# Flow Expenses Methodology

## 1. Overview

Expenses are measured as the total value of token incentives issued by the protocol to validators and delegators. For Flow, this calculation follows an "Inflation Offset" economic model where a fixed target for staking rewards is established per epoch. Transaction fees collected by the network are first utilized to satisfy this reward target, and new assets are only minted as an expense (token incentives) to cover any remaining shortfall. This metric reflects the cost of securing the network through the issuance of the native Flow asset.

## 2. Data sources

- **Blockchain events**: `RewardsPaid`, `DelegatorRewardsPaid`, and `NewWeeklyPayout` events from `FlowIDTableStaking` contracts, and transaction fee data, covering Flow and Flow EVM
- **External data**: End-of-day price feeds for the native Flow asset

## 3. Step-by-step calculation

### Component A: Staking reward target tracking

- **Purpose**: Identify the total reward obligations owed to node operators and delegators for network security.
- **Logic**: Staking reward data is extracted from `FlowIDTableStaking` contracts by parsing `RewardsPaid`, `DelegatorRewardsPaid`, and `NewWeeklyPayout` events. These amounts are aggregated to determine the total payout required for each epoch to maintain the security of the network.
- **Key fields**: `reward_amount` (extracted from `in_amount` and `in_newPayout` fields)

### Component B: Transaction fee aggregation

- **Purpose**: Calculate the total fees available to offset the staking reward target.
- **Logic**: Transaction fees are aggregated across the protocol. For Flow, fees are captured from transaction records. For Flow EVM, fees are calculated by multiplying the gas used by the gas price for every transaction. These values represent the protocol's primary source of non-inflationary reward coverage.
- **Key fields**: `fee_amount`, `receipt_gas_used`, `gas_price`

### Component C: Inflation offset and incentive calculation

- **Purpose**: Determine the portion of staking rewards that must be funded through new issuance.
- **Logic**: The total staking rewards required for the epoch are compared against the total transaction fees collected. Token incentives (expenses) are calculated as the positive difference between the reward target and the collected fees. If fees exceed the reward target, the expense is set to zero for that period. Expenses for Flow EVM are set to zero as all network staking rewards are managed and issued through the Flow staking contracts.
- **Key fields**: `total_staking_rewards`, `fees`

### Component D: USD conversion and aggregation

- **Purpose**: Normalize calculated expenses into USD for cross-asset comparison.
- **Logic**: Native Flow incentive amounts are normalized by decimal precision and multiplied by end-of-day price feeds. The resulting values are aggregated to a daily grain using UTC day boundaries.
- **Key fields**: `token_incentives`, `price`

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

Total project operating and incentive expenses.

Expenses

Blockchains (L1)

Validators process transactions and receive fees from users (supply-side fees).

Flow is a smart contract platform for decentralized applications (a blockchain). Flow was founded by Roham Gharegozlou, Dieter Shirley and Mikhael Naayem and launched in 2019.

FLOW holders own and govern the protocol. They currently don’t take a cut of the total transaction fees paid by users (revenue). Flow’s investors include a16z, Coatue, Coinfund, Fabric Ventures, etc.

Flow

Expenses

Expenses

Chain breakdown