Chainlink, the leading oracle network, has just constructed a new solution to help protocols reclaim maximal extractable value (MEV), which, while pioneered on the blockchain by Polar, marks a historic moment for DeFi.
With Chainlink Smart Value Recapture (SVR), we’re introducing an innovative solution that provides the opportunity for DeFi applications to reclaim non-toxic MEV generated from Chainlink Price Feeds. This represents a major step in helping DeFi lending platforms become more efficient and also more economically sustainable.
Chainlink SVR Drives Transparency and Cost Efficiency
The initial iteration of SVR is a collaboration, with Aave DAO contributors, BGD Labs, and Flashbots, among others, having clearly contributed well. DeFi lending protocols, and in particular the recapture of MEV from liquidation processes, serve as the main focus of this solution.
According to Chainlink’s announcement, ‘SVR enables protocols to remove unnecessary dependence on third parties and cut unnecessary third-party third contract integrations while having the Flashbots’ efficiency and security.’ The backbone of this system is a dual-aggregator contract architecture with a MEV-Share-like reward associated with it, guaranteeing smooth, secure functionality.
The Chainlink SVR is now live on the testnet and will launch on the Ethereum mainnet. They’re also looking forward to a suite of other additions to future iterations, such as decentralization, cross-chain capabilities, a decentralized oracle network (DON) based auction system, and better gas efficiency.
“Based on real-world testing, we believe Chainlink SVR can expect to achieve a realistic value recapture rate of approximately 40% (i.e., for every $100 that would have been leaked via liquidation MEV, $40 was recaptured).”
Chainlink Team in the blog announcement
On Aave, a major DeFi protocol, SVR is already being discussed through a governance proposal for integration. The implementation would unlock a new revenue stream for the protocol, if approved by the Aave community. This proposal, led by BGD Labs, wants to direct recaptured MEV to more revenue for Aave and help Chainlink’s economic viability.
This is part of a wave in DeFi, with other projects like Pyth Network and API3 tackling issues of improving protocol efficiencies and capturing MEV. Collectively, they can save DeFi platforms millions of dollars.
Chainlink’s SVR is in lockstep with the requirement for increasingly transparent, efficient, and cost-effective solutions in the DeFi space. Chainlink is establishing a new precedent for innovation in decentralized finance through its focus on reducing dependency on third-party services and enhancing liquidation processes.
The Aave community will be watching as the testnet rollout continues, discussions in it play out, and DeFi ecosystem watches the changes that Chainlink’s SVR brings to the scene of maximal extractable value.
