# PancakeSwap V3 Supply-side fees Methodology

## 1. Overview

The share of transaction fees that is distributed to service providers, specifically liquidity providers, on PancakeSwap V3 is measured by supply-side fees. This metric is utilized to evaluate the economic incentives provided to liquidity providers who facilitate trading on the platform. Net earnings retained by supply-side participants are determined by subtracting protocol revenue from total fees.

## 2. Data sources

- **Blockchain events**: `PoolCreated` events from `Factory` contracts, and `Swap` and `Flash` events from `Pool` 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: PancakeSwap V3 pool and fee tier identification

- **Purpose**: Identify active PancakeSwap V3 pools, their constituent assets, and their associated fee tiers.
- **Logic**: `PoolCreated` events from `Factory` contracts are parsed to extract pool addresses, asset addresses, and fee tiers. Fee tiers are normalized by dividing the raw fee value by one million. Pools identified in the denylist are excluded to prevent distortion from low-liquidity assets with limited price feed support. Asset metadata is joined to retrieve decimal precision for each asset.
- **Key fields**: `account_address` (pool address), `token0_address` (first asset address), `token1_address` (second asset address), `fee_tier` (normalized fee tier)

### Component B: PancakeSwap V3 swap volume and protocol revenue extraction

- **Purpose**: Capture swap volumes and protocol revenue generated from trading activities.
- **Logic**: `Swap` events from `Pool` contracts are parsed to extract swap amounts and protocol fees for both assets. Swap amounts are normalized by decimal precision and converted to USD using end-of-day price feeds. To mitigate price manipulation, trading volume is calculated using the lesser USD value between the two swapped assets. Protocol revenue is calculated by normalizing and summing the USD values of the protocol fees collected for both assets.
- **Key fields**: `amount0` (first asset swap amount), `amount1` (second asset swap amount), `protocolFeesToken0` (protocol fees for first asset), `protocolFeesToken1` (protocol fees for second asset)

### Component C: PancakeSwap V3 flash loan volume extraction

- **Purpose**: Capture volume generated from flash loans.
- **Logic**: `Flash` events from `Pool` contracts are parsed to extract flash loan amounts for both assets. These amounts are normalized by decimal precision and converted to USD using end-of-day price feeds. Flash loan volume is calculated as the sum of the USD values of both loaned assets.
- **Key fields**: `amount0` (first asset loan amount), `amount1` (second asset loan amount)

### Component D: PancakeSwap V3 total fees calculation

- **Purpose**: Calculate total fees generated from swaps and flash loans.
- **Logic**: Total fees are calculated by multiplying the trading volume and flash loan volume by their respective pool fee tiers. Swap fees and flash loan fees are then aggregated to determine the total fees generated by the protocol.
- **Key fields**: `trading_volume` (calculated swap volume), `flash_loan_volume` (calculated flash loan volume), `fee_tier` (pool fee tier)

### Component E: PancakeSwap V3 supply-side fees determination

- **Purpose**: Calculate the net fees distributed to liquidity providers.
- **Logic**: Supply-side fees are calculated by subtracting protocol revenue from total fees. The resulting values are aggregated daily with UTC day boundaries.
- **Key fields**: `fees` (total fees), `revenue` (protocol 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 V3

Supply-side fees

Supply-side fees

Chain breakdown