Last December, Chainlink introduced Smart Value Recapture (SVR), a novel solution allowing DeFi applications that use Chainlink Price Feeds to recapture non-toxic oracle-related Maximal Extractable Value (MEV) from liquidations. Built in collaboration with contributors to the Aave DAO, an initial version of SVR was planned for integration into Aave v3, pending governance approval.
Today, Chainlink along with BGD Labs, a web3 development initiative focused on the Aave ecosystem, and Aave Chan Initiative, one of the driving forces behind the Aave protocol, announced Aave has officially integrated SVR on Ethereum mainnet after the Aave DAO community’s near-unanimous onchain vote, which is currently in the timelock execution stage.
SVR leverages Chainlink’s industry-standard oracle infrastructure, which has enabled over $20 trillion in transaction value, as well as Flashbots MEV-Share and a novel onchain dual aggregator architecture that allows Chainlink Price Feed users to access the benefits of recaptured oracle-related MEV or Oracle Extractable Value (OEV) with minimal code changes and without introducing new security risks.
Without a solution like SVR, the DeFi protocols, end users, and oracles that originally generated OEV receive none of the tens of millions of dollars worth of captured value. Based on real-world testing, Chainlink expects SVR to recapture and return approximately 40% of non-toxic liquidation MEV related to activities, such as arbitrage and liquidations, that contribute to market efficiency and do not negatively impact users or network integrity.
Aave will use SVR to recapture liquidation MEV with an initial set of markets including tBTC, LBTC, AAVE, and LINK, with plans to expand to additional markets in the future. Recaptured OEV revenue will initially be shared at a six-month discounted rate of 65% to the Aave ecosystem and 35% to the Chainlink ecosystem.
SVR is also the first service connected to Chainlink’s cross-chain Payment Abstraction system designed to reduce billing and payment friction for users in the Chainlink ecosystem by automatically converting service fees to LINK.
“This Chainlink SVR integration increases revenue for the DAO, strengthening the Aave ecosystem,” said Aave Labs Founder, Stani Kulechov, in an official announcement.
Johann Eid, Chief Business Officer at Chainlink Labs, emphasized the role Chainlink and Aave’s long-standing partnership has played in advancing the entire DeFi industry, and described Aave’s SVR integration as a milestone that establishes a new standard in DeFi economics.
“SVR is a big step toward creating a truly long-term sustainable DeFi economy.”