# Aave V3 Supply-side fees Methodology

## 1. Overview

Supply-side fees measures the share of interest, flash loan premiums, and liquidation bonuses that is distributed to service providers within Aave V3. These service providers are represented by liquidity providers who supply assets, and liquidators who purchase collateral during liquidations. This metric is utilized to assess the economic incentives provided to supply-side participants, which directly drives the protocol's liquidity and solvency. Supply-side fees are calculated by subtracting the protocol's retained revenue from the total fees paid by borrowers and liquidation participants.

## 2. Data sources

- **Blockchain events**: `FlashLoan`, `LiquidationCall`, and `MintedToTreasury` events from `LendingPool` contracts, `ReserveFactorChanged` and `LiquidationProtocolFeeChanged` events from `LendingPoolConfigurator` contracts, `ReserveDataUpdated` events from `PoolLogic` contracts, `Mint` and `Burn` events from `TokenBase` contracts, `LiquidationCall` events from `LiquidationLogic` contracts, `LiquidationProtocolFeeChanged` and `ReserveFactorChanged` events from `PoolConfigurator` contracts, `FlashLoan` events from `FlashLoanLogic` contracts, and ERC-20 `Transfer` events, covering Ethereum, Arbitrum, Base, Polygon, and 12 other chains
- **External data**: End-of-day price feeds and asset metadata

## 3. Step-by-step calculation

### Component A: Interest-based supply-side fees on EVM chains

- **Purpose**: Calculates the interest fees distributed to liquidity providers on EVM-compatible chains.
- **Logic**: Daily interest revenue is determined by tracking the daily change in cumulative treasury accruals (extracted from state snapshots) and adding the value of treasury mints captured from `MintedToTreasury` events from `LendingPool` contracts. Reserve factors are extracted from `ReserveFactorChanged` events from `LendingPoolConfigurator` contracts. Supply-side fees are then derived by dividing the daily revenue by the reserve factor and multiplying by the remaining supplier share: `fees_supply_side = (revenue / reserve_factor) * (1 - reserve_factor)`. If the reserve factor is zero, the supply-side fees are set to zero.
- **Key fields**: `treasury_accruals`, `amount`, `reserve_factor`

### Component B: Interest-based supply-side fees on Aptos

- **Purpose**: Calculates the interest fees distributed to liquidity providers on Aptos.
- **Logic**: Outstanding variable debt is tracked cumulatively using `Mint` and `Burn` events from `TokenBase` contracts. The daily change in the variable borrow index is extracted from `ReserveDataUpdated` events from `PoolLogic` contracts. Total interest fees are calculated by multiplying the index change by the cumulative variable debt balance. Reserve factors are determined from `ReserveFactorChanged` events from `PoolConfigurator` contracts and initial configuration states. Supply-side fees are then calculated as: `fees_supply_side = total_fees * (1 - reserve_factor)`.
- **Key fields**: `value`, `variable_borrow_index`, `reserve_factor`

### Component C: Flash loan supply-side fees

- **Purpose**: Calculates the flash loan premiums distributed to liquidity providers.
- **Logic**: Flash loan premium amounts are extracted from `FlashLoan` events from `LendingPool` contracts (on EVM chains) and `FlashLoan` events from `FlashLoanLogic` contracts (on Aptos). A fixed fee split is applied where the supply-side receives 99.96% of the total premium, with the remaining 0.04% allocated to the protocol treasury: `fees_supply_side = premium_amount * (1 - 0.0004)`.
- **Key fields**: `premium`

### Component D: Liquidation supply-side fees on EVM chains

- **Purpose**: Calculates the liquidation bonuses distributed to liquidators on EVM-compatible chains.
- **Logic**: Liquidation protocol revenue is captured from ERC-20 `Transfer` events of `aToken` collateral from the liquidated user to the Aave V3 treasury, which are matched to `LiquidationCall` events from `LendingPool` contracts. Liquidation protocol fee factors are extracted from `LiquidationProtocolFeeChanged` events from `LendingPoolConfigurator` contracts. Supply-side fees (representing the liquidator's share of the liquidation bonus) are derived using the formula: `fees_supply_side = (revenue / liquidation_factor) * (1 - liquidation_factor)`.
- **Key fields**: `amount`, `liquidation_factor`

### Component E: Liquidation supply-side fees on Aptos

- **Purpose**: Calculates the liquidation bonuses distributed to liquidators on Aptos.
- **Logic**: Liquidation events and collateral amounts are extracted from `LiquidationCall` events from `LiquidationLogic` contracts. Liquidation protocol fee factors are retrieved from `LiquidationProtocolFeeChanged` events from `PoolConfigurator` contracts and initial configuration states. Supply-side fees are calculated directly as: `fees_supply_side = liquidated_collateral_amount * (1 - liquidation_factor)`.
- **Key fields**: `liquidated_collateral_amount`, `liquidation_factor`

### Component F: Normalization and USD conversion

- **Purpose**: Normalizes all supply-side fee components and converts them to USD.
- **Logic**: All calculated supply-side fee components are aggregated by day, chain, and asset. Asset amounts are normalized by decimal precision using asset metadata. Normalized amounts are multiplied by end-of-day price feeds to convert the values to USD. Daily values are zero-filled for days with no activity.
- **Key fields**: `decimals`, `price_usd`

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

Portion of fees distributed to service providers or supply-side participants.

Supply-side 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 V3

Supply-side fees

Supply-side fees

Chain breakdown