TL;DR
- Chainlink has introduced Smart Value Recapture (SVR), a solution designed to reclaim lost MEV for DeFi protocols, potentially bringing back 40% of the value that would otherwise be lost.
- SVR operates by creating parallel Chainlink price feeds and utilizing the Flashbots MEV-Share platform for auctions, ensuring DeFi protocols can capture value from liquidations.
- A key partnership with Aave will see the captured value split 65:35 between Aave and Chainlink for the first six months, with the integration of SVR into Aave v3 pending governance approval.
Chainlink has unveiled a groundbreaking solution aimed at recapturing lost Maximal Extractable Value (MEV) for DeFi protocols. The new system, known as Smart Value Recapture (SVR), is designed to enable DeFi applications to reclaim non-toxic MEV, which is often lost to third parties during transactions.
This innovative approach is expected to bring back approximately 40% of the value that would otherwise be lost, providing a significant economic boost to DeFi protocols.
How SVR Works
SVR operates by creating a parallel set of Chainlink price feeds and utilizing the Flashbots MEV-Share platform for auctions. This dual aggregator architecture ensures that DeFi protocols can capture value from liquidations without introducing new security risks.
The system is designed to be easily integrated with existing Chainlink oracles, requiring minimal changes for protocols already using these price feeds. In the event of a failure in the recapture process, protocols can revert to the standard price feed, ensuring continuous operation.
Partnership with Aave
One of the key partnerships in the launch of SVR is with Aave, a leading DeFi lending protocol. Under a special launch partner deal, the captured value will be split 65:35 between Aave and Chainlink for the first six months.
This collaboration is expected to generate significant economic opportunities for both communities, with liquidation MEV in DeFi measured in the tens of millions annually. The integration of SVR into Aave v3 is currently pending governance approval. Still, it is anticipated to provide a new revenue stream for the protocol.
Market Reaction and Future Plans
The announcement of SVR has already had a positive impact on Chainlink’s native token, LINK, which saw a 9% increase following the news. The token’s price climbed from just over $22 to an intraday high of $24.78. This surge reflects the market’s optimism about the potential benefits of SVR for the DeFi ecosystem.
Looking ahead, Chainlink plans to expand SVR to include increased decentralization, a DON-based auction system, enhanced gas efficiency, and cross-chain capabilities. These future implementations aim to further solidify Chainlink’s position as a leader in the DeFi space and provide even greater value to its users.
