# Aave V2 Liquidation volume Methodology

## 1. Overview

Liquidation volume measures the total USD value of debt covered in liquidations across all lending markets and chains. For Aave V2, the outstanding debt repaid by liquidators to restore the collateralization ratios of undercollateralized positions is quantified. Protocol health, risk management efficiency, and market volatility within the lending pools are indicated by this metric. Liquidation activity and the overall stability of the collateral backing the protocol are assessed through the tracking of liquidated debt volume.

## 2. Data sources

- **Blockchain events**: `LiquidationCall` events from `LendingPool` contracts, covering Ethereum, Avalanche, and Polygon
- **External data**: End-of-day price feeds and asset metadata for the underlying debt assets

## 3. Step-by-step calculation

### Component A: Aave V2 liquidation event extraction

- **Purpose**: Raw liquidation events are extracted and the debt covered during liquidations is identified.
- **Logic**: `LiquidationCall` events are parsed from `LendingPool` contracts. For each event, the debt asset address, collateral asset address, and the amount of debt covered are extracted. These events are joined with market configuration data so that the pool address and underlying asset addresses are validated to correspond to active Aave V2 markets.
- **Key fields**: `block_timestamp` (timing), `debt_token_address` (debt asset identification), `debt_to_cover` (raw debt amount repaid)

### Component B: Decimal normalization and USD conversion

- **Purpose**: Raw debt amounts are normalized by decimal precision and converted to USD.
- **Logic**: Raw debt covered amounts are normalized by the decimal precision of the respective debt asset using asset metadata. The normalized debt amounts are then multiplied by the corresponding end-of-day asset prices so that the USD value of the liquidated debt is determined.
- **Key fields**: `debt_to_cover` (raw debt amount), `decimals` (asset decimal precision), `price_usd` (end-of-day asset price)

### Component C: Daily aggregation and finalization

- **Purpose**: The USD liquidation values are aggregated to a daily granularity and zero-filling is applied.
- **Logic**: The USD-denominated liquidation volumes are aggregated by day, chain, and product. A zero-filling strategy is applied to ensure that days with no liquidation activity are populated with a value of zero so that a continuous daily time series is maintained.
- **Key fields**: `timestamp` (daily UTC boundaries), `liquidation_volume` (aggregated daily USD value)

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

USD value of debt covered or positions force-closed in liquidations.

Liquidation volume

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.