPoolConfigurator` contracts. These reserve factors are filled forward daily to ensure continuous coverage for each market.

### Component B: Interest fee extraction and allocation

- **Purpose**: Capture of interest fees and their allocation between protocol revenue and supply-side fees.
- **Logic**: Interest fees accumulated by the protocol are tracked via ERC-20 `Transfer` events where aTokens are minted from the null address to the Aave V2 treasury addresses. Specific treasury management transactions are excluded using a denylist, which is populated in part by tracking `Withdraw` events from `LendingPool` contracts where the user matches the swap address. Total interest fees are back-calculated by dividing the treasury transfer amount (protocol revenue) by the corresponding market's reserve factor. Supply-side fees are then calculated as the difference between total interest fees and protocol revenue. If the reserve factor is zero, supply-side fees are set to zero.

### Component C: Flash loan fee extraction

- **Purpose**: Capture of fees generated from flash loan executions.
- **Logic**: Flash loan fees are extracted from `FlashLoan` events emitted by `LendingPool` contracts. The premium amount paid by the borrower is captured from the event parameters and mapped to the corresponding underlying asset.

### Component D: USD conversion and aggregation

- **Purpose**: Normalization of fee amounts to USD and their daily aggregation.
- **Logic**: All extracted fee amounts are normalized by the decimal precision of their respective assets. The normalized amounts are then multiplied by end-of-day asset prices to convert them to USD. Daily fees are aggregated by timestamp, chain, and product at a daily granularity using UTC day boundaries.

*This methodology was automatically generated by Token Terminal's methodology analyzer.*

Total value users pay to use a protocol (gross fees, user-paid fees).

Fees

Lending

Lenders deposit funds into Aave and receive interest payments from borrowers (supply-side fees).

Aave is a non-custodial lending protocol built on Ethereum and other adjacent blockchains. Aave was founded by Stani Kulechov and launched in 2017.

AAVE tokenholders own and govern the protocol. They currently take a cut of the total interest paid by borrowers (revenue). Aave’s investors include ParaFi Capital, Framework Ventures, Three Arrows Capital, etc.

Aave V2

Fees

Fees

Chain breakdown