# Concentrated Liquidity Fees Methodology

## 1. Overview

Fees measures the total value paid by users to trade within Concentrated Liquidity pools or to incentivize liquidity provision. This metric represents the economic value generated by the application through trading activities and external incentive injections. Fees are composed of swap fees paid by traders and rewards distributed to liquidity providers, all of which are normalized to USD for comparative analysis.

## 2. Data sources

- **Blockchain events**: `Swap` events from `Pool` contracts, `PoolCreated` events from `Factory` contracts, `SetPoolFeeProtocol` and `FeeAdjustment` events from `PoolFactory` contracts, and `NotifyReward` events from `GaugeV3` contracts, covering Linea
- **External data**: End-of-day price feeds and asset metadata

## 3. Step-by-step calculation

### Component A: Concentrated Liquidity trading fee extraction

- **Purpose**: Calculate the fees generated by swap activities in Concentrated Liquidity pools
- **Logic**: `Swap` events are parsed from `Pool` contracts to determine trading volume for each transaction. This volume is joined with fee tier configurations extracted from `PoolCreated` events in `Factory` contracts and `FeeAdjustment` events in `PoolFactory` contracts. If a specific fee tier is not explicitly set during pair creation, a default value of 3000 (representing 0.3%) is applied. Total trading fees are calculated by multiplying the daily trading volume of each pool by its respective active fee tier.
- **Key fields**: `token0_amount`, `token1_amount`, `fee_tier`

### Component B: Liquidity provider incentive tracking

- **Purpose**: Capture additional value flowing into the protocol ecosystem through external rewards
- **Logic**: `NotifyReward` events are parsed from `GaugeV3` contracts to identify reward tokens and amounts distributed to liquidity providers. These amounts are included in the total fee calculation as they represent value paid into the system to facilitate liquidity. Rewards denominated in the protocol's native Rex asset are excluded to prevent circular value accounting.
- **Key fields**: `amount`, `token_address`

### Component C: USD conversion and final aggregation

- **Purpose**: Normalize all fee components into a common currency and aggregate by time and product
- **Logic**: Trading volumes and reward amounts are normalized by decimal precision based on asset metadata. Values are converted to USD using end-of-day price feeds. For trading volume, a safety check is applied where the lesser USD value between the two swapped assets is used to mitigate the impact of price manipulation. Total fees are aggregated as the sum of trading fees (partitioned into protocol and supply-side shares) and external incentives. Data is grouped by day using UTC boundaries.
- **Key fields**: `price_usd`, `decimals`, `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

Concentrated Liquidity

Archived

Fees

Fees