Chainlink introduces MEV recapture solution for DeFi

Chainlink, the oracle network that brings global finance on-chain, announced the launch of an oracle solution that it says will help decentralized finance protocols recapture maximum extractable value.

Chainlink Smart Value Recapture is an MEV solution that DeFi applications can leverage to recapture non-toxic maximum extractable value from Chainlink Price Feeds.

According to an announcement by the Chainlink (LINK) team, the first release of SVR is the work of Aave (AAVE) DAO contributors BGD Labs and Flashbots, among others.

According to Chainlink, the initial focus of Chainlink SVR is DeFi lending protocols.

One of the solutions aimed at helping protocols recapture MEV from liquidations. Projects like Chainlink, Pyth Network, and API3 are at the forefront of providing efficiency-enhancing solutions for DeFi lending protocols. These initiatives are helping projects recapture millions of dollars worth of non-toxic MEV.

Built on Chainlink’s infrastructure, SVR works by allowing projects to eliminate unnecessary third-party dependencies. It also eliminates the need for intermediary smart contract integrations while leveraging Flashbots for efficiency and security. This is the functionality of Flashbots’ MEV Sharing and contract architecture called “Binary Collector”.

“Based on real-world testing, we believe Chainlink SVR can expect to achieve a realistic value recapture rate of approximately 40% (i.e., $40 recaptured for every $100 leaked via liquidation MEV).”

Chainlink Team in blog announcement

It is also noteworthy that a management offer for Chainlink SVR integration continues in Aave.

If the Aave community approves BGD Labs’ proposal, the DeFi protocol will benefit from a new revenue stream. The value recovered by the MEV solution will provide additional revenue to Aave, as well as support the economic sustainability of Chainlink oracles.

Chainlink SVR is live on the testnet ahead of its launch on the Ethereum mainnet. Chainlink developers are also eyeing a future implementation that will bring improvements such as greater decentralization, cross-chain capabilities, DON-based auction system, and gas efficiency.