Chainlink unveils MEV recovery solution for DeFi, LINK jumps 9%

On December 23, Chainlink announced Smart Value Recapture (SVR), a novel solution designed to enable DeFi applications to recapture non-toxic Maximal Extractable Value (MEV).

Currently, when DeFi protocols use value oracles, such as during liquidity, the value is held by third parties, including miners and validators. None of these opportunities go back to the protocols or terms that created these opportunities.

The solution is SVR, which allows DeFi lending protocol applications to hold back some of the liquidity. Chainlink normally expects to recapture about 40% of lost value.

MEV is the profit that can be earned by including transactions in a blockchain block or ordering a strategy.

Introducing Chainlink Smart Value Recapture (SVR)—a new non-toxic MEV recovery solution for users of Chainlink Value Feeds.

The first version was created in collaboration with @bgdlabs, Flashbots and other contributors to @aave DAO.

— Chainlink (@chainlink) December 23, 2024

Aave partnership on SVR

The system creates a parallel set of ChainLink price feeds and uses FlashBots' MEV-share for bidding, he explained in a blog post. It also includes a fallback mechanism for security using standard rate feeds and requires minimal changes to protocols that already use Chainlink oracles.

SVR generally allocates 60% of the value held to DeFi protocols and 40% to Chainlink; However, under an exclusive launch partner agreement with Aave, it pays 65:35 for the first six months.

Chainlink Community Ambassador Zach Raines, aka ‘ChainlinkGod', said it was a “scary development”.

“Liquid MEV in DeFi measures tens of millions of dollars per year, providing a huge economic opportunity for both communities.”

SVR continues to be planned to be one of the first Chainlink services to plug into the Payment Abstraction system, “which will enable the Chainlink network partition to be converted to LINK using existing DEXs.

Introducing Chainlink's new non-toxic MEV recovery solution for $LINK and $AAVE development

Chainlink SVR (Smart Value Recapture)—designed to capture MEV in DeFi—integrates DeFi protocols and… pic.twitter.com/sSTAbhrH8c

– Zach Rynes | CLG (@ChainLinkGod) December 23, 2024

LINK price response

Chainlink's native token, LINK, rose around 9% on the announcement, climbing above $22 to reach an intraday high of $24.78.

At the time of writing, the asset had fallen back slightly but was still trading above $24. LINK is down 54% from its May 2021 all-time high of $52.70.

AAVE prices benefited the most from the partnership, rising more than 15% on the day to $380 at the time of writing.

The DeFi asset hit its highest price since September 2021, down 43 percent from its May 2021 all-time high of $662.