# Gearbox V3 Expenses Methodology

## 1. Overview

Expenses measures the total cost Gearbox V3 incurs to operate its protocol. Token incentives distributed to users and bad debt absorbed by the protocol treasury are included in this metric. GEAR assets claimed via Merkl and other distributor contracts, alongside specific trader rewards paid by the marketing multisig, are aggregated to determine token incentives. Liquidation losses absorbed by the treasury, rather than being passed on to lenders, are captured as bad debt expenses.

## 2. Data sources

- **Blockchain events**: `Claimed` events from `Distributor` contracts, `Repay` and `IncurUncoveredLoss` events from `PoolV3` contracts, and ERC-20 token transfers, covering Ethereum, Monad, and Plasma
- **External data**: End-of-day price feeds for the GEAR asset and pool denomination assets, and asset metadata

## 3. Step-by-step calculation

### Component A: Token incentives tracking

- **Purpose**: Capture GEAR asset incentives distributed to users
- **Logic**: GEAR claims are extracted from two main sources on Ethereum. First, `Claimed` events from Merkl `Distributor` contracts are parsed to identify claimed GEAR amounts. Second, ERC-20 token transfers of the GEAR asset from designated distributor contract addresses (excluding transfers to the treasury address) are aggregated. Additionally, specific trader reward transfers of the GEAR asset from the marketing multisig address are included for designated transaction hashes within the specified historical window.
- **Key fields**: `block_timestamp`, `amount`, `token_address`, `from_address`, `to_address`, `transaction_hash`

### Component B: Bad debt loss calculation

- **Purpose**: Calculate the total liquidation losses absorbed by the protocol treasury
- **Logic**: Liquidation losses are tracked using `Repay` and `IncurUncoveredLoss` events from `PoolV3` contracts across Ethereum, Monad, and Plasma. Total loss is extracted from `Repay` events, and uncovered loss is extracted from `IncurUncoveredLoss` events. The treasury-absorbed loss is calculated as the total loss minus the uncovered loss (with a minimum floor of zero), representing the portion covered by burning the treasury's pool shares.
- **Key fields**: `block_timestamp`, `loss`, `uncovered_loss`, `pool_address`, `credit_manager_address`, `transaction_hash`

### Component C: Protocol share allocation for bad debt

- **Purpose**: Determine the protocol's financial share of the absorbed bad debt
- **Logic**: The treasury-absorbed loss is scaled by the protocol's share of the pool's treasury. For Gearbox V3.0 pools, the protocol share is set to 1, unless the pool is specifically designated as a curator-owned treasury pool, in which case the share is set to 0. For Gearbox V3.1 pools, the protocol share is determined by the on-chain split configured in the splitter contract, defaulting to 0.5 if the split is not yet read.
- **Key fields**: `pool_address`, `protocol_share`, `version`

### Component D: USD conversion and aggregation

- **Purpose**: Normalize all expense components to USD and aggregate them
- **Logic**: Token incentives and protocol-allocated bad debt are normalized by their respective asset decimal precisions. The normalized amounts are multiplied by end-of-day asset prices to convert them to USD. Cost of revenue is set to zero as curator fees are paid directly via splitters and do not constitute a protocol expense. The daily USD values for token incentives and bad debt are summed to calculate the total daily expenses for Gearbox V3.
- **Key fields**: `timestamp`, `token_incentives`, `bad_debt`, `price_usd`

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

Total project operating and incentive expenses.

Expenses

Lending

Lenders deposit funds into Gearbox and receive interest payments from borrowers.

Gearbox is a non-custodial lending protocol built on Ethereum. Gearbox was founded by Mikhail Lazarev and launched in 2021.

GEAR tokenholders own and govern the protocol. They currently take a cut of the total interest paid by borrowers (revenue).

Gearbox V3

Expenses

Expenses

Chain breakdown