# Spark Liquidity Layer Expenses Methodology

## 1. Overview

Expenses is calculated as the total cost incurred by Spark Liquidity Layer to operate its business. These costs are comprised of cost of revenue, operating expenses, and token incentives. Cost of revenue is driven by interest expenses owed to Sky for borrowed USDS and to Spark Savings V2 vault depositors. Operating expenses are represented by swap losses incurred on Curve and Uniswap, alongside yield boost payments made to external venues such as CoinEx. Token incentives are distributed to users via staking rewards for the promotion of liquidity provision.

## 2. Data sources

- **Blockchain events**: `RewardPaid` events from `StakingRewards` contracts, covering Ethereum
- **Off-chain reported data**: Daily reported financial metrics for Spark Liquidity Layer, covering Ethereum, Base, and Avalanche
- **External data**: End-of-day price feeds and asset metadata

## 3. Step-by-step calculation

### Component A: Cost of revenue calculation

- **Purpose**: The capture of interest expenses incurred to fund Spark Liquidity Layer deployments.
- **Logic**: Daily reported financial data is parsed to extract borrowing costs. The Sky base rate is applied to USDS borrowed from Sky, and the vault savings rate is applied to deposits in Spark Savings V2 vaults. Capital allocation lines held on behalf of Sky, such as the Curve USDT pool, are excluded from the calculation. Because these reported values are already denominated in USD, price conversion is bypassed.
- **Key fields**: `sky_borrow_cost_usd`, `saving_v2_borrow_cost_usd`, `is_held_for_sky`

### Component B: Operating expenses calculation

- **Purpose**: The capture of swap losses and yield boost costs incurred by Spark Liquidity Layer.
- **Logic**: Daily reported financial data is analyzed to identify swap losses and boost costs. Realized losses from swaps executed through Spark Liquidity Layer's own Curve and Uniswap liquidity pools are recorded as positive operating expenses. Additionally, boost payments made to external venues (such as CoinEx) for the enhancement of user yields are captured and treated as positive operating expenses. These values are reported directly in USD, so price conversion is bypassed.
- **Key fields**: `spark_revenue_usd`, `is_swap_pnl`, `is_boost_cost`

### Component C: Token incentives extraction

- **Purpose**: The capture of the value of rewards distributed to liquidity providers.
- **Logic**: `RewardPaid` events are parsed from `StakingRewards` contracts. The reward amount is extracted from each event, normalized by the asset's decimal precision, and multiplied by end-of-day price feeds for USD valuation.
- **Key fields**: `amount`, `token_address`

### Component D: Final expenses aggregation

- **Purpose**: The aggregation of all cost components into the total expenses metric.
- **Logic**: Cost of revenue, operating expenses, and token incentives are aggregated on a daily basis. Daily values are summed across all active chains and products to calculate the total expenses. Missing days are filled with zeros to ensure a continuous time series.
- **Key fields**: `expenses`

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

Total project operating and incentive expenses.

Expenses

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

Expenses

Expenses

Chain breakdown