Aave, a leading decentralized finance (DeFi) protocol, is considering integrating Chainlink’s released Smart Value Recapture (SVR) oracle service. This move aims to capture a portion of Maximum Extractable Value (MEV) profits generated through Aave’s liquidation process and return them to the protocol’s users.
MEV refers to the additional value that can be extracted from a blockchain by strategically reordering or including transactions within a block. In the context of Aave, MEV opportunities arise during liquidations, where borrowers’ assets are seized if their loan-to-value ratio exceeds a certain threshold.
Chainlink’s SVR service allows protocols to capture a portion of MEV by auctioning the right to back-run its price-feed oracle. By integrating SVR, Aave aims to capture approximately 40% of MEV profits generated through liquidations. These profits would then be redirected to the Aave DAO, which could use them to benefit the protocol’s users, such as by reducing borrowing costs or improving protocol security.
This proposal aligns with Aave’s commitment to maximizing value for its users. By capturing and redistributing MEV profits, Aave can enhance the overall user experience and strengthen its position as a leading DeFi protocol.
