# Morpho Optimizers Supply-side fees Methodology

## 1. Overview

Supply-side fees measures the share of fees that goes to the service providers of Morpho Optimizers. For Morpho Optimizers, these service providers are represented by the liquidity suppliers (lenders) to whom interest and incentives are distributed for providing assets to the platform. Because no portion of the generated fees is retained by the protocol, 100% of the interest and incentives are directed to the supply-side participants. Consequently, supply-side fees are equivalent to the total fees generated by the protocol.

## 2. Data sources

- **Blockchain events**: `Mint`, `Burn`, and `BalanceTransfer` events from `AToken` contracts, `ReserveDataUpdated` events from `LendingPool` contracts, `DistributedBorrowerComp` and `DistributedSupplierComp` events from `Comptroller` contracts, `P2PTotalsUpdated` and `IndexesUpdated` events from `AaveV3Morpho` contracts, `P2PIndexesUpdated` events from `AaveInterestRatesManager` and `InterestRatesManager` contracts, and `P2PAmountsUpdated`, `Supplied`, `Withdrawn`, and `SupplierPositionUpdated` events from `EntryPositionsManager`, `ExitPositionsManager`, and `PositionsManager` contracts, covering Ethereum
- **External data**: End-of-day price feeds and asset metadata

## 3. Step-by-step calculation

### Component A: Aave V3 Optimizer interest accrual

- **Purpose**: Calculate interest earned on Aave V3 Optimizer deposits.
- **Logic**: `Mint` and `Burn` events from `AToken` contracts, along with `BalanceTransfer` events from `AToken` contracts, are parsed to track scaled principal balances. These balances are combined with `ReserveDataUpdated` events from `LendingPool` contracts to retrieve liquidity index updates. Interest accrued between index updates is calculated as the change in the liquidity index multiplied by the previous scaled principal balance.
- **Key fields**: `block_timestamp`, `amount`, `balance_increase`, `index_value`, `liquidity_index`

### Component B: Compound Optimizer incentive tracking

- **Purpose**: Capture COMP reward distributions to Compound Optimizer users.
- **Logic**: `DistributedBorrowerComp` and `DistributedSupplierComp` events from `Comptroller` contracts are parsed. The COMP delta amounts distributed to the Morpho Optimizer contract are summed.
- **Key fields**: `block_timestamp`, `amount`

### Component C: Peer-to-Peer (P2P) interest calculation

- **Purpose**: Calculate interest accrued on outstanding P2P supply balances.
- **Logic**: `P2PTotalsUpdated` events from `AaveV3Morpho` contracts, and `P2PAmountsUpdated` events from `EntryPositionsManager` and `PositionsManager` contracts are parsed to track outstanding P2P supply balances. These balances are combined with index updates parsed from `IndexesUpdated` events from `AaveV3Morpho` contracts and `P2PIndexesUpdated` events from `AaveInterestRatesManager` and `InterestRatesManager` contracts. Daily interest is calculated as the outstanding supply balance multiplied by the daily change in the P2P borrow index.
- **Key fields**: `block_timestamp`, `amount`, `p2p_borrow_index`

### Component D: Pool interest calculation

- **Purpose**: Calculate interest accrued on outstanding pool supply balances.
- **Logic**: `Supplied`, `Withdrawn`, and `SupplierPositionUpdated` events from `EntryPositionsManager`, `ExitPositionsManager`, and `PositionsManager` contracts are parsed to track outstanding pool supply balances. These balances are combined with index updates parsed from `IndexesUpdated` events from `AaveV3Morpho` contracts and `P2PIndexesUpdated` events from `AaveInterestRatesManager` and `InterestRatesManager` contracts. Daily interest is calculated as the outstanding supply balance multiplied by the daily change in the pool supply index.
- **Key fields**: `block_timestamp`, `amount`, `pool_supply_index`

### Component E: Normalization, USD conversion, and supply-side allocation

- **Purpose**: Convert all fee components to USD and allocate them to the supply-side.
- **Logic**: All calculated interest and incentive amounts are normalized by decimal precision using asset metadata. The normalized amounts are multiplied by end-of-day asset prices to convert them to USD. Since Morpho Optimizers do not retain a protocol fee, 100% of the total fees are allocated to the supply-side participants (lenders/suppliers), making supply-side fees equivalent to total fees.
- **Key fields**: `timestamp`, `fees`, `price_usd`

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

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

Supply-side fees

Lending

Lenders can earn on Morpho using Morpho Vaults, noncustodial simple to use lending vaults that optimize yields for depositors. Borrowers can borrow any assets directly from Morpho Markets. Developers and businesses can use different parts of Morpho’s permissionless infrastructure to build any custom use case or application.

Morpho is an open, efficient, and resilient platform that allows anyone to earn yield and borrow assets. At the same time, developers or businesses can create markets, curate vaults, and build a range of applications on its flexible, immutable infrastructure.

MORPHO tokenholders own and govern the protocol. They currently do not take a cut of the interest and third-party token incentives earned by lenders (revenue). Morpho's investors include a16z, Coinbase Ventures, Semantic Ventures, etc.

Morpho Optimizers

Supply-side fees

Supply-side fees

Chain breakdown