Aave and Chainlink are collaborating to deploy a new upgrade to the Aave protocol by integrating Chainlink’s Smart Value Recapture (SVR) on Ethereum’s mainnet.
This aims to recover the Oracle-related Maximal Extractable Value (MEV) lost to blockchain networks previously during liquidation events, according to the press release.
It follows a vote by the Aave DAO community and is now entering the timelock execution stage. By doing so, Aave hopes to boost its protocol revenue and set a new standard for DeFi applications.
The SVR service, developed in collaboration with BGD Labs, Flashbots, and other Aave contributors, works by using Chainlink’s oracle networks and Flashbots’ MEV-Share service to recapture the MEV that is generated when undercollateralized loans in DeFi protocols are liquidated.
MEV is usually taken by those involved in the block-building process, leaving no benefit for the protocols or oracle infrastructure behind it. This setup is meant to make sure this value returns to the ecosystem that helped create it and is, in the process, making the economic well-being of DeFi platforms healthier.
Currently, Aave has integrated Chainlink SVR into markets like tBTC, LBTC, AAVE, and LINK. In the first six months, any recaptured oracle-related value (OEV) will be split between the Aave and Chainlink communities.
The split is set at 65% for the Aave community and 35% for Chainlink. The integration also includes the innovative Payment Abstraction system, which simplifies cross-chain payments and converts service fees into the LINK cryptocurrency, benefiting Chainlink’s network of service providers.
“Optimizing liquidation algorithms on DeFi while keeping protocols financially and technically secure is a massive endeavor. But once again, the Aave-Chainlink partnership delivers,” said Ernesto Boado, Co-Founder of BGD Labs.
Chainlink’s SVR system is built on the very same decentralized architecture that has been supporting Chainlink’s Price Feeds for more than five years. That same architecture has helped secure more than $75 billion of DeFi TVL, making decentralized finance systems stable and trustworthy.
Also Read: AAVE Drops 10% as Crypto Market Reacts to Trump’s Executive Order
