# Aave V4 Fees Methodology

## 1. Overview

Fees are measured as the total value paid by users to utilize Aave V4. This includes interest paid by borrowers on active loans and protocol or liquidator fees generated during liquidation events. These fees represent the total economic value generated by the protocol, which is split between supply-side participants (depositors and liquidators) and the protocol treasury (revenue). A share-based accounting architecture across Hub and Spoke contracts is utilized by Aave V4 to manage assets and accrue fees.

## 2. Data sources

- **Blockchain events**: `UpdateAsset`, `MintFeeShares`, and `UpdateAssetConfig` events from Hub contracts (`CoreHub`, `PlusHub`, `PrimeHub`, `GlobalDollarHub`, `CashHub`, and `EquitiesHub`), plus `LiquidationCall`, `AddReserve`, and `AddAsset` events from `Spoke` and Hub contracts, covering Ethereum, Avalanche, Optimism, Base, and Arc
- **External data**: End-of-day price feeds for assets and asset metadata (decimals)

## 3. Step-by-step calculation

### Component A: Asset and reserve registry mapping

- **Purpose**: Spoke-local reserve identifiers and Hub-level asset identifiers are mapped to their underlying asset addresses.
- **Logic**: To map asset IDs to underlying asset addresses, `AddAsset` events from Hub contracts (`CoreHub`, `PlusHub`, `PrimeHub`, `GlobalDollarHub`, `CashHub`, and `EquitiesHub`) are parsed. To map Spoke-local reserve IDs to Hub-level asset IDs, `AddReserve` events from `Spoke` contracts are parsed. Spoke-level activities are bridged to the correct underlying assets through this registry.
- **Key fields**: `hub_address`, `asset_id`, `underlying_token_address`, `spoke_address`, `spoke_reserve_id`

### Component B: Interest-based fee calculation

- **Purpose**: Total interest fees and protocol revenue from lending activities are calculated.
- **Logic**: `UpdateAsset` events are parsed to extract the end-of-day accumulated fees, and the daily delta is calculated. `MintFeeShares` events are parsed and summed daily to capture treasury claims that reset accrued fees. Daily protocol revenue is calculated as the sum of the accrued fee delta and minted fees. `UpdateAssetConfig` events are parsed to extract the reserve factor. Total interest fees are calculated by dividing the protocol revenue by the reserve factor, and supply-side fees are derived as the difference between total fees and protocol revenue.
- **Key fields**: `accrued_fees`, `minted_fees`, `liquidity_fee_bps`

### Component C: Liquidation fee calculation

- **Purpose**: Protocol revenue and liquidator bonuses from liquidation events are calculated.
- **Logic**: `LiquidationCall` events from `Spoke` contracts are parsed to extract the liquidated collateral amount, debt to cover, collateral shares liquidated, and collateral shares sent to the liquidator. Protocol revenue is calculated as the liquidated collateral amount multiplied by the ratio of protocol shares (total shares liquidated minus shares sent to the liquidator) to total shares liquidated. The debt to cover is converted into collateral-equivalent terms using daily asset prices to determine the fair collateral value. The total liquidation bonus is calculated as the liquidated collateral amount minus the fair collateral value. Supply-side fees are calculated as the total bonus minus protocol revenue, floored at zero. Total liquidation fees are calculated as the sum of protocol revenue and supply-side fees.
- **Key fields**: `liquidated_collateral_amount`, `debt_to_cover`, `collateral_shares_liquidated`, `collateral_shares_to_liquidator`

### Component D: Normalization and USD conversion

- **Purpose**: Asset amounts are normalized and converted to USD.
- **Logic**: Interest-based fees and liquidation fees are aggregated by day, chain, and asset. Raw asset amounts are normalized by decimal precision using asset metadata. Normalized amounts are multiplied by end-of-day asset prices to convert them to USD. Daily values are aggregated to produce the final Fees metric.
- **Key fields**: `fees`, `price_usd`, `decimals`

*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 V4

Fees

Fees

Chain breakdown