Overcollateralized borrowers deposit funds into Liquity and receive LUSD stablecoin.

Liquity is a non-custodial stablecoin protocol built on Ethereum. Liquity was founded by Robert Lauko & Rick Pardoe and launched in 2020.

LQTY tokenholders own & govern the protocol. They currently take all of the total borrow & redemption fees paid by borrowers (revenue). Liquity’s investors include Lemniscap, Polychain, Alameda Research, etc.

github

twitter

discord

etherscan

website

Stablecoin issuers

Liquity

# Liquity Earnings Methodology

## 1. Overview

Liquity earnings represent the protocol's daily net profit, calculated as total revenue minus total expenses. Revenue comes from fees paid by users (borrowing fees when creating LUSD debt and redemption fees when redeeming LUSD for ETH), while expenses consist of LQTY token incentives paid to various protocol participants. This metric measures the protocol's core profitability from its stablecoin issuance and redemption operations.

## 2. Data sources

- **Liquity protocol events**: Parsed Ethereum events from Liquity v1 contracts including borrowing fee payments, redemption transactions, and reward distributions
- **Fee events**: `LUSDBorrowingFeePaid` events from the BorrowerOperations contract capturing fees paid when users mint LUSD
- **Redemption events**: `Redemption` events from the TroveManager contract capturing fees paid when users redeem LUSD for ETH
- **Reward events**: Multiple LQTY token distribution events including `RewardPaid` from Unipool, `LQTYPaidToDepositor` from StabilityPool, and `LQTYPaidToFrontEnd` from StabilityPool
- **Token price feeds**: End-of-day price data for LUSD (0x5f98805a4e8be255a32880fdec7f6728c6568ba0), WETH (0xc02aaa39b223fe8d0a0e5c4f27ead9083c756cc2), and LQTY (0x6dea81c8171d0ba574754ef6f8b412f2ed88c54d) tokens
- **Token metadata**: Decimal place information for accurate amount calculations

## 3. Step-by-step calculation

### Component A: Borrowing fees collection
- **Purpose**: Captures revenue from LUSD borrowing fees paid by users when creating new debt positions
- **Logic**: Extracts `LUSDBorrowingFeePaid` events from the Liquity BorrowerOperations contract on Ethereum. Each event contains the fee amount paid in LUSD tokens. Events are filtered to distinct occurrences based on block timestamp, transaction hash, and log index to prevent double-counting. The LUSD token address is hardcoded as the fee token.
- **Key fields**: `block_timestamp` for timing, `LUSDFee` for the fee amount in LUSD, transaction identifiers for deduplication

### Component B: Redemption fees collection  
- **Purpose**: Captures revenue from redemption fees paid when users exchange LUSD for ETH through the protocol
- **Logic**: Extracts `Redemption` events from the Liquity TroveManager contract on Ethereum. Each event contains the fee amount paid in ETH. Events are deduplicated using the same approach as borrowing fees. The WETH token address is used to represent ETH fees for consistent token handling.
- **Key fields**: `block_timestamp` for timing, `ETHFee` for the fee amount in ETH, transaction identifiers for deduplication

### Component C: LQTY token incentives collection
- **Purpose**: Captures expenses from LQTY token rewards distributed to protocol participants
- **Logic**: Combines three different types of LQTY reward distributions: Uniswap LP rewards from `RewardPaid` events, Stability Provider rewards from `LQTYPaidToDepositor` events, and Frontend Operator rewards from `LQTYPaidToFrontEnd` events. Each reward type is classified with a descriptive account name but all use the same LQTY token address. Events are deduplicated across all three sources.
- **Key fields**: `block_timestamp` for timing, reward amounts in LQTY tokens, `account_name` for categorizing different reward types

### Component D: Revenue aggregation
- **Purpose**: Converts fee collections to USD and aggregates daily revenue
- **Logic**: Combines borrowing fees (LUSD) and redemption fees (ETH) into a single revenue stream. Timestamps are truncated to daily boundaries for consistent aggregation. Token amounts are converted to USD using end-of-day price feeds and corrected for decimal places. All revenue is classified under the 'Interest' business line within the 'stablecoin_issuers' market sector.
- **Key fields**: Daily `timestamp`, USD-converted `fees` amount, chain and classification metadata

### Component E: Expenses aggregation  
- **Purpose**: Converts LQTY incentives to USD and aggregates daily expenses
- **Logic**: Takes the combined LQTY token incentives and applies the same USD conversion and decimal correction process as revenue. Daily timestamp truncation ensures alignment with revenue calculations. The token incentive amounts become the expense amounts for the earnings calculation.
- **Key fields**: Daily `timestamp`, USD-converted `token_incentives` amount treated as expenses

### Final aggregation
- **Combining components**: Daily revenue and expenses are joined by timestamp using the `calculate_earnings` macro, which performs a simple subtraction of expenses from revenue for each day
- **Currency conversion**: All native token amounts (LUSD, ETH, LQTY) are converted to USD using end-of-day price feeds with proper decimal place corrections applied based on each token's decimal configuration
- **Time aggregation**: All events are aggregated to daily boundaries using timestamp truncation, ensuring consistent daily granularity across revenue and expense streams
- **Final calculation**: Daily earnings equals daily revenue from fees minus daily expenses from LQTY incentives, with gap-filling applied to ensure complete time series coverage using zero-fill strategy for missing days

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

Net profit (also profits, net income, profitability) — revenue remaining after subtracting expenses.

LiquityLQTY

Earnings

Earnings

Competitive landscape