# X Layer Cost of revenue Methodology

## 1. Overview

Cost of revenue measures the expenses incurred by X Layer to settle transactions and post data to Ethereum. These expenses are represented by the L1 gas and blob fees paid to Ethereum for data availability and state settlement. This metric is utilized to evaluate the operational efficiency and net profitability of X Layer, as it represents the primary direct cost of running the Layer 2 network.

## 2. Data sources

- **Blockchain events**: Transaction data from the Ethereum blockchain, specifically tracking transactions sent by X Layer batcher wallets or sent to the Polygon CDK rollup contract, covering Ethereum
- **External data**: End-of-day price feeds for native gas assets

## 3. Step-by-step calculation

### Component A: L1 settlement transaction identification

- **Purpose**: Identify transactions on Ethereum that represent state settlement and data availability postings for X Layer.
- **Logic**: Transactions are filtered on Ethereum based on two distinct operational eras of X Layer. For the OP Stack era, transactions are identified where the sender matches designated batcher wallet addresses. For the earlier Polygon CDK Validium era, transactions are identified where the recipient matches the designated CDK rollup contract address.
- **Key fields**: `from_address`, `to_address`, `block_timestamp`

### Component B: Settlement fee calculation

- **Purpose**: Calculate the total gas and blob fees paid for each settlement transaction.
- **Logic**: For each identified transaction, gas fees and blob fees are calculated. The gas fee is computed by multiplying the gas used by the effective gas price. The blob fee is computed by multiplying the blob gas used by the blob gas price. These two components are summed to determine the total transaction fee in the native gas asset, which is then normalized by decimal precision.
- **Key fields**: `gas_used`, `gas_price`, `blob_gas_used`, `blob_gas_price`

### Component C: Daily aggregation and USD conversion

- **Purpose**: Aggregate settlement costs daily and convert the values to USD.
- **Logic**: Normalized transaction fees are aggregated to a daily granularity using UTC day boundaries. Daily fee totals are multiplied by end-of-day price feeds for the native gas asset to determine the cost of revenue in USD. Missing days are zero-filled to ensure a continuous time series.
- **Key fields**: `block_timestamp`, `l1_settlement_amount`

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

Expenses paid to third parties to deliver core service output.

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Chain breakdown