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.

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Flow

# Flow Expenses Methodology

## 1. Overview

The Flow expenses metric measures the cost of maintaining network security through validator incentives. It represents the value of newly minted FLOW tokens required to cover staking reward shortfalls when transaction fees are insufficient to fully compensate validators. This metric implements Flow's unique "Inflation Offset" economic model, where fixed epoch-based staking rewards are paid first from collected fees, with any remaining balance covered by token inflation. The expenses metric answers the business question: "How much does Flow spend in newly minted tokens to maintain network security when fee revenue is insufficient?"

## 2. Data sources

The calculation relies on the following raw data sources:
- **Flow blockchain transaction records**: Flow transaction data including fees, payer addresses, gas limits, and transaction metadata
- **Flow EVM transaction records**: EVM-compatible transaction data with gas usage, gas prices, and transaction details
- **Flow staking reward events**: Parsed `FlowIDTableStaking_RewardsPaid_event` and `FlowIDTableStaking_DelegatorRewardsPaid_event` logs capturing validator and delegator reward distributions
- **End-of-day price feeds**: FLOW token prices from CoinGecko for USD conversion
- **Token metadata**: FLOW token contract addresses and decimal configurations for proper unit conversion

## 3. Step-by-step calculation

### Component A: Flow transaction fees
- **Purpose**: Calculate daily transaction fees collected from Flow's main blockchain
- **Logic**: Extract transaction records from Flow blockchain data, filtering for valid transactions with non-null `fee_amount` values. Aggregate total fees, average fees, median fees, transaction counts, and unique payer counts by day. Each transaction fee is already calculated upstream in the source data.
- **Key fields**: `fee_amount` (transaction fee in FLOW tokens), `payer` (transaction initiator), `block_timestamp` (transaction timing)

### Component B: Flow EVM gas fees
- **Purpose**: Calculate daily gas fees from Flow's EVM-compatible execution environment
- **Logic**: Process Flow EVM transaction data to calculate gas fees using the standard formula: gas fee = (`gas_used` × `gas_price`) ÷ 10^18. Convert from wei to FLOW token units and aggregate by day. All Flow EVM transactions use FLOW as the gas token.
- **Key fields**: `gas_used` (gas consumed by transaction), `gas_price` (gas price in wei), `block_timestamp` (transaction timing)

### Component C: Flow staking rewards
- **Purpose**: Determine total daily staking reward payouts to validators and delegators
- **Logic**: Extract and combine reward events from Flow's staking contract: node operator rewards from `FlowIDTableStaking_RewardsPaid_event` and delegator rewards from `FlowIDTableStaking_DelegatorRewardsPaid_event`. Sum all reward amounts by day to get total daily staking reward payouts. These represent the fixed target amounts that must be paid to maintain network security.
- **Key fields**: `amount` (reward amount in FLOW tokens from both event types), `block_timestamp` (reward distribution timing)

### Component D: Fee distribution calculation
- **Purpose**: Apply Flow's "Inflation Offset" model to determine how fees are allocated
- **Logic**: Combine daily fees (from both Flow and Flow EVM) and daily staking rewards. Calculate three key metrics: revenue (excess fees beyond validator needs), supply-side fees (portion of fees going to validators), and token incentives (minted tokens covering shortfalls). The core formulas are: Revenue = MAX(Total Fees - Total Staking Rewards, 0), Supply-side Fees = MIN(Total Fees, Total Staking Rewards), Token Incentives = MAX(Total Staking Rewards - Total Fees, 0).
- **Key fields**: `fees` (total daily fees), `total_staking_rewards` (total daily validator payouts), `token_incentives` (minted tokens)

### Final aggregation
- **Combining components**: The token incentives from Flow represent the actual expenses, as they show newly minted FLOW tokens. Flow EVM has no separate staking mechanism, so its expenses are always zero. The final expenses metric only includes Flow token incentives.
- **Currency conversion**: Convert FLOW token amounts to USD using end-of-day price feeds from CoinGecko, applying the conversion at the daily timestamp boundary
- **Time aggregation**: All data is aggregated to daily boundaries using timestamp truncation to day level, with consistent timezone handling
- **Final calculation**: Expenses = Flow Token Incentives (in USD) + Flow EVM Token Incentives (always 0). This represents the total value of newly minted tokens required to maintain network security when fees are insufficient to cover staking rewards.

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

Total project operating and incentive expenses.

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