# Uniswap V2 Supply-side fees Methodology

## 1. Overview

Supply-side fees is defined as the share of transaction fees that is distributed to liquidity providers for facilitating trades on Uniswap V2. This metric is utilized to evaluate the economic incentives and yield generated for service providers within the Uniswap V2 ecosystem. Prior to the activation of the protocol fee switch, all swap fees are allocated to the supply side. Following the activation of the fee switch, a portion of the swap fees is redirected to the protocol treasury as revenue, with the remaining balance distributed to liquidity providers.

## 2. Data sources

- **Blockchain events**: `PairCreated` events and `setFeeTo` function calls from `Factory` contracts, and `Swap` events from `Pair` contracts, covering Ethereum, Arbitrum, Base, Polygon, and 5 other chains
- **External data**: End-of-day price feeds for assets, and asset metadata

## 3. Step-by-step calculation

### Component A: Uniswap V2 trading pair and fee tier initialization

- **Purpose**: To ensure valid Uniswap V2 trading pairs are identified and their fee tiers are established.
- **Logic**: `PairCreated` events from `Factory` contracts are parsed to identify the pool address and the associated assets. A default fee tier of 0.3% is assigned to all Uniswap V2 pools. Denylisted trading pairs are excluded based on a predefined list of addresses with limited price feed support. Asset metadata is joined to retrieve decimal precision and symbols for each asset.
- **Key fields**: `account_address` (pool identification), `token0_address` and `token1_address` (asset identification)

### Component B: Uniswap V2 revenue split tracking

- **Purpose**: To ensure the activation and rate of the protocol fee switch are tracked.
- **Logic**: `setFeeTo` function calls from `Factory` contracts are monitored. If the designated fee recipient address is set to a valid, non-null address, the protocol fee switch is considered active, and a revenue split of 1/6th is applied. This split is mapped to swap events using interval-based matching on block numbers, remaining valid from the block of the function call until a subsequent call updates the configuration.
- **Key fields**: `fee_to_address` (recipient address), `revenue_split` (protocol share percentage)

### Component C: Uniswap V2 swap volume extraction

- **Purpose**: To ensure raw swap volumes are extracted and calculated for each transaction.
- **Logic**: `Swap` events from `Pair` contracts are parsed. The net change in asset balances for each swap is calculated by subtracting the outgoing amount from the incoming amount for both assets. Transactions are joined with transaction metadata to identify the sender address. Swap volumes are aggregated daily by pool and asset, and normalized by dividing the raw amounts by the respective asset decimal precision.
- **Key fields**: `amount0_in`, `amount0_out`, `amount1_in`, `amount1_out` (raw swap amounts)

### Component D: USD normalization and volume filtering

- **Purpose**: To ensure swap volumes are converted to USD and filters are applied to mitigate price manipulation.
- **Logic**: Normalized daily asset volumes are multiplied by end-of-day asset prices. To prevent distortion from low-liquidity or manipulated pools, the total USD trading volume for each swap is determined by taking the lesser USD value between the two swapped assets.
- **Key fields**: `price_usd` (asset price), `trading_volume` (USD volume)

### Component E: Total fees and protocol revenue calculation

- **Purpose**: To ensure total fees collected and the portion allocated as protocol revenue are calculated.
- **Logic**: Total fees are calculated by multiplying the filtered USD trading volume by the 0.3% fee tier. Protocol revenue is calculated by multiplying the trading volume by the product of the fee tier and the active revenue split. This revenue calculation is only applied for transactions occurring on or after the protocol fee switch activation date.
- **Key fields**: `fee_tier` (pool fee percentage), `revenue` (protocol revenue)

### Component F: Supply-side fees allocation

- **Purpose**: To ensure the final share of fees distributed to liquidity providers is determined.
- **Logic**: Supply-side fees are calculated as the difference between total fees and protocol revenue. Prior to the fee switch activation date, the revenue split is zero, meaning 100% of the collected fees are allocated to the supply side. After the fee switch activation date, the protocol revenue is subtracted from the total fees, and the remaining balance is allocated to the supply side.
- **Key fields**: `fees_supply_side` (supply-side fee allocation)

*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

Exchanges (DEX)

Liquidity providers deposit funds into Uniswap and receive trading fees from traders (supply-side fees).

Uniswap is a non-custodial exchange protocol built on Ethereum. Uniswap was founded by Hayden Adams and launched in 2018.

UNI tokenholders own and govern the protocol. They do not currently take a cut of the total trading fees paid by traders (revenue). Uniswap's investors include Paradigm, a16z, USV, etc.

Uniswap V2

Supply-side fees

Supply-side fees

Chain breakdown