# Constant Product Fees Methodology

## 1. Overview

Fees measures the total value users pay to trade and interact with the Constant Product pools on Etherex. This metric includes the trading fees generated from swap activity, as well as additional economic value generated through liquidity provider incentives and voting bribes. Fees represent the total economic value produced by the application, which is subsequently distributed between liquidity providers and the protocol treasury.

## 2. Data sources

- **Blockchain events**: `Swap` events from `Pair` contracts, `PairCreated`, `SetPairFee`, and `SetPairFeeSplit` events from `Factory` and `PairFactory` contracts, `NotifyReward` events from `Gauge` contracts, and `VotesIncentivized` events from `FeeDistributor` contracts, covering Linea.
- **External data**: End-of-day price feeds and asset metadata.

## 3. Step-by-step calculation

### Component A: Trading volume extraction

- **Purpose**: Calculate the gross value of swap activity within Constant Product pools.
- **Logic**: Swap events are parsed from `Pair` contracts to determine the change in token balances for each transaction. Trading volume is calculated by taking the absolute difference between the amounts in and out for both assets in a pair. To mitigate the impact of price manipulation, the final USD volume for each swap is determined by applying end-of-day price feeds to both assets and selecting the lower USD value between the two legs of the trade.
- **Key fields**: `token0_amount`, `token1_amount`, `transaction_hash`.

### Component B: Fee configuration and split tracking

- **Purpose**: Determine the applicable fee tiers and protocol revenue shares for each pool.
- **Logic**: Fee tiers are identified from `SetPairFee` and `PairCreated` events emitted by `PairFactory` and `Factory` contracts. If no specific fee event is recorded for a pool, a default fee tier of 0.3% is applied. Protocol fee splits, which define the portion of trading fees directed to the treasury versus liquidity providers, are parsed from `SetPairFeeSplit` events from `PairFactory` contracts. These configurations are tracked over time using block numbers to ensure the correct rates are applied to historical trade data.
- **Key fields**: `fee_tier`, `fee_split`, `pool_address`.

### Component C: Incentive and bribe extraction

- **Purpose**: Capture secondary fee components including liquidity rewards and governance incentives.
- **Logic**: External incentives paid to liquidity providers are parsed from `NotifyReward` events from `Gauge` contracts, excluding native protocol emissions. Governance-related incentives are extracted from `VotesIncentivized` events from `FeeDistributor` contracts. These amounts represent additional value paid by users or external actors to influence the Etherex ecosystem and are included in the total Fees calculation.
- **Key fields**: `amount`, `token_address`, `product_id`.

### Component D: Aggregation and USD conversion

- **Purpose**: Normalize all fee components into a single USD-denominated metric.
- **Logic**: Total trading fees are calculated by multiplying the trading volume by the applicable fee tier for each pool. These trading fees are then combined with the captured LP rewards and voting bribes. All amounts are normalized by decimal precision based on asset metadata and converted to USD using end-of-day price feeds. The final metric is aggregated at a daily granularity following UTC day boundaries.
- **Key fields**: `fees_supply_side`, `revenue`, `timestamp`.

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

Total value users pay to use a protocol (gross fees, user-paid fees).

Fees

Constant Product

Archived

Fees

Fees