Fraxtal batches users' transactions and submits them to Ethereum, paying a share of the transaction fees to Ethereum validators (expense).

Fraxtal is an Ethereum Layer 2 (L2) blockchain built on the OP Stack by Frax Finance. It uses frxETH as the gas token and features a blockspace incentive system called Flox. Fraxtal launched in February 2024.

Frax Finance team owns and governs the protocol. Frax Finance's investors include Dragonfly Capital, Mechanism Capital, Galaxy Digital, etc.

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Fraxtal

# Fraxtal Earnings Methodology

## 1. Overview

Earnings measures the net value retained by Fraxtal after all onchain expenses are subtracted from the total revenue generated by the network. This metric reflects the protocol's onchain profitability by calculating the spread between the gas fees collected from users on the Fraxtal network and the settlement costs paid by the sequencer to Ethereum. Expenses include both the cost of revenue for L1 data availability and any token-based incentives distributed by the protocol.

## 2. Data sources

- **Blockchain events**: Transaction data from the Fraxtal network and transactions sent to the sequencer address on Ethereum, covering Fraxtal and Ethereum
- **External data**: End-of-day price feeds for native gas assets including frxETH, ETH, and FRAX

## 3. Step-by-step calculation

### Component A: Revenue calculation

- **Purpose**: To calculate the total gas fees paid by users for executing transactions on Fraxtal.
- **Logic**: Fees are extracted from transaction-level data on Fraxtal. The total fee is calculated by summing the L2 execution fee (gas used multiplied by gas price) and the L1 security fee (L1 gas used multiplied by L1 gas price and the L1 fee scalar). The native gas asset is identified as frxETH for transactions occurring before the North Star hardfork and FRAX for transactions occurring after the hardfork.

### Component B: Cost of revenue calculation

- **Purpose**: To calculate the expenses incurred by the sequencer for settling Fraxtal transaction data to Ethereum.
- **Logic**: Transactions sent to the Fraxtal sequencer address on Ethereum are identified. Settlement costs are calculated by summing the gas fees (gas used multiplied by gas price) and blob fees (blob gas used multiplied by blob gas price) paid for these transactions. These costs are denominated in ETH.

### Component C: Token incentives

- **Purpose**: To account for any token-based subsidies distributed by the protocol.
- **Logic**: This component is currently set to a constant value of zero, as no onchain token incentive distributions are currently mapped for the protocol.

### Component D: Earnings aggregation and USD conversion

- **Purpose**: To calculate the final net value and normalize the results to USD.
- **Logic**: Expenses are calculated as the sum of cost of revenue and token incentives. Earnings are then determined by subtracting total expenses from total revenue. All values are normalized by decimal precision and multiplied by end-of-day price feeds for the respective assets. Data is aggregated to daily granularity using UTC day boundaries.

*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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