# Spark Liquidity Layer Revenue Methodology

## 1. Overview

The total earnings generated by Spark Liquidity Layer from its deployed capital, on-chain lending activities, and swap operations are measured as revenue. The protocol's capacity to generate income from liquidity allocation across various venues before any operating expenses or funding costs are deducted is reflected by this metric. Earnings are derived from on-chain yield on SparkLend, reported gross yield on external capital deployments, and positive swap performance. These revenue streams are aggregated to assess the financial performance of Spark Liquidity Layer and its integration with the broader Sky ecosystem.

## 2. Data sources

- **Blockchain events**: `BalanceTransfer`, `Burn`, and `Mint` events from `spToken` contracts, `ReserveDataUpdated` events from `Pool` contracts, and `ReserveFactorChanged` and `ReserveInitialized` events from `PoolConfigurator` contracts, covering Ethereum and Gnosis
- **Off-chain reported data**: Daily financial snapshots of gross yield, swap performance, and capital allocations reported by Spark, covering Ethereum, Arbitrum, Avalanche, Base, and 2 other chains
- **External data**: End-of-day price feeds for underlying assets, and asset metadata including decimal precision

## 3. Step-by-step calculation

### Component A: On-chain SparkLend yield calculation

- **Purpose**: To calculate the yield generated by Spark Liquidity Layer's deposits in SparkLend.
- **Logic**: Balance changes for Spark Liquidity Layer accounts (such as ALM Proxy, PSM3, Morpho, and Aave V3 pools) are tracked using `Mint`, `Burn`, and `BalanceTransfer` events from `spToken` contracts. These balance changes are accumulated over time to determine the scaled principal balance. Interest accrual is calculated by applying the change in the liquidity index (extracted from `ReserveDataUpdated` events from `Pool` contracts) to the previous scaled principal balance. The reserve factor (extracted from `ReserveFactorChanged` and `ReserveInitialized` events from `PoolConfigurator` contracts) is applied to calculate the reserve factor interest. The total interest is calculated as the sum of supplier interest and reserve factor interest. This on-chain yield is calculated for all assets except PYUSD.
- **Key fields**: `block_timestamp`, `amount`, `index_value`, `reserve_factor`

### Component B: Reported gross yield extraction

- **Purpose**: To capture the gross yield generated on deployed capital across external venues.
- **Logic**: Gross yield values are extracted from daily reported financial snapshots. Deployed capital allocations to SparkLend are excluded, with the exception of PYUSD allocations. Allocations held on behalf of Sky are also excluded. The remaining gross yield values are captured directly in USD.
- **Key fields**: `timestamp`, `gross_yield_usd`, `protocol_token`

### Component C: Swap profit and loss tracking

- **Purpose**: To capture positive swap performance from Curve and Uniswap operations.
- **Logic**: Swap revenue values are extracted from daily reported financial snapshots. Only positive swap revenue (gains) is included in the revenue metric, while negative swap revenue (losses) is treated as an operating expense and excluded from this calculation.
- **Key fields**: `timestamp`, `spark_revenue_usd`, `is_swap_pnl`

### Component D: Normalization and USD conversion

- **Purpose**: To normalize all revenue components and convert them to USD.
- **Logic**: On-chain SparkLend yield amounts are normalized by decimal precision and multiplied by end-of-day asset prices. Reported gross yield and positive swap P&L are already denominated in USD, and the price conversion is skipped for these components. All components are aggregated to a daily grain using UTC day boundaries.

*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

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

Revenue

Revenue

Chain breakdown