# Constant Product Supply-side fees Methodology

## 1. Overview

Supply-side fees measures the share of total fees that is distributed to liquidity providers for Shadow Constant Product. These fees consist of trading fees generated from swap activities within the pools and additional liquidity incentives claimed by service providers. This metric is essential for evaluating the yield and economic incentives provided to the supply-side participants of the protocol on Sonic.

## 2. Data sources

- **Blockchain events**: `Swap` and `setFeeSplit` function calls from `Pair` contracts, `SetPairFeeSplit` and `SetFee` events from `PairFactory` contracts, `PairCreated` events from `Factory` contracts, and `ClaimRewards` events from `Gauge` contracts, covering Sonic
- **External data**: End-of-day price feeds and asset metadata

## 3. Step-by-step calculation

### Component A: Trading parameter tracking

- **Purpose**: Tracks the specific fee tiers and protocol fee splits required to calculate the supply-side portion of trading fees
- **Logic**: Fee tiers are identified using `SetFee` events from `PairFactory` contracts and `PairCreated` events from `Factory` contracts, with a default value applied for pairs created before the first factory setting. Fee splits, which define the protocol's share of fees, are parsed from `SetPairFeeSplit` events and `setFeeSplit` function calls. These parameters are maintained as time-series intervals to ensure the correct values are applied to trades based on the block timestamp of the transaction.

### Component B: Trading fee allocation

- **Purpose**: Calculates the portion of swap fees retained by liquidity providers
- **Logic**: `Swap` events from `Pair` contracts are parsed to determine the trading volume for each transaction. Gross fees are calculated by applying the pool-specific fee tier to the swap volume. The supply-side portion is then determined by applying the inverse of the protocol fee split to these gross fees. This calculation ensures that only the value actually distributed to the supply-side participants is captured.

### Component C: Incentive reward aggregation

- **Purpose**: Captures additional rewards distributed to liquidity providers through the protocol's gauge system
- **Logic**: `ClaimRewards` events from `Gauge` contracts are parsed to identify additional asset distributions to liquidity providers. Reward amounts are included in the total supply-side fee calculation, with the exclusion of incentives distributed in the `xShadow` asset to focus on liquid fee components.

### Component D: Normalization and USD conversion

- **Purpose**: Normalizes all fee components to USD for standardized reporting
- **Logic**: All raw asset amounts are normalized by decimal precision based on asset metadata. Daily totals are converted to USD using end-of-day price feeds for each respective asset. Values are aggregated with daily granularity using UTC day boundaries.

*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