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Lending

Dolomite

# Dolomite Earnings Methodology

## 1. Overview

Dolomite earnings represents the net profit generated by the Dolomite lending protocol across Arbitrum, Base, Ink, Berachain, and Ethereum networks. The metric follows standard accounting principles where earnings equals revenue minus expenses. Revenue primarily comes from interest fees collected on loans and premiums from oARB (options on ARB tokens). Expenses include ARB token payouts to option holders, bad debt losses, and token incentives. The calculation aggregates daily protocol activity, converts all amounts to USD, and computes net earnings to show the protocol's profitability.

## 2. Data sources

The earnings calculation relies on several categories of raw blockchain and external data:

**Blockchain events**: Parsed Dolomite protocol events from Arbitrum, Base, Ink, Berachain, and Ethereum including `LogTrade` events for internal trading, `LogDeposit` and `LogWithdraw` events for user interactions, `LogTransfer` events for internal transfers, `LogLiquidate` and `LogVaporize` events for liquidations and bad debt settlements, `LogBuy` and `LogSell` events for external trades, `LogIndexUpdate` events tracking interest rate changes, and `LogAddMarket` events for market creation.

**Fee configuration data**: `LogSetEarningsRate` events establishing global protocol fee splits and `LogSetEarningsRateOverride` events setting market-specific fee overrides that determine how interest revenue is shared between the protocol and supply-side participants.

**oARB option data**: `VesterProxy_VestingPositionCreated_event` and `VesterProxy_PositionClosed_event` tracking the creation and exercise of oARB options, capturing both ARB token costs and ETH premiums received.

**External data**: End-of-day token price feeds for USD conversion, token metadata including decimal precision and symbols, and Dolomite market price data from protocol states used as fallback pricing when external feeds are unavailable.

## 3. Step-by-step calculation

### Component A: Interest fee revenue
- **Purpose**: Calculate protocol revenue from lending interest, net of supply-side fees paid to lenders
- **Logic**: Start with parsed `LogIndexUpdate` events that track changes in borrow and supply interest rate indices. For each index update, identify all active loans by matching with account balance updates from `LogTrade`, `LogDeposit`, `LogWithdraw`, `LogTransfer`, `LogLiquidate`, and other balance-changing events. Calculate interest accrued by multiplying the loan principal amount by the change in borrow index. Apply fee split percentages from global earnings rate settings or market-specific overrides to determine the protocol's share versus the supply-side share paid to lenders.
- **Key fields**: Extract `borrow_index` changes, `par_amount` loan balances, `supply_side_fee_share` percentages, and `token_address` for proper decimal adjustment and USD conversion

### Component B: oARB option revenue  
- **Purpose**: Calculate revenue from oARB (options on ARB tokens) option premiums
- **Logic**: Match `VesterProxy_VestingPositionCreated_event` records with corresponding `VesterProxy_PositionClosed_event` records using `vesting_id`. When options are exercised, extract the ETH cost paid by users from the `ethCostPaid` field in the close events. Convert ETH amounts to USD using end-of-day price feeds.
- **Key fields**: Use `vesting_id` to link creation and closure events, `ethCostPaid` for premium amounts, and `token_address` for WETH on Arbitrum

### Component C: Internal trading fee revenue
- **Purpose**: Calculate protocol revenue from internal AMM trading fees
- **Logic**: Process parsed `LogTrade` events to identify internal trades within the Dolomite AMM. Extract input amounts and apply a fixed 0.3% trading fee to calculate fee revenue. Join with market data to get token details and convert amounts using proper decimal adjustments.
- **Key fields**: Use `input_amount` from trade events, apply `0.003` fee rate, and reference `token_decimals` for amount normalization

### Component D: Liquidation fee revenue
- **Purpose**: Calculate protocol revenue from liquidation spread premiums
- **Logic**: Process `LogLiquidate` events to capture liquidation volumes. Apply liquidation spread premiums based on both held and owed market configurations, with a default 5% spread. The spread premium represents the protocol's revenue from facilitating liquidations.
- **Key fields**: Extract `liquidation_amount`, apply `liquidation_spread_premium` calculations, and use `market_id` references for proper token identification

### Component E: Cost of revenue from oARB options
- **Purpose**: Calculate expenses from ARB tokens paid out when options are exercised  
- **Logic**: For each closed oARB position, reference the original creation event to determine the ARB token amount that must be paid to the option holder. Extract `cost_of_revenue_amount` from creation events and convert to USD using end-of-day ARB token prices.
- **Key fields**: Link `vesting_id` between creation and closure, use `cost_of_revenue_amount` for ARB payouts, and apply price conversion for USD valuation

### Component F: Bad debt expenses
- **Purpose**: Calculate losses from bad debt that cannot be recovered through liquidation
- **Logic**: Process `LogVaporize` events which represent bad debt settlements where the protocol absorbs losses. Extract the `bad_debt_amount` from the `deltaWei.value` field and convert to USD using token prices. These represent direct losses to the protocol when collateral is insufficient to cover debts.
- **Key fields**: Use `bad_debt_amount` from vaporization events, apply `token_decimals` for proper scaling, and convert via price feeds

### Component G: Token incentive expenses  
- **Purpose**: Account for token rewards paid to users (currently zero for Dolomite)
- **Logic**: Set token incentives to zero as Dolomite does not currently operate a token incentive program. This component maintains schema consistency and allows for future incentive programs.
- **Key fields**: Static zero values across all time periods and chains

### Final aggregation
- **Combining components**: Sum all revenue components (interest fees net of supply-side payments, oARB premiums, trading fees, liquidation spreads) and subtract all expense components (oARB token costs, bad debt losses, token incentives)
- **Currency conversion**: Apply end-of-day USD price feeds with fallback to Dolomite market prices when external feeds are unavailable. All amounts are normalized using token decimal precision before price application
- **Time aggregation**: Aggregate all components to daily boundaries using timestamp truncation, ensuring consistent daily reporting across all revenue and expense streams  
- **Final calculation**: Earnings = (Interest Fee Revenue + oARB Premium Revenue + Trading Fee Revenue + Liquidation Fee Revenue) - (oARB Token Costs + Bad Debt Expenses + Token Incentive Expenses), with forward-filling of zero values for days with no activity to maintain continuous time series data

*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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