By Decentralized finance protocol Aave has integrated Chainlink Smart Value Recapture (SVR) on the Ethereum mainnet, with this coming on the back of a community vote.
The integration is an initiative of Chainlink and Aave (AAVE) ecosystem contributors BGD Labs, and Aave Chan Initiative, according to an announcement.
Chainlink SVR on the Ethereum (ETH) mainnet will help the Aave protocol recapture lost revenue from oracle-related Maximal Extractable Value, a development that brings further benefits to the user community.
Recapturing oracle-related MEV offers a new standard for DeFi profitability and sustainability.
“The partnership between Chainlink and Aave has played a fundamentally important role in shaping, developing, and pioneering blockchain innovations since the early days of DeFi,” Johann Eid, chief business officer at Chainlink Labs, said.
“Chainlink SVR is another milestone along that shared path, establishing a new standard in DeFi economics, where liquidation MEV value is returned back to DeFi apps in a highly secure, efficient, and transparent manner,” Eid added.
SVR will also play a crucial role in security and efficiency across the DeFi ecosystem, the Chainlink exec added.
Chainlink Smart Value Recapture (SVR) is a novel oracle solution that enables DeFi apps to recapture the non-toxic MEV derived from their use of Chainlink Price Feeds. SVR was built in collaboration with @bgdlabs, Flashbots, & @aave DAO contributors. 👇 blog.chain.link/chainlink-smar…
SVR to help Aave recapture liquidation MEV
Chainlink SVR leverages the same decentralized oracle network, or DON architecture, that supports Chainlink Data Feeds.
The technology does not rely on intermediary smart contracts and features a dual aggregator for enhanced redundancy.
The Chainlink SVR feature targets the issue of leakage of oracle extractable value in DeFi, with OEV a type of MEV from liquidations of undercollateralized loans.
Notably, this type of extractable value has attracted siphoning runs, leaving protocols like Aave and oracle networks like Chainlink without a share of the value they help create.
With SVR, Aave can now recapture this value using Chainlink’s trusted oracle networks and Flashbots’ MEV-Share service. It could redirect millions of dollars’ worth of potential revenue back to the ecosystem.
“Optimizing liquidation algorithms on DeFi while keeping the protocols financially and technically secure is a massive endeavor. But once again, the Aave-Chainlink partnership delivers, innovating responsibly on the edge with SVR and its OEV recapturing model,” said Ernesto Boado, co-founder of BGD Labs.
Revenue split
According to the announcement, the integration will see recaptured OEV fees split between Aave and Chainlink.
The projects are looking at an initial six-month discounted rate. 65% of value recaptured will go to the Aave ecosystem and the remaining 35% allocated to Chainlink.
Aave’s adoption marks a milestone in DeFi’s evolution.
It provides protocols and oracles a chance to reclaim value and thrive.
Per DeFiLlama, Aave’s total value currently stands at over $19 billion.
Meanwhile, Chainlink’s infrastructure has enabled more than $20 trillion in transaction value. Some of the partners tapping into oracle solution include Swift, Fidelity International, and ANZ Bank.
Aave, GMX and Lido also tap into Chainlink’s products.
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