# Orca Token Swap V2 Supply-side fees Methodology

## 1. Overview

Supply-side fees is defined as the share of transaction fees that goes to the service providers. For Orca Token Swap V2, these fees are distributed to liquidity providers as compensation for facilitating trades and taking on inventory risk. The metric is calculated by applying the supply-side fee share to the total trading volume and trade fee rates of each pool. By tracking these distributions, the economic incentives and sustainability of the liquidity provider ecosystem are evaluated.

## 2. Data sources

- **Blockchain events**: `Initialize` instructions from `TokenSwapV2` programs, and trade instructions from Solana DEX programs, covering Solana
- **External data**: End-of-day price feeds and asset metadata

## 3. Step-by-step calculation

### Component A: Pool metadata and fee rate extraction

- **Purpose**: Extraction of pool configurations, vault accounts, and fee structures for Orca Token Swap V2 pools.
- **Logic**: `Initialize` instructions from `TokenSwapV2` programs are parsed to identify pool accounts, asset vault accounts, and fee parameters. The liquidity provider fee rate is calculated by dividing the trade fee numerator by the trade fee denominator. The protocol fee rate is calculated by dividing the owner trade fee numerator by the owner trade fee denominator.
- **Key fields**: `pool_address`, `token_0_vault_address`, `token_1_vault_address`, `lp_fee_rate`, `protocol_fee_rate`

### Component B: Trade activity tracking

- **Purpose**: Capture and normalization of swap transactions executed through Orca Token Swap V2.
- **Logic**: Trade instructions are filtered for the Orca Token Swap V2 program account (`9W959DqEETiGZocYWCQPaJ6sBmUzgfxXfqGeTEdp3aQP`). Raw trade amounts for both assets in a trading pair are normalized by their respective decimal precisions using asset metadata. Vault accounts are matched against pool metadata to correctly assign asset directions.
- **Key fields**: `pool_address`, `amount_0`, `amount_1`, `token_0_address`, `token_1_address`

### Component C: Fee share allocation

- **Purpose**: Determination of the proportion of trading fees allocated to the supply side.
- **Logic**: The total trade fee rate is calculated as the sum of the liquidity provider fee rate and the protocol fee rate. The supply-side fee share is calculated by dividing the liquidity provider fee rate by the total trade fee rate.
- **Key fields**: `trade_fee_rate`, `supply_side_fee_share`

### Component D: USD valuation and aggregation

- **Purpose**: Conversion of trading volumes to USD and calculation of the final supply-side fees.
- **Logic**: Trading volumes for each asset are converted to USD using end-of-day price feeds, with the trade value determined by the lower USD value of the two swap legs, except for trades involving exactly one tokenized stock asset, which are valued using the tokenized stock leg. Supply-side fees are calculated by multiplying the USD trading volume by the total trade fee rate and the supply-side fee share. The resulting values are aggregated daily using UTC day boundaries.
- **Key fields**: `trading_volume`, `fees_supply_side`

*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

Exchanges (DEX)

Users are able to use the Orca protocol to transact with digital assets on a peer-to-peer or peer-to-protocol basis by trading against liquidity  pools, which are created and seeded by other users providing liquidity of a pair of tokens into such liquidity pools in exchange for a stake of the liquidity and trading fees generated by such pools.

Orca is a non-custodial automated market maker (AMM) protocol built on Solana. Orca was founded by Yutaro Mori and Grace Kwan and launched in 2021.

ORCA tokenholders govern the Orca protocol treasury, which receives a portion of the trading fees paid by users of the protocol.