Liquidity providers deposit funds into Wombat Exchange and receive WOM token rewards.

Wombat Exchange is a non-custodial exchange protocol built on BNB Chain. Wombat Exchange was founded by Alex Lee and launched in April 2022.

WOM tokenholders own and govern the protocol. They currently receive all trading fees paid by traders (revenue). Wombat Exchange’s investors include Binance Labs, Animoca Brands and Hailstone Ventures.

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Wombat Exchange

# Wombat Exchange Earnings Methodology

## 1. Overview

Wombat Exchange earnings represent the net profit generated by the protocol from its decentralized exchange operations across multiple blockchain networks. The metric is calculated as total daily revenue minus total daily expenses, where revenue comes from trading fees collected across all Wombat liquidity pools, and expenses primarily consist of token incentives distributed to liquidity providers. This metric provides insight into the protocol's profitability and operational efficiency in maintaining its AMM-based trading infrastructure.

## 2. Data sources

The calculation relies on several categories of blockchain data and external feeds:

- **Blockchain events**: Parsed `Swap` events from Wombat pool contracts across BSC, Arbitrum, Ethereum, Avalanche, Optimism, and Base networks, capturing all trading activity
- **Configuration events**: Parsed `SetHaircutRate` events that update fee tiers for each pool, and `SetFee` events that modify revenue splits between protocol and liquidity providers
- **Incentive events**: Parsed `Harvest` events from Master Wombat V2 and V3 contracts on BSC and Arbitrum, recording token incentive distributions to liquidity providers
- **Transaction data**: Blockchain transaction records from supported networks to identify user addresses and validate trading activity
- **External data**: End-of-day token price feeds for USD conversion and token metadata including decimal precision and symbols for accurate amount calculations

## 3. Step-by-step calculation

### Component A: Trading volume calculation
- **Purpose**: Determine USD trading volume for each swap transaction across all Wombat pools
- **Logic**: Extract all `Swap` events from Wombat pool contracts across supported chains, including various pool types such as main pools, side pools, cross-chain pools, and specialized pools for different tokens. For each swap, identify the input and output token addresses and amounts. Join with token metadata to obtain decimal precision for each token. Normalize token amounts by dividing by 10^decimals. Convert both token amounts to USD using end-of-day price feeds. Take the minimum USD value between the two tokens to prevent price manipulation attacks. Group by day, transaction, and pool to aggregate total trading volume.
- **Key fields**: `fromToken` and `toToken` addresses, `fromAmount` and `toAmount` raw values, normalized amounts after decimal correction, USD values for both tokens, final `trading_volume` as minimum USD value

### Component B: Fee tier application
- **Purpose**: Apply dynamic fee rates (haircut rates) to trading volumes to calculate gross fees
- **Logic**: Maintain a time-series of fee tiers for each pool contract using hardcoded initial values combined with updates from `SetHaircutRate` events. The initial fee tiers are set at protocol launch with values ranging from 0.00002 to 0.0025 depending on the pool type and risk profile. Updates come from `SetHaircutRate` events where the `value` parameter represents the new fee tier as an 18-decimal number. Forward-fill fee tiers to ensure continuous coverage. Multiply trading volume by the applicable fee tier for each pool and day to calculate gross fees.
- **Key fields**: `fee_tier` values from hardcoded initial settings and `value` parameter from `SetHaircutRate` events, `fees` calculated as volume × fee_tier

### Component C: Revenue split calculation
- **Purpose**: Determine the protocol's share of gross fees as revenue
- **Logic**: Apply revenue splits using retention ratios from `SetFee` events. Initially, all pools have a 100% retention ratio, meaning the protocol keeps all fees. Updates come from `SetFee` events where the `retentionRatio` parameter (18-decimal format) specifies the protocol's share versus liquidity provider share. Forward-fill retention ratios to maintain continuous coverage. Multiply gross fees by the retention ratio to determine protocol revenue.
- **Key fields**: `retentionRatio` from `SetFee` events, `revenue_percentage` as normalized retention ratio, final `revenue` as fees × revenue_percentage

### Component D: Token incentive expenses
- **Purpose**: Calculate expenses from token incentives distributed to liquidity providers
- **Logic**: Extract `Harvest` events from Master Wombat V2 and V3 contracts on BSC and Arbitrum networks. These events record when users claim their liquidity mining rewards. The `amount` parameter represents the token incentive amount in raw format. Identify the token address for each incentive (WOM token on BSC, 7B5E token on Arbitrum). Normalize amounts using token decimals and convert to USD using end-of-day price feeds. Aggregate by day to calculate total incentive expenses.
- **Key fields**: `amount` from `Harvest` events, token addresses for incentive tokens, normalized and USD-converted `token_incentives` values

### Component E: Final aggregation
- **Combining components**: Aggregate revenue from all pools and chains by day, and aggregate expenses from all incentive distributions by day. Both revenue and expenses are already in USD format from previous steps.
- **Currency conversion**: All amounts are converted to USD using end-of-day price feeds with proper decimal normalization for each token type
- **Time aggregation**: Data is aggregated to daily boundaries using timestamp truncation, with gap-filling applied to ensure continuous time series
- **Final calculation**: Calculate earnings as total daily revenue minus total daily expenses. Apply the standard finalization macro to ensure proper schema formatting, data validation, and gap-filling for missing days using a fill-zeros strategy

## Critical implementation notes

- **Price manipulation protection**: Trading volume uses the minimum USD value between token pairs to prevent inflated volume calculations
- **Cross-chain aggregation**: Data is combined from six blockchain networks (BSC, Arbitrum, Ethereum, Avalanche, Optimism, Base) with consistent methodology
- **Dynamic configuration**: Fee tiers and revenue splits are updated in real-time based on on-chain governance events
- **Token handling**: Special logic handles wrapped token addresses and ensures consistent token identification across chains
- **Decimal precision**: All token amounts are properly normalized using each token's decimal precision before USD conversion
- **Time continuity**: Gap-filling ensures continuous daily metrics even when no trading or incentive activity occurs

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

Net profit (also profits, net income, profitability) — revenue remaining after subtracting expenses.

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