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.

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Liquity

# Liquity Supply-side fees Methodology

## 1. Overview

The Liquity supply-side fees metric measures the portion of protocol fees that would be distributed to liquidity providers or other supply-side participants. For Liquity, this metric is explicitly set to zero because stablecoin issuance protocols like Liquity do not have traditional liquidity providers who earn fee shares. Instead, all fees collected by the protocol (borrowing and redemption fees) are retained by the protocol itself rather than distributed to supply-side participants.

## 2. Data sources

The calculation relies on the following data sources:
- **Blockchain events**: Parsed Ethereum smart contract events from Liquity v1 protocol contracts
- **Borrowing fee events**: `LUSDBorrowingFeePaid` events from the BorrowerOperations contract containing LUSD fee amounts
- **Redemption fee events**: `Redemption` events from the TroveManager contract containing ETH fee amounts  
- **Token metadata**: LUSD token contract information and WETH token contract information for proper decimal handling
- **External data**: End-of-day price feeds for USD conversion of LUSD and ETH fee amounts

## 3. Step-by-step calculation

### Component A: Borrowing fees extraction
- **Purpose**: Captures fees paid by users when borrowing LUSD stablecoin against collateral
- **Logic**: Extracts `LUSDBorrowingFeePaid` events from Liquity's BorrowerOperations contract on Ethereum. Each event represents a fee payment when a user opens or adjusts a borrowing position. The events include transaction details, timestamps, and fee amounts denominated in LUSD tokens
- **Key fields**: `LUSDBorrowingFeePaid` event data with `LUSDFee` amount field, transaction hash, block timestamp, and log index for unique identification

### Component B: Redemption fees extraction  
- **Purpose**: Captures fees paid during LUSD redemption operations where users exchange LUSD for underlying ETH collateral
- **Logic**: Extracts `Redemption` events from Liquity's TroveManager contract on Ethereum. These events occur when users redeem LUSD tokens for ETH collateral, paying a redemption fee. The fee amount is captured in ETH and associated with the WETH token address for standardization
- **Key fields**: `Redemption` event data with `ETHFee` amount field, transaction details, and timestamps

### Component C: Fee data standardization
- **Purpose**: Combines and standardizes both fee types into a unified dataset
- **Logic**: Unions borrowing fees (denominated in LUSD) and redemption fees (denominated in ETH) into a single dataset. Truncates all timestamps to daily boundaries for consistent time series aggregation. Applies business classification tags including market sector identification as stablecoin issuers and business line classification as Interest
- **Key fields**: Daily timestamp boundaries, chain identification as Ethereum, token addresses for LUSD and WETH, and standardized fee amounts

### Component D: USD conversion and decimal correction
- **Purpose**: Converts fee amounts to USD and corrects for token decimal places
- **Logic**: Applies USD conversion using end-of-day price feeds for both LUSD and ETH tokens. Corrects fee amounts for proper decimal representation based on each token's decimal configuration. LUSD amounts use 18 decimals while ETH amounts also use 18 decimals through WETH representation
- **Key fields**: USD-denominated fee amounts with proper decimal precision

### Final aggregation
- **Combining components**: All fee data is aggregated at the daily level after USD conversion, creating a complete picture of protocol fee collection
- **Currency conversion**: Uses end-of-day price feeds to convert LUSD and ETH fee amounts to USD equivalents
- **Time aggregation**: Daily boundary aggregation with gap-filling using zero values for days without fee activity
- **Final calculation**: Sets supply-side fees to zero for all time periods because Liquity operates as a stablecoin issuance protocol without traditional liquidity providers who would receive fee distributions. The protocol retains all collected fees rather than sharing them with supply-side participants

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

Portion of fees distributed to service providers or supply-side participants.

LiquityLQTY

Supply-side fees

Supply-side fees

Competitive landscape

Chain breakdown