# Concentrated Liquidity Expenses Methodology

## 1. Overview

Expenses measures the total cost incurred by Concentrated Liquidity to operate its business, specifically focusing on token incentives distributed to liquidity providers. These incentives are paid in the form of xShadow emissions to reward supply-side participants for providing liquidity to the protocol. This metric is used to evaluate the protocol's expenditure on liquidity bootstrapping and participant rewards.

## 2. Data sources

- **Blockchain events**: `ClaimRewards` events from `GaugeV3` contracts on Sonic
- **External data**: End-of-day price feeds and asset metadata

## 3. Step-by-step calculation

### Component A: Concentrated Liquidity incentive extraction

- **Purpose**: Identify and extract protocol-emitted rewards distributed to liquidity providers.
- **Logic**: `ClaimRewards` events are parsed from `GaugeV3` contracts on Sonic. The logic specifically identifies distributions where the reward asset matches the xShadow contract address. This filtering ensures that only protocol-led emissions are captured, excluding external or third-party rewards that do not represent a direct protocol expense.
- **Key fields**: `in_reward` (asset identification), `in_amount` (emission quantity)

### Component B: Normalization and USD conversion

- **Purpose**: Convert raw emission quantities into a standardized USD value for cross-asset comparison.
- **Logic**: Raw reward amounts are normalized by decimal precision based on asset metadata. These normalized quantities are multiplied by end-of-day price feeds to determine the USD value at the time of the distribution.
- **Key fields**: `block_timestamp` (timing), `amount` (normalized quantity)

### Component C: Aggregation and zero-filling

- **Purpose**: Finalize the daily expense figures and ensure data continuity.
- **Logic**: The USD values are aggregated by day using UTC boundaries. A chain availability filter is applied to ensure data is only reported for periods where the underlying chain's data is verified. For days where no events are recorded, values are zero-filled to maintain a continuous time series for analysis.
- **Key fields**: `timestamp`, `chain_id`, `product_id`

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

Total project operating and incentive expenses.

Expenses