Ave completed the integration of Chainlink to return MEV payments to users.
According to a proposal on Aave's governance forum, Ave is working on a new chainlink platform designed to transfer profits to users of the decentralized finance (DeFi) protocol.
On December 23rd, decentralized oracle service provider ChainLink released Smart Value Recapture (SVR) that focuses on collecting profits from Maximum Extractable Value (MEV) to leverage DeFi protocols.
On the same day, Aave proposed to integrate SVR “to recover MEV from Aave liquidity and return to Aave ecosystem.
Block developers profit from MEV by reordering transactions before posting completed blocks to the public blockchain ledger. This sometimes, but not always, comes at the expense of consumers.
Source: Ave
Aave MEV problem
Aave allows users to borrow cryptocurrency by putting up other crypto assets as collateral. If the holding declines significantly in value, it is liquidated or “liquidated.”
“Anytime you need to delete a location, [a third-party] The liquidator pays a certain amount of the debt and receives an equivalent value as collateral, and receives a percentage of the above-mentioned liquidation bonus;
It's a “nice solution,” but “recently a ‘problem' has emerged that deserves some form of optimization: MEV,” the proposal says.
The liquidity bonus “creates a very clear opportunity for MEV” and a very significant profit for “the party that doesn't do most of the work: the builder.”
Meanwhile, “protocol users will receive a proportionate amount,” the proposal says.
According to Aave, ChainLink's SVR is a service that trades in MEV-Share auction, ChainLink's price feed, and liquidation profits.
Aave estimates that SVR will hold approximately 40% of MEV's profits, which could be transferred to Aave DAO to benefit users.
Protection against MEV
Users and protocols in the Ethereum network are racing to avoid the harmful costs of MEVs.
As users seek to secure trades, private transactions dominate Ethereum's order flow, according to an August report from Blocknative.
Private orders involve sending transactions directly to a validator, rather than to a public queue, in an arrangement known as a “dark pool”.
“Users typically prefer to transfer transactions privately for MAV protection,” Blocknative explained.
Magazine: Rise of Microstrategy Clones, Asia Dominates Crypto Adoption: Asia Express 2024 Review
