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Aave Integrates Chainlink SVR on Ethereum Mainnet

Aave DAO, in collaboration with Chainlink and BGD Labs, has officially announced the integration of Chainlink's Smart Value Recapture (SVR) on the Ethereum Mainnet. This groundbreaking move follows an on-chain community vote and is poised to redefine how decentralized finance (DeFi) applications reclaim their Maximal Extractable Value (MEV) that was previously seeping into blockchain ecosystems without any benefit returning to them.

Historically, the liquidation of undercollateralized loans in various DeFi protocols has seen MEV leaking into the hands of participants involved in the block building process. Chainlink SVR aims to resolve this issue by recapturing the Oracle Extractable Value (OEV) generated during these liquidations. The method employed involves using Chainlink's established oracle networks combined with Flashbots’ MEV-Share service to significantly increase protocol revenue and ensure long-term sustainability.

What is Chainlink SVR?

Chainlink SVR is a novel oracle solution designed specifically to allow DeFi applications to capitalize on the Maximal Extractable Value created from the interactions with Chainlink Price Feeds. Charitably referred to as Oracle Extractable Value, this MEV often stems from the liquidation processes occurring within DeFi lending protocols and, as mentioned, has amounted to millions in value lost in transaction processing.

Built through collaborations with BGD Labs, Flashbots, and engaged members of the Aave community, SVR ensures that all reclaimed MEV returns to the DeFi protocols and the oracle infrastructure that initially generated it. Notably, it operates on a decentralized infrastructure that has been delivering reliable results for over five years, securing billions in DeFi Total Value Locked (TVL) and facilitating trillions of transaction value.

Initial Integration and Future Plans

Aave's introduction of Chainlink SVR targets a set of specific markets including tBTC, LBTC, AAVE, and LINK, with plans to expand to additional markets in the future. For the first six months, the revenue split from recaptured OEV is set at 65% for the Aave ecosystem and 35% for the Chainlink network, as ratified by an Aave DAO vote. This signifies a fruitful partnership between both ecosystems, with the aim of uplifting the prospects of various DeFi projects.

Chainlink SVR will also be linked to Payment Abstraction, a new payment system that diminishes friction in payment processes across the Chainlink network. This allows service fees to be seamlessly converted to LINK, which will be accessible to Chainlink Network stakeholders, pushing further efficiency in financial interactions.

Comments from Industry Leaders

Ernesto Boado, co-founder of BGD Labs, expressed the significance of this integration, stating, “Optimizing liquidation algorithms while maintaining financial security within these protocols is a substantial endeavor, but the Aave-Chainlink partnership once again brings innovation to the forefront with SVR.”

Marc Zeller from the Aave Chan Initiative emphasized the smooth operations by urging users,