# Hydration Lending Fees Methodology

## 1. Overview

Fees measures the total value paid by users to utilize the Hydration Lending protocol. This metric captures interest paid by borrowers, liquidation penalties incurred during collateral liquidations, and stability fees associated with the HOLLAR stablecoin. These fees represent the total economic value generated by the lending application, which is subsequently distributed between liquidity providers (supply-side fees) and the Hydration treasury (revenue).

## 2. Data sources

- **Blockchain events**: `LiquidationCall` and `MintedToTreasury` events from `LendingPool` contracts, `ReserveFactorChanged` and `LiquidationProtocolFeeChanged` events from `LendingPoolConfigurator` contracts, and `Mint` and `Burn` events from `VToken` contracts, plus ERC-20 `Transfer` events, covering Hydration Substrate and Hydration EVM
- **External data**: End-of-day price feeds for underlying collateral assets, borrowed assets, and HOLLAR

## 3. Step-by-step calculation

### Component A: Interest accrual tracking

- **Purpose**: Calculate the total interest paid by borrowers on active loans.
- **Logic**: Cumulative interest is derived from the sum of treasury accruals and `MintedToTreasury` events from `LendingPool` contracts. Daily interest values are calculated by taking the delta between consecutive days' cumulative balances. Total fees are then extrapolated by dividing the treasury's portion by the applicable reserve factor, which is retrieved from `ReserveFactorChanged` events emitted by `LendingPoolConfigurator` contracts.
- **Key fields**: `in_amountMinted`, `in_reserve`, `in_newReserveFactor`

### Component B: Liquidation penalty extraction

- **Purpose**: Capture fees generated from the liquidation of undercollateralized positions.
- **Logic**: `LiquidationCall` events from `LendingPool` contracts are monitored to identify liquidated positions. Associated ERC-20 token transfers from the liquidated user to the treasury address are parsed to determine the liquidation fee amount. These amounts are adjusted based on liquidation protocol fee factors derived from `LiquidationProtocolFeeChanged` events from `LendingPoolConfigurator` contracts.
- **Key fields**: `in_collateralAsset`, `in_user`, `in_liquidator`, `in_newFee`

### Component C: HOLLAR stability and minting fees

- **Purpose**: Measure fees specifically generated by the HOLLAR stablecoin product within the lending environment.
- **Logic**: Fees are extracted via two primary mechanisms. First, interest accruals are calculated by tracking the change in the variable borrow index applied to the cumulative balance of HOLLAR, using `Mint` and `Burn` events from `VToken` contracts. Second, stability module fees are captured by tracking HOLLAR transfers to and from the stability module contract, with a fixed percentage allocation applied to determine the fee and revenue components.
- **Key fields**: `in_value`, `in_balanceIncrease`, `in_variableBorrowIndex`, `to_address`

### Component D: Supply-side fee calculation

- **Purpose**: Determine the portion of total fees distributed to depositors.
- **Logic**: Supply-side fees are calculated as the residual value of total interest and liquidation fees after the protocol revenue portion is deducted. This is mathematically expressed by applying the inverse of the reserve factor (1 - reserve factor) to the total interest accrued. For HOLLAR-specific interest accruals, the supply-side component is currently set to zero as it is a self-custody product.

### Component E: USD conversion and aggregation

- **Purpose**: Normalize all fee components into a single currency for reporting.
- **Logic**: All extracted fee amounts are normalized by their respective asset decimal precision. These values are multiplied by end-of-day price feeds for each specific asset. Daily totals are aggregated by summing the interest, liquidation, and stability components across all supported chains. Data is bounded by UTC days.

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

Total value users pay to use a protocol (gross fees, user-paid fees).

Fees

Lending

Collators aggregate parachain transactions block candidates and producing state transition proofs for validators based on those blocks.

Hydration is a Polkadot parachain specialized in trading, lending, and stablecoin issuance.

HDX holders own and govern the protocol. Hydration’s investors include KR1 plc, Hypersphere, etc.

Hydration Lending

Fees

Fees

Chain breakdown