# Celo L2 Expenses Methodology

## 1. Overview

Expenses is defined as the total cost incurred by Celo L2 to operate its business and maintain network security. This metric includes cost of revenue, represented by the L1 settlement fees paid to Ethereum for data availability, as well as token incentives distributed to validators and voters. These components are aggregated to represent the total economic outflow required to sustain the protocol's infrastructure.

## 2. Data sources

- **Blockchain events**: `ValidatorEpochPaymentDistributed` and `EpochRewardsDistributedToVoters` events from `Validators` and `Election` contracts on Celo L1 (legacy), and native asset transfers for settlement from Ethereum transactions, covering Celo L1 (legacy) and Ethereum.
- **External data**: End-of-day price feeds for native gas assets and project-related assets.

## 3. Step-by-step calculation

### Component A: L1 settlement cost (Cost of revenue)

- **Purpose**: Captures the fees paid by the Celo L2 sequencer to Ethereum for transaction settlement and data availability.
- **Logic**: Transactions sent from the designated sequencer address to the null address on Ethereum are identified. The total settlement cost is calculated by multiplying the gas used by the effective gas price, with the inclusion of blob gas costs where applicable. These values are captured for all activity following the transition to a Layer 2 architecture.
- **Key fields**: `gas_price`, `blob_gas_price`, `gas_used_amount`, and `blob_gas_used_amount`.

### Component B: Token incentive extraction

- **Purpose**: Identifies the value of rewards distributed to network participants.
- **Logic**: Reward distributions are parsed from `ValidatorEpochPaymentDistributed` events from `Validators` contracts and `EpochRewardsDistributedToVoters` events from `Election` contracts. For validator rewards, both validator and group payments are summed. For voter rewards, the distributed value is extracted directly from the event data.
- **Key fields**: `validatorPayment`, `groupPayment`, and `value`.

### Component C: USD conversion and final aggregation

- **Purpose**: Normalizes all expense components into a single USD-denominated metric.
- **Logic**: Raw amounts for settlement fees and token incentives are normalized by decimal precision. These normalized values are then multiplied by the corresponding end-of-day price feeds. All components are aggregated on a daily basis using UTC day boundaries to determine the total expenses for Celo L2.

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

Total project operating and incentive expenses.

Expenses

Blockchains (L2)

Validators process transactions and receive fees from users (supply-side fees).

Celo is a smart contract platform for decentralized applications (a blockchain). Celo was founded by Rene Reinsberg and Marek Olszewski and launched in 2020.

CELO holders own and govern the protocol. They currently take a cut of the total transaction fees paid by users (revenue). Celo's investors include a16z, Greenfield, Electric Capital, etc.

Celo L2

Expenses

Expenses

Chain breakdown