New Oracle System to Help DApps Recover Millions Lost to MEV

A new oracle system aims to retrieve the additional fees paid to miners by users of decentralized applications (DApp) called maximum extractable value (MEV). It is the maximum value a miner can get from moving transactions when producing a block on a blockchain network.

MEV can be defined as the maximum value that can be extracted from block production above the standard block reward and gas allowances. The MEV includes arbitrage and liquidation fees that can reach millions and are often extracted by block producers.

A new Oracle system called Oracle Extractable Value (OEV) promises to change that and return the extra revenue to the DApp rather than to third parties and block producers. Web3 Oracle Decentralized Service Provider API3 has come up with the concept of OEV that promises to provide an additional revenue stream for decentralized financial (DeFi) protocols.

The traditional way to extract MEV is by participating in blockspace auctions, which were often done by third parties and block producers, but OEV-enabled oracles take off-chain auctions and auction the right to extract value in-chain to the same outsider. seekers who used to bid on the blockspace.

Talking about how the OEV oracles work and how it would help the DeFi ecosystem, Burak Benligiray, core technical team leader at API3, told Cointelegraph:

“OEV auctions will take place off-chain, meaning that even when a lot of value is mined, gas prices will not be affected. In addition, block space auction revenues are claimed by block validators, while OEV revenues can be redirected to the dApps that create them .”

Data from flashbots suggests that block producers captured nearly $653 million in MEV. Flashbots is a centralized entity dedicated to transparent and efficient MEV extraction.

Related: MEV bot makes $1 million but loses everything to a hacker an hour later

OEV-enabled data feeds then feed the proceeds from these auctions back to the DApps generating the value in the first place. The OEV-enabled data feeds not only aid in retrieval of the MEV, but also minimize it by updating it exactly when needed, achieving a zero drift threshold.

OEV Oracle services are available on numerous Ethereum virtual machine (EVM) compatible networks, including Ethereum, Polygon, Arbitrum, Optimism, BNB Chain, Avalanche, Milkomeda, Fantom, and many more.