Network participants process transactions and receive fees from users (supply-side fees).

Polkadot is a security & interoperability platform for blockchains and applications. Polkadot was founded by Gavin Wood and launched in 2020.

DOT holders own and govern the protocol. They currently take a cut of the total transaction fees paid by users (revenue). Polkadot’s investors include Polychain, IOSG Ventures, Hashkey, etc.

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# Polkadot Expenses Methodology

## 1. Overview

The Polkadot expenses metric measures the total daily incentives paid out by the Polkadot network to validators and system parachain participants. This metric captures the network's operational costs in terms of token rewards distributed to maintain security and functionality. The calculation aggregates staking rewards from the relay chain and bounty payments from system parachains, converted to USD values to provide a standardized view of network expenses.

## 2. Data sources

The calculation relies on these raw data sources:
- **Polkadot blockchain event logs**: Parsed events from the Polkadot relay chain containing staking rewards and bounty payments
- **Staking events**: `Rewarded` and `Reward` events from the staking pallet that record validator and nominator rewards
- **Bounty events**: `Claimed` events from the childBounties pallet for system parachain incentive distributions
- **End-of-day price feeds**: Daily DOT token prices for USD conversion
- **Token metadata**: DOT token decimal precision and chain identification information

## 3. Step-by-step calculation

### Component A: Relay chain staking incentives
- **Purpose**: Extracts staking rewards paid to validators and nominators on the Polkadot relay chain
- **Logic**: Filters Polkadot event logs for staking pallet events, handling two different event methods and schema changes over time. For events after September 7, 2021, it captures `Rewarded` events, while earlier events use the `Reward` method. The model accounts for a schema change at block 19550701 where the reward amount moved from the second to third position in the event data array. Raw amounts are extracted from JSON event data and converted from Polkadot's native 10-decimal precision to standard DOT amounts by dividing by 1e10.
- **Key fields**: `block_timestamp` for daily aggregation, `event_data` array containing reward amounts, `event_pallet` and `event_method` for filtering, `block_number` for schema change handling, and `amount` for the calculated DOT reward value

### Component B: System parachain incentives  
- **Purpose**: Captures incentive payments from system parachain bounty programs
- **Logic**: Filters for `Claimed` events from the childBounties pallet where the bounty ID equals 32, indicating system parachain-related bounties. These represent additional incentive mechanisms beyond basic staking rewards. Similar to relay chain data, amounts are extracted from JSON event data and converted from 10-decimal precision to standard DOT amounts.
- **Key fields**: `event_data` array with bounty amounts in position 2, bounty ID in position 0 for filtering, `amount` for the calculated DOT incentive value, and `block_timestamp` for temporal aggregation

### Component C: Token incentives aggregation
- **Purpose**: Combines relay chain and system parachain incentives into daily totals
- **Logic**: Unions data from both incentive sources and aggregates by day using timestamp truncation. Each record is tagged with consistent metadata including chain ID, market sector as blockchains layer 1, business segment as blockchain, and product ID as Polkadot Relay Chain. The aggregation sums all incentive amounts within each day to produce total daily incentive distributions.
- **Key fields**: `timestamp` truncated to day boundaries, `chain_id` for network identification, `product_id` for categorization, and `token_incentives` as the summed DOT amounts per day

### Component D: USD conversion
- **Purpose**: Converts DOT-denominated incentives to USD values for standardized reporting
- **Logic**: Joins the aggregated daily DOT incentives with end-of-day price feeds, matching on timestamp and chain to ensure accurate price application. The conversion multiplies each day's total DOT incentives by the corresponding daily DOT price to produce USD-denominated values.
- **Key fields**: `token_incentives` multiplied by `price_usd` to generate USD values, `timestamp` and `chain_id` as join keys for price matching

### Final aggregation
- **Combining components**: The model flows sequentially from raw event extraction through aggregation and USD conversion, with no additional combining needed
- **Currency conversion**: Daily DOT incentive amounts are multiplied by end-of-day DOT prices to produce USD values, ensuring consistent valuation across time periods
- **Time aggregation**: Events are aggregated to daily boundaries using timestamp truncation, with all incentives within a calendar day summed together
- **Final calculation**: The final expenses metric equals the sum of daily staking rewards and system parachain bounties, converted to USD, with the `finalize_metric_expenses` macro applying zero-filling for missing days and standard metric schema validation. The token incentives are simply renamed as expenses in the final output, representing the total daily cost to the Polkadot network for maintaining security and operations.

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

Total project operating and incentive expenses.

PolkadotDOT

Expenses

Expenses

Competitive landscape

Chain breakdown