# Aave V3 Liquidation volume Methodology

## 1. Overview

Liquidation volume is defined as the total USD value of debt covered in liquidations across all lending markets and chains for Aave V3. This metric is used to assess the volume of undercollateralized debt that is successfully liquidated, which is critical for understanding the risk management and solvency of the protocol. Liquidations are triggered when a borrower's health factor falls below the designated threshold, whereby a portion of the outstanding debt is repaid by liquidators in exchange for collateral at a discount.

## 2. Data sources

- **Blockchain events**: `LiquidationCall` events from `LendingPool` and `LiquidationLogic` contracts, and `ReserveInitialized` events from `LendingPoolConfigurator` and `PoolTokenLogic` contracts, covering Ethereum, Arbitrum, Optimism, Base, and 12 other chains
- **External data**: End-of-day price feeds and asset metadata

## 3. Step-by-step calculation

### Component A: Market mapping and address normalization

- **Purpose**: Map active lending markets and normalize asset addresses.
- **Logic**: Market configurations are identified using `ReserveInitialized` events from `LendingPoolConfigurator` contracts on EVM chains and `PoolTokenLogic` contracts on Aptos. For Aptos, short-form addresses are normalized to full Move type addresses using a centralized token mapping. These configurations are joined with pool configurator mappings to associate each market with its corresponding underlying asset, debt asset, and pool address.
- **Key fields**: `underlying_token_address`, `atoken_address`, `vtoken_address`, `pool_address`

### Component B: Liquidation event extraction

- **Purpose**: Extract raw liquidation details from the blockchain.
- **Logic**: For EVM chains, `LiquidationCall` events are parsed from `LendingPool` contracts to extract the debt asset, user address, liquidator address, and the raw debt amount covered. For Aptos, `LiquidationCall` events are parsed from `LiquidationLogic` contracts to extract the same parameters. The extracted events are filtered to include only those associated with Aave V3 markets.
- **Key fields**: `debt_token_address`, `debt_to_cover`, `block_timestamp`

### Component C: Decimal normalization and USD conversion

- **Purpose**: Normalize raw debt amounts and convert them to USD.
- **Logic**: Raw debt amounts are normalized by the decimal precision of the respective debt asset using asset metadata. The normalized debt amounts are then multiplied by the end-of-day asset prices obtained from price feeds to calculate the USD value of the covered debt.
- **Key fields**: `debt_to_cover`, `price_usd`

### Component D: Daily aggregation and finalization

- **Purpose**: Aggregate liquidation volumes to a daily granularity.
- **Logic**: The USD-denominated liquidation volumes are aggregated by day, chain, and product. Missing days within the time series are zero-filled to ensure continuity, and chain availability filters are applied to align the data with active reporting periods.
- **Key fields**: `timestamp`, `liquidation_volume`

*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.