Chainlink Adds Tools for Recapturing MEV
Chainlink has rolled out new data feed products designed to help DeFi protocols become more resilient and profitable. Smart Value Recapture (SVR) Feeds allow protocols to recapture Oracle Extractable Value (OEV), especially from liquidations. Additionally, Liquidity-Weighted Bid-Ask (LWBA) pricing gives protocols a more detailed view of order book dynamics, helping to spot imbalances and anticipate price movements.
- Oracle Extractable Value (OEV) is a subset of MEV created when an oracle update reveals a liquidation opportunity, which searchers then compete to act on by backrunning the oracle transaction. Historically, this value was captured entirely by third parties, but SVR Feeds create a new revenue stream for DeFi protocols by auctioning off the right to execute these liquidations. - Chainlink's SVR was developed in collaboration with BGD Labs, Flashbots, and contributors to the Aave DAO, with Aave being the first major protocol to adopt it on the Ethereum mainnet. The initial revenue split for Aave is 65% for the Aave ecosystem and 35% for the Chainlink ecosystem for the first six months. - Since its launch, Chainlink SVR has processed over $460 million in liquidations and recaptured more than $10 million in OEV for protocols. It has achieved a dominant market share of over 99% among OEV recapture solutions. - The system utilizes a "Dual Aggregator" architecture, sending oracle updates through both a private channel for the auction and a public one that serves as a fallback, ensuring data availability. This design requires minimal code changes for protocols already using Chainlink Price Feeds. - To expand its SVR capabilities across multiple chains, Chainlink acquired Atlas, an order flow auction protocol. This acquisition extended SVR deployment to five blockchains: Ethereum, Arbitrum, Base, BNB Chain, and HyperEVM. - Unlike traditional price feeds that often use a volume-weighted average price (VWAP), the Liquidity-Weighted Bid-Ask (LWBA) pricing gives a more precise view of the market by considering the volume of assets at different price levels in the order book. This helps in assessing market depth and managing risk more effectively, especially during high volatility. - LWBA is part of Chainlink's "pull-based" oracle solution, Data Streams, which allows applications to retrieve data on-demand for lower latency, as opposed to the "push-based" model of standard Data Feeds that publish updates at fixed intervals. - Leading DeFi protocols such as Aave, Compound, and Venus are live with SVR integrations. The recaptured MEV is split between the DeFi protocol, the Chainlink network, and block builders.
