# SparkLend Supply-side fees Methodology

## 1. Overview

Supply-side fees for SparkLend are measured as the total value distributed to supply-side participants, including interest earned by depositors, flash loan premiums, and the supply-side share of liquidation penalties. This metric is utilized to evaluate the yield and incentives generated for liquidity providers and service providers within the SparkLend protocol. To prevent double-counting, supplier interest earned by the Spark Liquidity Layer on its own SparkLend deposits is netted out from the total. All fee values are normalized by decimal precision and converted to USD using end-of-day price feeds.

## 2. Data sources

- **Blockchain events**: `FlashLoan`, `LiquidationCall`, and `ReserveDataUpdated` events from `Pool` contracts; `ReserveFactorChanged` and `ReserveInitialized` events from `PoolConfigurator` contracts; `LiquidationProtocolFeeChanged` events from `LendingPoolConfigurator` contracts; `Initialized`, `Mint`, `Burn`, and `BalanceTransfer` events from `spToken` contracts; and ERC-20 token transfers, covering Ethereum and Gnosis
- **External data**: End-of-day price feeds for assets, and asset metadata

## 3. Step-by-step calculation

### Component A: SparkLend depositor interest accrual

- **Purpose**: Captures the gross interest accrued to depositors.
- **Logic**: `Mint` and `Burn` events from `spToken` contracts are aggregated to track the scaled principal balance of depositors over time. `ReserveDataUpdated` events from `Pool` contracts are parsed to extract the liquidity index. The active deposit balance is calculated by multiplying the scaled principal balance by the liquidity index, which is normalized by standard ray precision. Interest accrued is calculated as the difference between the active deposit balance at the current liquidity index and the active deposit balance at the previous liquidity index.
- **Key fields**: `block_timestamp`, `amount`, `index_value`

### Component B: Spark Liquidity Layer yield netting

- **Purpose**: Prevents double-counting by netting out the interest earned by the Spark Liquidity Layer.
- **Logic**: `Mint`, `Burn`, and `BalanceTransfer` events from `spToken` contracts associated with Spark Liquidity Layer accounts are tracked to determine its scaled principal balance. The supplier interest earned by the Spark Liquidity Layer is calculated by applying liquidity index updates to this balance. This interest is then subtracted from the total interest accrued to depositors to determine the net external supply-side interest.
- **Key fields**: `block_timestamp`, `amount`, `index_value`

### Component C: SparkLend flash loan premium collection

- **Purpose**: Captures fees generated from flash loans.
- **Logic**: `FlashLoan` events from `Pool` contracts are parsed to extract the premium amount paid by borrowers. These premium amounts are aggregated daily per asset.
- **Key fields**: `block_timestamp`, `amount`

### Component D: SparkLend liquidation fee allocation

- **Purpose**: Calculates the supply-side portion of liquidation penalties.
- **Logic**: Liquidation transactions are identified using `LiquidationCall` events from `Pool` contracts. ERC-20 token transfers of deposit tokens from the liquidated user to the treasury are tracked. The liquidation protocol fee factor is retrieved from `LiquidationProtocolFeeChanged` events from `LendingPoolConfigurator` contracts. The supply-side portion of the liquidation fee is calculated by dividing the transferred fee amount by the liquidation factor and multiplying by one minus the liquidation factor.
- **Key fields**: `block_timestamp`, `amount`, `liquidation_factor`

### Component E: USD conversion and aggregation

- **Purpose**: Normalizes and aggregates all supply-side fee components into USD.
- **Logic**: Net depositor interest, flash loan premiums, and supply-side liquidation fees are summed. The aggregated asset amounts are normalized by decimal precision using asset metadata and multiplied by end-of-day asset prices to convert the values to USD. Daily granularity is applied with UTC day boundaries.
- **Key fields**: `timestamp`, `fees_supply_side`

*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

Lending

Lenders deposit funds into Spark and receive interest payments from borrowers (supply-side fees).

Spark is a non-custodial lending protocol built on Ethereum. Spark’s development team Phoenix Labs was founded in early 2023.

SPK tokenholders own and govern the protocol. They currently take a cut of the total interest paid by borrowers (revenue).

SparkLend

Supply-side fees

Supply-side fees

Chain breakdown