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.

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Celo

# Celo Earnings Methodology

## 1. Overview

Celo L1 (legacy) earnings represents the net profit generated by the Celo L1 (legacy) blockchain protocol, calculated as total revenue minus total expenses. This metric answers the fundamental business question of how profitable the Celo L1 (legacy) protocol operations are on a daily basis. The calculation uses a simple earnings formula (revenue - expenses) but accounts for Celo L1 (legacy)'s transition from Layer 1 to Layer 2 operations on March 26, 2025, which changes how revenue is calculated while introducing new L1 settlement costs.

## 2. Data sources

The earnings calculation draws from multiple blockchain and external data sources:

- **Celo L1 (legacy) blockchain transactions**: All transaction records from the Celo L1 (legacy) network including gas usage, gas prices, and fee currency information
- **Celo L1 (legacy) blockchain blocks**: Block-level data containing base fee per gas information used for revenue calculations
- **Ethereum blockchain transactions**: Ethereum transaction records specifically for Celo L1 (legacy)'s sequencer address to calculate L1 settlement costs
- **Celo L1 (legacy) reward distribution events**: Parsed `ValidatorEpochPaymentDistributed` and `EpochRewardsDistributedToVoters` events from Celo L1 (legacy)'s validator and election contracts
- **End-of-day token price feeds**: Token price data for USD conversion of fees and rewards
- **Token metadata**: Information about token addresses, symbols, and decimal places for proper unit conversion

## 3. Step-by-step calculation

### Component A: Revenue calculation

- **Purpose**: Calculate total revenue earned by the Celo L1 (legacy) protocol from transaction fees
- **Logic**: The revenue calculation uses different methodologies based on Celo L1 (legacy)'s operational model transition. Before March 26, 2025, revenue comes from base fees calculated by multiplying each transaction's `gas_used` amount by the block's `base_fee_per_gas` value. This represents the portion of transaction fees that goes to the protocol rather than miners. After March 26, 2025, when Celo L1 (legacy) transitions to L2 operations, revenue comes from gas fees calculated by multiplying `gas_used` by `effective_gas_price` for L1 transactions, or by multiplying `gas_price` by `gas_used` and dividing by 1e18 for L2 transactions. The logic joins transaction data with block data to access base fee information and filters transactions by the transition date.
- **Key fields**: `gas_used` (gas consumed per transaction), `base_fee_per_gas` (protocol fee rate from blocks), `effective_gas_price` (actual gas price paid), `gas_price` (L2 gas price), `block_timestamp` (for transition logic)

### Component B: Cost of revenue calculation

- **Purpose**: Calculate L1 settlement costs incurred by Celo L1 (legacy)'s sequencer on Ethereum
- **Logic**: This component identifies transactions sent by Celo L1 (legacy)'s sequencer address (`0x0cd08c7f7a96aa9635f761b49216b9ea74c5ca60`) to Celo L1 (legacy)'s null address (`0xff00000000000000000000000000042220`) on Ethereum starting from March 26, 2025. For each settlement transaction, it calculates the total L1 cost by multiplying `gas_used_amount` by `gas_price` and adding the product of `blob_gas_used_amount` by `blob_gas_price` (when blob gas is used). The total cost is divided by 10^18 to convert from wei to ETH units. These represent the costs Celo L1 (legacy) pays to Ethereum for data availability and settlement.
- **Key fields**: `receipt_gas_used` (gas used for settlement), `receipt_effective_gas_price` (gas price), `receipt_blob_gas_used` (blob gas consumed), `receipt_blob_gas_price` (blob gas price)

### Component C: Token incentives calculation

- **Purpose**: Calculate token rewards paid to validators and voters as protocol expenses
- **Logic**: This component aggregates rewards from two sources. Validator rewards come from `ValidatorEpochPaymentDistributed` events where it sums the `validatorPayment` and `groupPayment` amounts paid in Celo L1 (legacy) Dollar tokens. Voter rewards come from `EpochRewardsDistributedToVoters` events using the `value` field paid in Celo L1 (legacy) tokens. Both reward types are filtered to transactions occurring before March 26, 2025, and represent the protocol's token-based incentive costs for network security and governance participation.
- **Key fields**: `validatorPayment` (validator reward amount), `groupPayment` (validator group reward), `value` (voter reward amount)

### Final aggregation

- **Combining components**: Revenue and expense components are calculated separately and then combined using the earnings formula. Revenue comes from the single revenue component, while expenses are the sum of cost of revenue (L1 settlement fees) and token incentives (validator/voter rewards). Each component is first aggregated daily and converted to USD before the final calculation.
- **Currency conversion**: All amounts are converted to USD using end-of-day token price feeds. The conversion process applies appropriate decimal corrections for different tokens (Celo L1 (legacy), Celo L1 (legacy) Dollar, ETH) and uses the daily closing prices for consistent valuation.
- **Time aggregation**: All data is aggregated to daily boundaries using day-truncated timestamps. Missing days are filled with zero values to ensure complete time series coverage.
- **Final calculation**: The final earnings value is computed as total daily revenue minus total daily expenses (cost of revenue + token incentives), expressed in USD. The calculation uses a simple subtraction formula applied to the aggregated and USD-converted component values.

*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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