# SparkLend Revenue Methodology

## 1. Overview

Revenue for SparkLend is defined as the share of interest and fees retained by the protocol from its lending and borrowing operations. Earnings generated by SparkLend before operating expenses and token incentives are represented by this metric. Protocol revenue is derived from three primary sources: interest accrued on active loans via the reserve factor, interest earned on treasury deposits, and protocol liquidation fees. A portion of the interest revenue is netted out to account for yield allocated to the Spark Liquidity Layer on its own deposits.

## 2. Data sources

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

## 3. Step-by-step calculation

### Component A: Variable borrow interest accrual

- **Purpose**: Calculate the protocol's share of interest accrued on active loans.
- **Logic**: Outstanding borrow balances are tracked over time by aggregating `Mint` and `Burn` events from `VariableDebtToken` contracts to compute a running scaled principal balance. Interest rates and borrow indices are extracted from `ReserveDataUpdated` events emitted by `Pool` contracts. The total interest accrued between index updates is calculated by multiplying the previous scaled principal balance by the change in the variable borrow index. The protocol's share of this interest is determined by applying the reserve factor, which is tracked via `ReserveFactorChanged` and `ReserveInitialized` events from `PoolConfigurator` contracts.
- **Key fields**: `block_timestamp`, `amount`, `index_value`, `reserve_factor`

### Component B: Treasury deposit interest accrual

- **Purpose**: Calculate interest earned on SparkLend treasury deposits.
- **Logic**: Treasury balances of deposit assets are tracked by aggregating `Mint`, `Burn`, and `BalanceTransfer` events from `spToken` contracts, `MintedToTreasury` events from `Pool` contracts, and protocol-accrued interest. The running scaled principal balance of the treasury is maintained across blocks. Interest accrual is calculated by multiplying the previous treasury scaled principal balance by the change in the liquidity index, which is extracted from `ReserveDataUpdated` events from `Pool` contracts.
- **Key fields**: `block_timestamp`, `amount`, `index_value`

### Component C: Liquidation protocol fee extraction

- **Purpose**: Capture the protocol's share of liquidation penalties.
- **Logic**: Liquidation events are identified using `LiquidationCall` events from `Pool` contracts. Deposit asset transfers from the liquidated user to the treasury address are tracked. The protocol's liquidation revenue is calculated by applying the liquidation protocol fee factor, which is monitored via `LiquidationProtocolFeeChanged` events from `LendingPoolConfigurator` contracts, to the transferred collateral amount.
- **Key fields**: `block_timestamp`, `amount`, `liquidation_factor`

### Component D: Spark Liquidity Layer yield netting

- **Purpose**: Deduct the interest revenue share allocated to the Spark Liquidity Layer.
- **Logic**: Deposits made by Spark Liquidity Layer accounts are tracked using `Mint`, `Burn`, and `BalanceTransfer` events from `spToken` contracts. The reserve factor interest generated by these specific deposits is calculated using the corresponding reserve factors. Because the reserve factor interest on its own supply is retained by the Spark Liquidity Layer as yield, these calculated amounts are subtracted from the total protocol interest revenue of SparkLend.
- **Key fields**: `block_timestamp`, `amount`, `reserve_factor`

### Component E: Normalization and USD conversion

- **Purpose**: Normalize revenue values and convert them to USD.
- **Logic**: The net revenue components are aggregated daily. Raw asset amounts are normalized by decimal precision using asset metadata and converted to USD using end-of-day price feeds. Daily values are aggregated using UTC day boundaries.
- **Key fields**: `block_timestamp`, `revenue`, `price_usd`

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

fees * take_rate (illustrative — revenue is observed directly per project, not derived from take_rate)

Fee revenue retained after supply-side payouts. Before cost of revenue (e.g. L2 DA fees) and before operating expenses.

Revenue

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

Revenue

Revenue

Chain breakdown