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).

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Gearbox

# Gearbox Earnings Methodology

## 1. Overview

Earnings measures the net value retained by Gearbox after subtracting all protocol expenses from its revenue. Protocol revenue is generated from interest rate markups and liquidation fees across Gearbox V1 and Gearbox V3. Expenses subtracted from revenue include GEAR token incentives distributed to users and bad debt absorbed by the protocol treasury. On-chain profitability of the Gearbox protocol is reflected by this metric.

## 2. Data sources

- **Blockchain events**: `Repay` and `IncurUncoveredLoss` events from `PoolV3` contracts; `LiquidateCreditAccount` and `PartiallyLiquidateCreditAccount` events from `CreditFacadeV3` contracts; `Repay` and `RemoveLiquidity` events from `Pool` contracts; `LiquidateCreditAccount`, `OpenCreditAccount`, and `CloseCreditAccount` events from `CreditManager` and `CreditFacade` contracts; `Claimed` events from `Distributor` contracts; and ERC-20 token transfers, covering Ethereum, Monad, and Plasma
- **External data**: End-of-day price feeds and asset metadata

## 3. Step-by-step calculation

### Component A: Protocol revenue calculation

- **Purpose**: Quantify the total revenue generated by the protocol across Gearbox V1 and Gearbox V3.
- **Logic**: For Gearbox V1, revenue is identified from ERC-20 token transfers of diesel assets minted to the treasury address upon repayment, as well as withdrawal fees from V1 pools, excluding transfers related to treasury withdrawals or V3 assets. For Gearbox V3, revenue is calculated as the protocol's share of treasury income, which includes interest markups and liquidation fees. Interest markups are accrued daily based on changes in the base interest index, credit manager borrow balances, and credit manager interest fee rates. Liquidation fees are extracted from liquidation events. The protocol's share of this treasury income is determined by pool-specific treasury share configurations, where V3.0 pools default to a 100% protocol share (except curator-owned pools which receive 0%) and V3.1 pools apply a dynamic split.

### Component B: Protocol expenses calculation

- **Purpose**: Quantify the total expenses incurred by the protocol, including token incentives and absorbed bad debt.
- **Logic**: Token incentives are calculated from claimed GEAR assets, which are extracted from `Claimed` events emitted by Merkl distributor contracts and direct transfers from distributor addresses or the marketing multisig. Bad debt expenses are calculated from liquidations that leave unpaid debt, where the loss is absorbed by burning the treasury's pool shares. The protocol's share of this absorbed loss is determined by applying the protocol's treasury share percentage to the total treasury-absorbed loss, which is derived from `Repay` and `IncurUncoveredLoss` events from `PoolV3` contracts. Cost of revenue is set to zero as curator fees are paid directly by the splitter contract.

### Component C: USD conversion and final earnings aggregation

- **Purpose**: Normalize all revenue and expense values to USD and calculate net earnings.
- **Logic**: All native asset amounts are normalized by decimal precision using asset metadata. Normalized amounts are multiplied by end-of-day asset prices to convert them to USD. Daily protocol earnings are calculated by subtracting total protocol expenses (token incentives and absorbed bad debt) from total protocol revenue. Calculations are aggregated daily 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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