Aave and Chainlink Are Collaborating to Deploy a New Upgrade to the Aave Protocol

This aims to recover the Oracle-related Maximal Extractable Value (MEV) lost to blockchain networks previously during liquidation events

Aave and Chainlink are joining forces to introduce a significant upgrade to the Aave protocol with the integration of Chainlink’s Smart Value Recapture (SVR) on Ethereum’s mainnet.

This integration aims to recover the Maximal Extractable Value (MEV) related to Aave’s Chainlink oracles, which is currently lost to blockchain networks during liquidation events, the companies said.

The move, which follows a vote by the Aave DAO community and is now entering the timelock execution stage, is expected to generate additional protocol revenue for Aave and set a new standard for efficient and value-maximalizing practices within DeFi applications.

The SVR service, developed in collaboration with BGD Labs, Flashbots, and other Aרית בניטרcontributors, utilizes Chainlink’s industry-leading oracle networks and Flashbots’ MEV-Share service to identify and recapture the MEV that arises during the liquidations of undercollateralized loans in protocols like Aave.

Typically, this MEV is claimed by those involved in the block-building process, leaving no benefit for the protocols or the critical oracle infrastructure that powers these smart contracts. This integration is designed to ensure that this value is returned to the ecosystem where it was generated, ultimately contributing to the economic well-being of DeFi platforms.

Aave has already completed the integration of Chainlink SVR for key markets like tBTC, LBTC, AAVE, and LINK. To kickstart the collaboration and maximize its impact, the parties will be splitting any recaptured oracle-related value (OEV) over the first six months of launch.

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, benefitting 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 and scalable architecture that has been supporting Chainlink’s Price Feeds for more than five years. That same architecture is used to routinely secure and aggregate data for the top 150 crypto tokens, which in aggregate are used to underpin over $75 billion of DeFi TVL, rendering these decentralized finance systems both stable and trustworthy.