Liquidity providers deposit funds into Aerodrome and stake their LP tokens to receive AERO tokens in proportion to their share of the votes (token incentives).

Aerodrome is a non-custodial exchange protocol built on Base. Aerodrome was launched by the Velodrome team in 2023.

AERO tokenholders own and govern the protocol. They vote which pools they wish to earn trading fees from (revenue), while the pools' unstaked liquidity providers earn the remainder of the trading fees (supply-side fees).

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Aerodrome

# Aerodrome Earnings Methodology

## 1. Overview

Earnings measures the net value retained by Aerodrome after subtracting all asset incentive expenses from total protocol revenue. On-chain profitability of the protocol's automated market maker (AMM) and liquidity alignment marketplace is reflected by this metric. Revenue is generated from trading fees and third-party voting incentives (bribes), while expenses are comprised of native AERO asset incentives distributed to liquidity providers. Net values are calculated across Aerodrome's core products, including V1, V2, and Slipstream.

## 2. Data sources

- **Blockchain events**: `Claim` events from `Pool` contracts, `CollectFees` events from `CLPool` contracts, `NotifyReward` events from `BribeVotingReward` and `CLBribeVotingReward` contracts, `ClaimRewards` events from `Gauge` contracts, `IgnitionEvent` events from `IgnitionRegistry` contracts, and `GaugeCreated` events from `Voter` contracts, covering Base and Arc
- **External data**: End-of-day price feeds and asset metadata

## 3. Step-by-step calculation

### Component A: Trading fee revenue extraction

- **Purpose**: Capture trading fees collected by the protocol.
- **Logic**: Trading fees are extracted from `Claim` events from `Pool` contracts (for V1 and V2) and `CollectFees` events from `CLPool` contracts (for Slipstream). The collected amounts for both assets in a trading pair are identified using the respective collector addresses. Only fees directed to incentive accounts (identified via `GaugeCreated` events from `Voter` contracts) are classified as protocol revenue.
- **Key fields**: `amount0` and `amount1` representing the collected fee quantities for each asset in the pool, and `fee_collector_address` representing the recipient of the fees.

### Component B: Voting incentive revenue extraction

- **Purpose**: Capture third-party voting incentives (bribes) paid to voters.
- **Logic**: Voting incentives are extracted from `NotifyReward` events from `BribeVotingReward` (V1) and `CLBribeVotingReward` (V3) contracts. These incentives are categorized under the core voting incentives product or the Ignition launchpad product. Ignition launchpad pools are identified using `IgnitionEvent` events from `IgnitionRegistry` contracts, with manual overrides applied for specific campaigns.
- **Key fields**: `amount` representing the incentive quantity, and `reward` representing the asset address of the incentive.

### Component C: Liquidity incentive expense extraction

- **Purpose**: Capture liquidity incentives distributed to gauges as protocol expenses.
- **Logic**: Liquidity incentives are extracted from `ClaimRewards` events from `Gauge` contracts. The distribution of native AERO assets to liquidity providers is captured from these events. The gauge addresses are mapped to their corresponding trading pairs using `GaugeCreated` events from `Voter` contracts.
- **Key fields**: `amount` representing the quantity of native AERO assets distributed.

### Component D: USD conversion and normalization

- **Purpose**: Normalize all fee, incentive, and expense values to USD.
- **Logic**: Asset amounts are normalized by their decimal precision using asset metadata. Normalized amounts are multiplied by end-of-day asset prices to determine their USD value. For Ignition launchpad assets, a time-weighted average price (TWAP) from the first 24 hours of trading is applied when standard daily prices are unavailable, provided the first-day trading volume validates the exit opportunity.
- **Key fields**: `price_usd` representing the end-of-day asset price, and `decimals` representing the asset decimal precision.

### Component E: Earnings calculation

- **Purpose**: Calculate net earnings by subtracting expenses from revenue.
- **Logic**: Total revenue is calculated as the sum of trading fees and voting incentives. Total expenses are defined as the sum of asset incentives. Daily earnings are calculated by subtracting total expenses from total revenue, with values aggregated at a daily granularity using UTC day boundaries.

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

Net profit (also profits, net income, profitability) — revenue remaining after subtracting expenses.

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