# Aave V2 Token incentives Methodology

## 1. Overview

Token incentives measures the value of native assets that Aave V2 pays out to its supply-side and demand-side users. These incentives are primarily used to compensate stakeholders, such as liquidity providers, borrowers, and Safety Module participants, to encourage protocol participation and secure the system. This metric is analogous to stock-based compensation in traditional finance and represents a cost incurred by the protocol to bootstrap or maintain liquidity.

## 2. Data sources

- **Blockchain events**: `RewardsClaimed` events from `IncentivesController`, `stkAAVE`, `stkAAVEwstETHBPTv2`, and `stkABPT` contracts, covering Ethereum
- **External data**: End-of-day price feeds and asset metadata

## 3. Step-by-step calculation

### Component A: Safety Module reward extraction

- **Purpose**: Capture rewards distributed to users who stake assets to secure the protocol.
- **Logic**: `RewardsClaimed` events are parsed from the `stkAAVE`, `stkAAVEwstETHBPTv2`, and `stkABPT` contracts. These events represent the retroactive or ongoing distribution of AAVE tokens to participants who provide backstop liquidity to the Aave ecosystem. Rewards specifically associated with GHO staking are excluded from this component and attributed to the GHO product.
- **Key fields**: `amount` (quantity of rewards claimed).

### Component B: Liquidity mining incentive extraction

- **Purpose**: Capture incentives distributed to lenders and borrowers within Aave V2 markets.
- **Logic**: `RewardsClaimed` events are parsed from `IncentivesController` contracts. These events track the distribution of rewards to users interacting with specific reserve assets. Only events originating from Aave V2 deployment addresses are included in this calculation to ensure clear separation from subsequent protocol versions.
- **Key fields**: `amount` (quantity of rewards claimed).

### Component C: USD conversion and normalization

- **Purpose**: Normalize reward quantities into a common currency for reporting.
- **Logic**: Raw reward amounts are joined with asset metadata to be normalized by decimal precision. The resulting values are multiplied by end-of-day price feeds for the respective reward asset (primarily AAVE). Values are aggregated to a daily granularity using UTC day boundaries. Any days without recorded incentive events are filled with zero values to ensure a continuous time series.

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

Value of native tokens distributed as incentives.

Token incentives

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

Token incentives

Token incentives

Chain breakdown