TL;DR
- Aave integrates Chainlink Smart Value Recapture (SVR) on Ethereum to recapture the MEV associated with loan liquidations in DeFi protocols.
- The SVR solution allows DeFi protocols to recover value lost in block building, improving the DeFi economy in a sustainable and transparent way.
- The recaptured revenue will be split between the Aave (65%) and Chainlink (35%) communities.
Aave has integrated Chainlink Smart Value Recapture (SVR) on the Ethereum mainnet with the goal of recapturing the Maximum Extractable Value (MEV) associated with loan liquidations.
The integration aims to increase DeFi protocol revenues by recovering value that was previously lost during the block building process and not returned to the protocols or oracle infrastructure.
MEV is primarily generated when undercollateralized loans are liquidated in DeFi lending protocols. Historically, this value has been captured by those involved in block building, without being distributed back to the DeFi protocols or the infrastructure that generated it. With Chainlink SVR, DeFi protocols can now recover part of this MEV, thanks to a collaboration between Chainlink, Flashbots, and BGD Labs, which combines Chainlink’s oracle networks and Flashbots’ MEV-Share service.
A More Sustainable Model for the DeFi Economy
The SVR protocol is an innovative solution that specifically focuses on recapturing the MEV generated during liquidations. This ensures that the extracted value is returned to the protocols that generated it, optimizing the DeFi economy and creating a more sustainable and transparent model. Additionally, SVR is supported by the same decentralized infrastructure that has protected Chainlink Price Feeds for over five years, a system that has secured billions of dollars in value within the DeFi ecosystem.
Aave and Chainlink Will Split the Revenue
The integration started with specific markets such as tBTC, LBTC, AAVE, and LINK, with the intention to expand to additional markets in the future. The recaptured revenue will be split between the Aave and Chainlink communities, starting with a 65% share for Aave and the remaining 35% for Chainlink, as confirmed by a vote within the Aave DAO.
Chainlink SVR is also the first Chainlink network service to be connected to Payment Abstraction, a solution that facilitates the automatic conversion of service fees into LINK, improving efficiency in cross-chain payments.
This development is crucial for the creation of a more stable and efficient DeFi economy, where applications and protocols benefit in a secure and fair manner.
