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# Shadow Earnings Methodology

## 1. Overview

Earnings represents the net profit generated by the ShadowExchange protocol, calculated as total revenue minus total expenses. This metric measures the protocol's profitability by accounting for fee income from trading activity and voting bribes while deducting token incentives paid to liquidity providers. The calculation provides insight into the protocol's financial performance and sustainability by showing the actual profit after accounting for growth incentives.

## 2. Data sources

The calculation relies on several types of blockchain data and external feeds:

- **Trading events**: Parsed `Swap` events from ShadowExchange v2 Pair contracts and v3 Pool contracts on Sonic blockchain, containing token amounts and trade details
- **Protocol creation events**: `PairCreated` and `PoolCreated` events from Factory contracts that establish trading pairs and pools
- **Fee parameter events**: Configuration change events including `SetPairFee`, `SetPairFeeSplit`, and `FeeAdjustment` events that modify fee structures over time
- **Liquidity provider rewards**: `ClaimRewards` events from Gauge and GaugeV3 contracts tracking token incentive distributions
- **Voting incentives**: `VotesIncentivized` events from FeeDistributor contracts capturing bribe payments
- **Transaction data**: Sonic blockchain transaction records for user address resolution
- **Price feeds**: End-of-day token price feeds for USD conversion
- **Token metadata**: Token contract information including decimal places and symbols for proper amount calculations

## 3. Step-by-step calculation

### Component A: Trading fee revenue calculation

- **Purpose**: Calculate protocol revenue from trading fees applied to swap transactions
- **Logic**: Extract swap events from both v2 and v3 ShadowExchange contracts on Sonic blockchain. For v2 swaps, calculate token amounts as the difference between `amount0In` minus `amount0Out` and `amount1In` minus `amount1Out`. For v3 swaps, use `amount0` and `amount1` directly. Join with trading pair dimension data to get token addresses and decimal places. Apply decimal correction by dividing raw amounts by 10^decimals for each token. Convert both token amounts to USD using end-of-day price feeds, then take the minimum USD value between the two tokens to prevent price manipulation attacks. Apply dynamic fee parameters by joining with fee tier and fee split dimension tables that track parameter changes over time. Calculate fee revenue as: trading_volume_usd × fee_tier × fee_split
- **Key fields**: `amount0In`, `amount0Out`, `amount1In`, `amount1Out` from v2 swaps; `amount0`, `amount1` from v3 swaps; `fee_tier` and `fee_split` from dimension tables

### Component B: Voting bribe revenue calculation

- **Purpose**: Capture additional protocol revenue from voting incentive payments
- **Logic**: Extract `VotesIncentivized` events from FeeDistributor contracts on Sonic blockchain. These events contain reward token addresses and amounts paid as incentives for governance votes. Apply decimal correction using token metadata and convert to USD using end-of-day price feeds. Aggregate by day to get total daily bribe revenue
- **Key fields**: `reward` token address, `amount` of incentive payment

### Component C: Token incentive expenses calculation

- **Purpose**: Calculate expenses from token rewards distributed to liquidity providers
- **Logic**: Extract `ClaimRewards` events from both Gauge (v2) and GaugeV3 (v3) contracts on Sonic blockchain. Filter specifically for xShadow token rewards (address `0x5050bc082ff4a74fb6b0b04385defddb114b2424`) which represent protocol-issued incentives. Convert xShadow token address to Shadow token address (`0x3333b97138d4b086720b5ae8a7844b1345a33333`) for consistent USD pricing. Apply decimal correction and convert to USD using end-of-day price feeds. Aggregate daily to get total incentive expenses
- **Key fields**: `reward` token address, `amount` of reward claimed

### Final aggregation

- **Combining components**: Sum trading fee revenue and voting bribe revenue to get total daily revenue. Use token incentives as total daily expenses
- **Currency conversion**: All components are converted to USD using end-of-day price feeds with proper decimal correction applied before aggregation
- **Time aggregation**: All events are aggregated to daily boundaries using timestamp truncation to day level
- **Final calculation**: Calculate daily earnings as total_revenue minus total_expenses, where total_revenue includes both trading fees and voting bribes, and total_expenses consists of token incentives paid to liquidity providers

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

Net profit (also profits, net income, profitability) — revenue remaining after subtracting expenses.

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Earnings

Earnings

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