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

Polygon is a smart contract platform for decentralized applications & interoperability platform for blockchains. Polygon was founded by Jaynti Kanani, Sandeep Nailwal & Anurag Arjun and launched in 2017.

MATIC holders own and govern the protocol. They currently take a cut of the total transaction fees paid by users (revenue). Polygon’s investors include Coinbase Ventures, ZBS Capital, MiH Ventures, etc.

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Polygon

# Polygon Supply-side fees Methodology

## 1. Overview

Supply-side fees represent the portion of transaction fees that goes to network validators and other supply-side participants (like stakers) rather than being burned or captured by the protocol. For Polygon, this metric calculates the net compensation to validators by taking total user-paid gas fees and subtracting the base fees that are burned according to EIP-1559 mechanics.

The calculation follows the formula: Supply-side fees = Total gas fees paid by users - Base fees burned by the protocol.

## 2. Data sources

The calculation relies on several core data sources:

- **Polygon transaction records**: Individual transaction data including gas consumption (`gas_used`) and effective gas prices (`effective_gas_price`) paid by users
- **Polygon block headers**: Block-level data containing base fee per gas (`base_fee_per_gas`) that determines the burned portion of fees
- **End-of-day price feeds**: WPOL token price data used for USD conversion, since Polygon uses WPOL as the native gas token
- **Token metadata**: WPOL token information for proper decimal handling and price conversion

## 3. Step-by-step calculation

### Component A: Total gas fees calculation
- **Purpose**: Calculate the total amount of gas fees paid by users on Polygon
- **Logic**: Extract all transaction records from Polygon blockchain and aggregate the total gas fees paid. For each transaction, multiply the `gas_used` by the `effective_gas_price` (which includes both base fee and any priority fee/tip). The effective gas price is converted from wei to WPOL by dividing by 10^18. Sum these fee amounts across all transactions per day.
- **Key fields**: `gas_used` (gas consumed by transaction), `effective_gas_price` (actual gas price paid including tips), `block_timestamp` (for daily aggregation)

### Component B: Base fees calculation (burned fees)
- **Purpose**: Calculate the portion of gas fees that are burned by the protocol
- **Logic**: Join transaction data with block header data to access the base fee information. For each transaction, multiply the `gas_used` by the `base_fee_per_gas` from the corresponding block header. The base fee per gas is converted from wei to WPOL by dividing by 10^18. Sum these burned fee amounts across all transactions per day.
- **Key fields**: `gas_used` (from transactions), `base_fee_per_gas` (from block headers), `block_number` (for joining transactions to blocks)

### Final aggregation
- **Combining components**: The two components are combined using a union operation where total fees are added as positive values and burned fees are added as negative values (representing a deduction from supply-side compensation)
- **Currency conversion**: Both fee amounts are converted to USD using end-of-day WPOL token prices through the conversion macro, with no additional decimal correction needed since prices are already adjusted
- **Time aggregation**: All calculations are aggregated to daily boundaries using timestamp truncation to the day level
- **Final calculation**: The final supply-side fees represent the net amount going to validators and supply-side participants, calculated as the sum of total user-paid fees minus the base fees that are burned by the protocol

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

Portion of fees distributed to service providers or supply-side participants.

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Supply-side fees

Supply-side fees

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