# PancakeSwap V2 Supply-side fees Methodology

## 1. Overview

Supply-side fees is defined as the share of fees that goes to the service providers, specifically the liquidity providers for PancakeSwap V2. The incentives distributed to users who supply liquidity to the automated market maker pools are represented by this metric. The economic attractiveness and liquidity depth of the protocol are evaluated using these historical distributions. Supply-side fees are calculated by subtracting protocol revenue from the total swap fees generated by trading activities.

## 2. Data sources

- **Blockchain events**: `Swap` events from `Pair` contracts, covering Arbitrum, Base, BNB Chain, Ethereum, and zkSync Era
- **External data**: End-of-day price feeds for assets, and asset metadata

## 3. Step-by-step calculation

### Component A: Trading volume calculation

- **Purpose**: To calculate the daily trading volume for PancakeSwap V2 pools.
- **Logic**: `Swap` events from `Pair` contracts are parsed. Denylisted trading pairs are excluded using a predefined list of addresses to filter out low-liquidity assets with limited price feed support. For each swap, the net change in asset amounts is calculated by subtracting the outgoing amount from the incoming amount. These amounts are normalized by decimal precision using asset metadata. The USD value of each asset is determined using end-of-day price feeds. To prevent price manipulation distortions, the daily trading volume is calculated using the lesser USD value between the two assets in the swap.
- **Key fields**: `block_timestamp`, `transaction_hash`, `log_index`, `account_address`, `token0_amount`, `token1_amount`

### Component B: Total swap fees calculation

- **Purpose**: To calculate the total fees generated by trading activities.
- **Logic**: Total swap fees are calculated by multiplying the daily trading volume of each pool by its respective fee tier. For PancakeSwap V2, a flat fee tier of 0.25% is applied to all trading pairs.
- **Key fields**: `trading_volume`, `fee_tier`

### Component C: Protocol revenue calculation

- **Purpose**: To calculate the portion of fees retained by the protocol.
- **Logic**: Protocol revenue for PancakeSwap V2 is calculated by applying a fixed protocol fee tier of 0.08% to the daily trading volume. The protocol's share of the total swap fees is represented by this value.
- **Key fields**: `trading_volume`

### Component D: Supply-side fees calculation

- **Purpose**: To determine the net fees distributed to liquidity providers.
- **Logic**: Supply-side fees are calculated by subtracting the protocol revenue from the total swap fees. The remaining 0.17% of trading volume distributed directly to liquidity providers is isolated by this step. Daily values are aggregated by chain and product, and any missing days are filled with zeros.
- **Key fields**: `fees`, `revenue`

*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)

Liquidity providers deposit funds into PancakeSwap and receive trading fees from traders (supply-side fees).

PancakeSwap is a non-custodial exchange protocol built on Binance Smart Chain and other blockchains (originally a fork of Uniswap). PancakeSwap was founded by an anonymous team and launched in 2020.

CAKE tokenholders own and govern the protocol. They currently take a cut of the total trading fees paid by traders (revenue).

PancakeSwap V2

Supply-side fees

Supply-side fees

Chain breakdown