API3, a decentralized oracle provider, has announced the launch of the OEV Network, described as the first on-chain solution for recovering oracle extractable value (OEV) for lending protocols. Integrated with the API3 Oracle Stack, the OEV Network is a layer-2 platform designed to create an efficient market for oracle updates. While Maximum Extractable Value (MEV) extracts value during transaction security, OEV extracts value during oracle updates, particularly in lending markets where price updates can lead to liquidations.
Users of the OEV Network can bid on valuable upgrades, such as price updates that could result in liquidating a position in a lending market. Auction proceeds are returned to the decentralized application (dapp), potentially recovering millions of dollars annually and providing a new revenue stream for both lending protocols and the API3 oracle stack.
In traditional credit markets, external parties known as investigators facilitate settlements and are compensated with fees. However, API3’s head of strategy, Ugur Mersinlioglu, noted that lenders end up paying significantly more for these services, with much of the liquidation value flowing to block builders rather than the lending protocols.
The OEV Network aims to change this by shifting the competition to make oracle upgrades that enable settlements, programmatically returning auction proceeds to dapps. This shift could potentially unlock multi-billion dollar opportunities for dapps by reclaiming value that was previously lost.
Typically, oracles have operated as cost centers, providing data feeds without generating revenue. The OEV Network seeks to create an efficient and competitive market for oracle upgrades, allowing providers to directly link the value obtained through oracles to their potential revenue.
API3 sees a significant opportunity in recovering value for lending protocols across various blockchains. For example, Aave V3 has granted $23.4 million in settlement incentives so far, while Venus has paid $5.8 million by 2024. The integration of the OEV Network into the API3 Oracle Stack provides a built-in solution to recover significant value, creating new revenue streams to support operations, growth, and expansion into new chains.
Overall, the OEV Network represents a groundbreaking advancement in the oracle space, offering a more efficient and competitive model for recovering value in the lending market and potentially transforming the way oracle services are provided and compensated.
Article Source
https://decrypt.co/239092/api3s-oev-network-to-recapture-oracle-extractable-value-for-lending-protocols?amp=1