AAVE to reach new highs again? With the help of Chainlink, it is expected to increase revenue by tens of millions of dollars annually
The old-school DeFi is teaming up to stir things up, with profits split 60/40.Author: Azuma, Odaily Planet Daily
The two leading DeFi projects, Aave (AAVE) and Chainlink (LINK), have both seen significant increases today, but the reason is not due to the Trump concept WLFI increasing its holdings again (see "What Assets Might the Trump Family Project WLFI Buy Next?"), but rather because the two projects have joined forces to promote a tangible collaboration that is expected to help both parties increase their annual revenue by tens of millions of dollars.
According to OKX market data, as of around 11 AM Beijing time, AAVE is priced at 377.69 USDT, with a 24-hour increase of 16.66%; LINK is priced at 23.9 USDT, with a 24-hour increase of 5.8%.
Chainlink SVR
In the early hours of today Beijing time, Chainlink officially announced the launch of a new service called "Smart Value Recapture (SVR)," which is a brand new oracle solution designed to enable DeFi applications to recover MEV value in a "non-toxic" manner through Chainlink's quotes.
MEV, or "Maximal Extractable Value," refers to the value that block proposers gain by including, excluding, or changing the order of transactions in a specific block. As a subset of MEV, OEV (Oracle Extractable Value) refers to the MEV generated when oracle reports are transmitted on-chain and consumed by on-chain applications. The most common OEV opportunities arise in lending protocols, especially during liquidation processes.
Odaily Note: The term OEV is actually a common misunderstanding, as it does not refer to oracles actively extracting value from users, but rather to the MEV associated with oracles.
In the current DeFi operating environment, the value of MEV (especially OEV) is captured by participants in the block building process, such as searchers, builders, and validators, without being returned to the original DeFi protocols, end users, and oracles that generated the MEV. If there is a way to recover this MEV, it would help return the related value to its original creators.
This is the intention behind Chainlink's development of SVR. From an application scenario perspective, Chainlink SVR cannot be used for controversial MEV extraction scenarios such as front-running or sandwich attacks, but is specifically built for value recovery scenarios related to liquidation, addressing the OEV issue that commonly troubles lending protocols.
Aave Community Proposal Integration
As one of the partners in the initial development of SVR (specifically including BGD Labs, Flashbots, and Aave DAO), BGD Labs immediately initiated a preliminary proposal in the Aave community forum after Chainlink's announcement, suggesting that Aave integrate SVR as soon as possible.
BGD Labs pointed out that Aave's long-standing stable operation has proven the effectiveness of its liquidation mechanism, but there are also significant MEV arbitrage opportunities— in actual liquidation scenarios, builders often gain substantial profits, while they have not done most of the work; meanwhile, searchers, i.e., protocol users, receive a much smaller proportion.
Chainlink's SVR is expected to properly address this issue and more precisely define who benefits the most from transaction ordering. For stability considerations, BGD Labs suggested deploying SVR for only 1-3 assets in the initial pilot phase to advance the integration work in a controlled manner.
Potential Value Capture Scale
According to data from Chainlink, after testing, Chainlink SVR is expected to achieve an actual value recovery rate of about 40%—for every 100 dollars leaked through liquidation MEV, 40 dollars can be recovered.
Chainlink added that while some alternative solutions claim to achieve higher liquidation recovery efficiency, the team has yet to see conclusive actual data to prove this. For SVR, 40% is a conservative but realistic estimate, but actual performance is needed to collect real data.
BGD Labs further noted that a 40% recovery efficiency corresponds to the scale of past MEV leakage, potentially achieving tens of millions of dollars in value recovery.
It is worth mentioning that BGD Labs also noted that for the sake of simplifying the system, the form of assets receiving the recovered value will be ETH.
Revenue Sharing Plan
In the announcement regarding SVR, Chainlink stated that the value recovered by SVR is planned to be distributed between the integrated DeFi protocols and the Chainlink network at a standard ratio, with 60% of the value flowing to the DeFi protocols and 40% to the Chainlink ecosystem—this ratio is not fixed and may be adjusted in the future.
For the first partner, to establish a long-term collaboration with Aave, Chainlink proposed a revenue share of 65% to Aave and 35% to Chainlink for the first six months, but the relevant data must be approved through Aave community governance.
As for the final destination of the value after the revenue sharing, Chainlink did not specify, only mentioning that "it can support the economic sustainability of Chainlink oracles through payment of transaction gas costs and other ongoing infrastructure expenses"; however, on Aave's side, BGD Labs has clearly proposed using the recovered value to benefit users, such as providing incentives to stakers in the Umbrella module—this may also be one of the reasons why AAVE's increase is more pronounced than LINK's at present.
