# Spark Liquidity Layer Cost of revenue Methodology

## 1. Overview

Cost of revenue measures the expenses incurred by the Spark Liquidity Layer to fund its active deployments. These expenses are represented by the interest costs associated with sourcing capital, specifically the interest charged on USDS borrowed from Sky at the Sky base rate, as well as the vault savings rate owed to depositors in Spark Savings V2 vaults. This metric is utilized to evaluate the net profitability of the capital allocation strategies of the Spark Liquidity Layer. All costs are denominated in USD and are reflected in the actual daily accounting records of the protocol.

## 2. Data sources

- **Reported data**: Daily accounting snapshots of Spark Liquidity Layer performance, covering Ethereum, Base, and Avalanche
- **External data**: Asset metadata for USDS

## 3. Step-by-step calculation

### Component A: Reported data ingestion and filtering

- **Purpose**: Ingest and filter the daily accounting snapshots of the Spark Liquidity Layer
- **Logic**: Daily accounting records are ingested from the latest snapshot of the reported performance dataset. Historical records are filtered to exclude the current day's accruing data. Allocations held on behalf of Sky, specifically the Curve USDT pool, are excluded from the dataset. Chain identifiers are assigned based on the protocol asset identifier suffix, mapping to Base, Avalanche, or defaulting to Ethereum.
- **Key fields**: `timestamp` (timing), `protocol_token` (allocation identifier)

### Component B: Cost of revenue extraction

- **Purpose**: Extract and categorize the funding costs for the deployed capital
- **Logic**: Funding costs are extracted from two distinct categories: the Sky borrow cost (representing interest on USDS drawn from Sky at the Sky base rate) and the Savings V2 borrow cost (representing interest owed to Spark Savings V2 vault depositors). These costs are mapped to the USDS asset contract address. Only non-zero cost records are retained for further aggregation.
- **Key fields**: `sky_borrow_cost_usd` (Sky interest expense), `saving_v2_borrow_cost_usd` (Savings V2 interest expense)

### Component C: Aggregation and normalization

- **Purpose**: Aggregate the extracted costs and format the final metric
- **Logic**: The extracted Sky borrow costs and Savings V2 borrow costs are unioned and aggregated by timestamp, chain, and product. Because the reported values are already denominated in USD, the original values are preserved during the conversion step without the application of external price feeds. Missing daily values are filled with zeros to ensure a continuous time series.
- **Key fields**: `cost_of_revenue` (aggregated USD cost)

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

Expenses paid to third parties to deliver core service output.

Cost of revenue

Asset management

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).

Spark Liquidity Layer

Cost of revenue

Cost of revenue

Chain breakdown