# Aave V4 Liquidation volume Methodology

## 1. Overview

Liquidation volume is measured as the total USD value of debt covered in liquidations across all lending markets and chains for Aave V4. This metric is utilized to evaluate the volume of undercollateralized debt cleared by liquidators to maintain protocol solvency. By aggregating the total debt repaid during liquidation events, insights are provided into market stability, risk management efficiency, and liquidator activity within the Aave V4 ecosystem.

## 2. Data sources

- **Blockchain events**: `LiquidationCall` and `AddReserve` events from `Spoke` contracts, alongside `AddAsset` events from `CoreHub`, `PlusHub`, `PrimeHub`, `GlobalDollarHub`, `CashHub`, and `EquitiesHub` contracts, covering Ethereum, Avalanche, Optimism, Base, and 1 other network
- **External data**: End-of-day price feeds and asset metadata for underlying assets

## 3. Step-by-step calculation

### Component A: Spoke contract liquidation event extraction

- **Purpose**: Extraction of raw liquidation data from Aave V4 Spoke contracts
- **Logic**: `LiquidationCall` events are parsed from `Spoke` contracts across all supported networks. For each event, the debt covered is extracted from the `debtAmountRestored` field, and the collateral removed is extracted from the `collateralAmountRemoved` field. Additional parameters, including the `collateralReserveId`, `debtReserveId`, `user`, and `liquidator`, are captured to identify the liquidation parameters.
- **Key fields**: `debtAmountRestored`, `collateralAmountRemoved`, `collateralReserveId`, `debtReserveId`

### Component B: Spoke-to-Hub asset resolution

- **Purpose**: Mapping of Spoke-local reserve identifiers to their corresponding underlying assets
- **Logic**: Spoke-local reserve identifiers (`collateralReserveId` and `debtReserveId`) are mapped to Hub-level asset identifiers using registry mappings generated from `AddReserve` events emitted by `Spoke` contracts. These Hub-level asset identifiers are subsequently resolved to their underlying asset addresses using mappings generated from `AddAsset` events emitted by various Hub contracts, including `CoreHub`, `PlusHub`, `PrimeHub`, `GlobalDollarHub`, `CashHub`, and `EquitiesHub`. Because share-based accounting is utilized in Aave V4 rather than separate aToken and vToken contracts, the resolved underlying asset address is applied directly for both collateral and debt tracking.
- **Key fields**: `spoke_reserve_id`, `hub_asset_id`, `underlying_token_address`

### Component C: USD conversion and aggregation

- **Purpose**: Normalization of liquidation values and conversion to USD
- **Logic**: The extracted debt covered amounts (`debtAmountRestored`) are aggregated daily by chain, product, and debt asset. These aggregated amounts are normalized by the decimal precision of the respective underlying assets using asset metadata. The normalized amounts are then multiplied by end-of-day asset prices to calculate the final liquidation volume in USD. Daily boundaries are defined using UTC timestamps.
- **Key fields**: `liquidation_volume`, `decimals`, `price_usd`

*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.