Lenders deposit funds into Compound and receive interest payments from borrowers (supply-side fees).

Compound is a non-custodial lending protocol built on Ethereum. Compound was founded by Robert Leshner & Geoffrey Hayes and launched in 2017.

 COMP tokenholders own and govern the protocol. They currently take a cut of the total interest paid by borrowers (revenue). Compound’s investors include a16z, Paradigm, Polychain, etc.

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# Compound Supply-side fees Methodology

## 1. Overview

Supply-side fees is measured as the share of interest paid by borrowers that is distributed to liquidity providers (suppliers) on Compound V2 and Compound V3. This metric is represented by the total interest earned by depositors and is utilized to evaluate the incentives provided to liquidity providers. The calculations are performed across all supported chains. By analyzing supply-side fees, the efficiency of liquidity recruitment and the yield generated for depositors are assessed.

## 2. Data sources

- **Blockchain events**: `AccrueInterest` and `NewReserveFactor` events from `CEther`, `CErc20`, and `CErc20Delegator` contracts for Compound V2, and on-chain state records of market parameters for Compound V3, covering Ethereum and other supported chains
- **External data**: End-of-day price feeds for underlying assets, and asset metadata for decimal normalization

## 3. Step-by-step calculation

### Component A: Compound V2 interest and reserve factor tracking

- **Purpose**: Capture interest accrued and the reserve factor updates for Compound V2 markets
- **Logic**: `AccrueInterest` events are parsed from `CEther`, `CErc20`, and `CErc20Delegator` contracts to extract the accumulated interest. `NewReserveFactor` events are parsed from the same contracts to track changes in the reserve factor over time. Each interest accrual event is matched with the active reserve factor at the time of the transaction.
- **Key fields**: `interestAccumulated`, `newReserveFactorMantissa`, `account_address`

### Component B: Compound V2 supply-side fee calculation

- **Purpose**: Calculate the portion of accrued interest allocated to suppliers in Compound V2
- **Logic**: The supply-side fees are calculated by multiplying the accrued interest by the complement of the reserve factor: `fees_supply_side = (1 - reserve_factor) * accrued_interest`.
- **Key fields**: `accrued_interest`, `reserve_factor`

### Component C: Compound V3 supply-side fee calculation

- **Purpose**: Calculate the interest earned by suppliers in Compound V3 markets
- **Logic**: On-chain state records are parsed to extract daily average rates and indices. The supply-side fees are calculated by multiplying the supply rate by the product of the base supply index and the total supply base: `fees_supply_side = supply_rate * (baseSupplyIndex * totalSupplyBase)`.
- **Key fields**: `supply_rate`, `baseSupplyIndex`, `totalSupplyBase`

### Component D: Normalization and USD conversion

- **Purpose**: Normalize asset amounts and convert them to USD
- **Logic**: Supply-side fee amounts from both Compound V2 and Compound V3 are normalized by the decimal precision of the respective underlying assets. The normalized amounts are then multiplied by the end-of-day asset prices to determine the USD value. Daily aggregation is performed using UTC day boundaries.
- **Key fields**: `fees_supply_side`, `decimals`, `price_usd`

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

Portion of fees distributed to service providers or supply-side participants.

CompoundCOMP

Supply-side fees

Supply-side fees

Competitive landscape

Chain breakdown