Summary
UMA and Flashbots have launched Oval, a mechanism that allows lending protocols to capture and monetize Oracle Extractable Value (OEV) in order to generate revenue and contribute to the sustainability of decentralized finance (DeFi). Oval leverages Chainlink price updates and Flashbots’ MEV-Share to redirect up to 90% of the OEV value back to the protocols. This mechanism presents an opportunity for lending protocols to create sustainable revenue streams and improve the stability of DeFi. Oval is currently live on the Ethereum mainnet and does not require code changes for integration. The collaboration aims to minimize the impact of MEV on Ethereum and divert value back to lending protocols.
Key Points
1. Oval’s mechanism recaptures up to 90% of lost revenue for lending protocols, contributing to the sustainability of decentralized finance (DeFi). This creates new income streams for lending protocols and improves the overall stability of DeFi.
2. Oval addresses the issue of Oracle Extractable Value (OEV), a type of Maximal Extractable Value (MEV), that is lost by lending protocols when consuming Chainlink oracle data for price updates. By wrapping Chainlink price updates and utilizing Flashbots’ MEV-Share, Oval auctions off the OEV and redirects up to 90% of the value back to the protocols that created it.
3. The collaboration between UMA, Flashbots, and Chainlink aims to minimize the impact of MEV on Ethereum. Oval has the potential to recapture as much as 90% of the value generated by leading DeFi protocols, such as Aave and Compound, significantly impacting the revenue generated by lending activities.