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

Ink is an Ethereum Layer 2 (L2) blockchain built on Optimism's Superchain, focused on providing a secure, scalable infrastructure for Web3 applications.

Kraken team owns and governs the protocol. Kraken's investors include RIT Capital Partners, Hummingbird Ventures, Money Partners Group, etc.

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Blockchains (L2)

# Ink Earnings Methodology

## 1. Overview

Earnings represents the net profit generated by the Ink Layer 2 blockchain protocol, calculated as total revenue minus total expenses. This metric answers the fundamental business question: "How much profit does the Ink protocol generate after accounting for operational costs?" The calculation uses a straightforward approach where revenue comes from transaction fees collected from users, and expenses include the costs of settling transactions on Ethereum mainnet plus any token incentives distributed to users.

## 2. Data sources

The calculation relies on three primary data sources:
- **Ink blockchain transaction records**: Complete transaction data from the Ink Layer 2 network, including gas usage, gas prices, and Layer 1 fee components for each transaction
- **Ethereum mainnet transaction records**: Ethereum transaction data specifically for the Ink sequencer address (`0x005969bf0ecbf6edb6c47e5e94693b1c3651be97`) to capture L1 settlement costs including both regular gas fees and blob gas fees for data availability
- **End-of-day token price feeds**: Daily ETH/USD exchange rates used to convert all fee amounts from ETH denomination to USD for standardized reporting

## 3. Step-by-step calculation

### Component A: Revenue calculation
- **Purpose**: Calculate total revenue generated from user transaction fees on the Ink network
- **Logic**: Extract all transactions from Ink blockchain records and calculate two fee components for each transaction. The L2 gas fee represents the computational cost on Ink itself, calculated by multiplying `gas_used` by `gas_price` and dividing by 1e18 to convert from wei to ETH. The L1 gas fee represents the cost of data availability on Ethereum, calculated by multiplying `l1_gas_used`, `l1_gas_price`, and `l1_fee_scalar` together, then dividing by 1e18. Sum both fee components for each transaction to get the total fee per transaction. Aggregate all transaction fees by day using timestamp truncation to get daily fee totals. Convert daily ETH amounts to USD using end-of-day exchange rates.
- **Key fields**: `gas_used` (L2 computational gas consumed), `gas_price` (L2 gas price in wei), `l1_gas_used` (L1 data availability gas), `l1_gas_price` (L1 gas price), `l1_fee_scalar` (L1 fee multiplier), `block_timestamp` (transaction timestamp)

### Component B: Cost of revenue calculation  
- **Purpose**: Calculate the operational costs incurred by Ink to settle transaction batches on Ethereum mainnet
- **Logic**: Filter Ethereum mainnet transactions to only include those sent to the Ink sequencer address (`0x005969bf0ecbf6edb6c47e5e94693b1c3651be97`), which represents batch settlement transactions. For each settlement transaction, calculate the total gas cost by multiplying `gas_used` by `gas_price` for regular execution gas, then add the blob gas cost by multiplying `blob_gas_used` by `blob_gas_price` for data availability costs. Divide the total by 1e18 to convert from wei to ETH. Aggregate these settlement costs by day to get daily operational expenses. Convert daily ETH amounts to USD using end-of-day exchange rates.
- **Key fields**: `gas_used` (execution gas for settlement), `gas_price` (gas price for settlement), `blob_gas_used` (blob gas for data availability), `blob_gas_price` (blob gas price), `to_address` (filtered to sequencer address)

### Component C: Token incentives calculation
- **Purpose**: Account for any token-based rewards or incentives distributed to users
- **Logic**: Currently set to zero for all time periods, indicating that Ink does not distribute token incentives to users. This component exists as a placeholder for potential future incentive programs.
- **Key fields**: Hardcoded zero values aligned with the same daily timestamp structure as other components

### Final aggregation
- **Combining components**: Revenue equals the total daily transaction fees collected from users. Expenses equal the sum of daily L1 settlement costs and daily token incentives (currently zero). Both revenue and expenses are denominated in USD after currency conversion.
- **Currency conversion**: All ETH-denominated amounts are converted to USD using end-of-day exchange rates applied at the daily aggregation level, ensuring consistent pricing across all components
- **Time aggregation**: All calculations use daily boundaries determined by truncating transaction timestamps to day precision, with results reported on a daily basis
- **Final calculation**: Earnings equals daily revenue minus daily expenses, representing the net profit generated by the Ink protocol each day in USD terms

*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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