- Aave proposes using Chainlink’s Smart Value Recapture to redirect MEV profits back to its ecosystem.
- The integration could potentially return 40% of MEV profits to benefit Aave users.
What happened: Aave proposes Chainlink’s Smart Value Recapture integration
Aave, a prominent decentralised finance (DeFi) platform, has proposed integrating Chainlink’s newly launched Smart Value Recapture (SVR) service. The move aims to recover profits generated from maximum extractable value (MEV) during transaction backrunning and return them to the protocol’s users.
The proposal, shared in Aave’s governance forum, highlights how this integration could address the growing concerns around MEV exploitation.
On 23 December, Chainlink introduced SVR, a specialised oracle designed to auction the rights to backrun its price-feed updates. By participating in an MEV-Share auction, Aave could recover up to 40% of MEV profits generated from liquidations.
These recovered funds would be directed to Aave’s decentralised autonomous organisation (DAO), ultimately benefiting the user base. MEV is often criticised for enabling blockbuilders to extract undue profits by reordering transactions, leaving protocols and users with disproportionately smaller benefits.
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Why it’s important
The integration of Chainlink’s Smart Value Recapture (SVR) marks a significant advancement in tackling Maximum Extractable Value (MEV) challenges that have long plagued decentralised finance (DeFi) ecosystems.
MEV, a practice where third-party blockbuilders reorder transactions for profit, often leaves users and protocols bearing the cost, eroding fairness in the ecosystem. Aave’s proposal to integrate SVR not only reflects a technical breakthrough in blockchain finance but also underscores its commitment to fair profit distribution.
By capturing up to 40% of MEV profits from liquidations and redirecting them back to its decentralised autonomous organisation (DAO), Aave aims to prioritise user benefits and protocol sustainability.
Meanwhile, private transactions and “dark pool” arrangements have become increasingly prevalent on Ethereum as a protective measure against MEV exploitation. These systems enable users to send transactions directly to validators, bypassing the public transaction queue.
Aave’s proposed integration of SVR could set a precedent for other DeFi platforms to follow, fostering a more equitable landscape. By ensuring MEV profits are returned to the ecosystem, Aave and Chainlink are not only mitigating MEV risks but also building greater trust, transparency, and long-term stability in the DeFi space.
This innovation could redefine how decentralised platforms approach MEV management across the blockchain industry.
