Today, 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. The initial version of SVR was built in collaboration with contributors to the Aave DAO, including BGD Labs and Flashbots, to be integrated into Aave v3 pending governance approval.
MEV refers to the value miners extract from a blockchain by manipulating the order, inclusion, or exclusion of transactions in a block. Non-toxic MEV involves activities such as arbitrage and liquidations, which contribute to market efficiency and do not negatively impact users or network integrity. Oracle-related MEV or Oracle Extractable Value (OEV) describes MEV created during the transmission and consumption of oracle reports onchain.
SVR leverages Chainlink’s industry-standard oracle infrastructure, which has enabled over $17 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 OEV with minimal code changes and without introducing new security risks.
Now live on testnet, SVR is slated to launch on Ethereum mainnet with future implementations adding features such as increased decentralization, a DON-based auction system, enhanced gas efficiency, and cross-chain capabilities.
Without a solution like SVR, the DeFi protocols, end users, and oracles that originally generated oracle-related MEV receive none of the captured value. Based on real-world testing, Chainlink expects SVR to reliably recapture and return approximately 40% of non-toxic liquidation MEV.
MEV recaptured by SVR will be split at a standard rate, with 60% going toward the integrating DeFi protocol as an additional revenue stream and 40% supporting the long-term sustainability of the Chainlink Network. As an SVR launch partner and long-standing collaborator with Chainlink, Aave will receive a proposed 65% of recaptured MEV while Chainlink receives 35% for the first six months of its in-production integration.
Ultimately, SVR is anticipated to be one of the first services connected to Chainlink’s Payment Abstraction system of smart contracts designed to reduce billing and payment friction for users in the Chainlink ecosystem.
To learn more, read the official Chainlink SVR blog post.