Chainlink, a leading oracle network that aims to bring global finance on-chain, has recently announced the launch of an innovative oracle solution. The new system, Chainlink Smart Value Recapture (SVR), has been designed to aid decentralized finance (DeFi) protocols in recapturing maximal extractable value (MEV).
The SVR system offers a novel approach to reclaiming non-toxic MEV from Chainlink Price Feeds, which can be utilized by a variety of DeFi applications. The initial version of this promising technology has been developed through a collaborative effort involving Aave (AAVE) DAO contributors BGD Labs, Flashbots, and the Chainlink (LINK) team.
Initially, the SVR will focus on DeFi lending protocols, as stated by Chainlink. The system is one of the many solutions currently being developed to help protocols recapture MEV from liquidations. Various projects, including Chainlink, Pyth Network, and API3, are leading the charge in this area, offering solutions that enhance the efficiency of DeFi lending protocols and helping to recapture millions of dollars in non-toxic MEV.
The SVR system is built on Chainlink’s robust infrastructure and is designed to eliminate unnecessary third-party dependencies. The system also negates the need for intermediary smart contracts integrations, leveraging Flashbots for enhanced efficiency and security. This is achieved through the use of the Flashbots’ MEV-Share and a contract architecture known as “Dual Aggregator”.
The Chainlink team stated in a recent blog announcement, “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).”
Furthermore, a governance proposal for the integration of Chainlink SVR on Aave is currently underway. If the Aave community approves the proposal made by BGD Labs, the DeFi protocol stands to gain a new revenue stream. The value recaptured by the MEV solution could generate additional revenue for Aave, while also supporting the economic sustainability of Chainlink oracles.
Presently, the Chainlink SVR is live on testnet, preceding its launch on the Ethereum mainnet. The Chainlink developers have also indicated a future implementation of the system that will introduce myriad improvements, such as further decentralization, cross-chain capabilities, a DON-based auction system, and enhanced gas efficiency.
