Aave Chainlink SVR Integration Reclaims Oracle-Related MEV

Aave, a leading DeFi platform, has adopted Chainlink’s Smart Value Recapture (SVR) to reclaim millions of dollars in lost maximum extractable value (MEV) stemming from on-chain oracle usage. Through an on-chain vote, the Aave community approved this feature for the Ethereum mainnet, marking a new milestone in mitigating revenue leaks tied to oracles.

Oracle-Related MEV Recovery

Aave’s integration of SVR aims to address MEV (maximum extractable value), particularly “oracle extractable value.” Block producers or third parties can manipulate on-chain data (like price feeds) for profit at the expense of users and protocols. With SVR, Aave and Chainlink work together to recapture some of that lost value instead of letting it leak to block producers or external arbitrageurs.

How SVR Works

Chainlink introduced SVR in December 2024 as a way for DeFi protocols to share in the economic upside of DeFi transactions. The solution leverages:

• Oracle Networks: Chainlink’s decentralized feeds, which supply off-chain data to Aave’s smart contracts.
• MEV-Share: Developed by Flashbots, enabling “good faith” order flow and preventing malicious front-running.

Bringing Revenue Back In-House

Traditionally, MEV minted from oracle price updates or liquidation opportunities often bypasses the protocol. Aave’s latest move ensures that a portion of revenue stays with the community instead. The platform will initially apply SVR to recapture liquidation MEV tied to assets like Threshold Bitcoin (tBTC), LBTC, AAVE, and LINK. Additional markets will be phased in as the system scales.

Ernesto Boado, co-founder of BGD Labs, an Aave-focused development group, calls the partnership “innovation on the edge,” uniting Aave, Chainlink, and Flashbots to optimize liquidation algorithms securely.

Revenue Model

During the first six months of the integration, the recaptured MEV will be split between the Aave and Chainlink communities at a 65%/35% ratio. Chainlink then plans to convert its portion into LINK tokens and distribute them to network service providers, reinforcing the Chainlink ecosystem’s utility and liquidity.

What It Means for DeFi

For protocols reliant on oracle data, MEV remains an ongoing challenge. The Aave Chainlink SVR solution demonstrates that responsibly capturing a slice of that value could offer protocols a new revenue stream—thus strengthening their financial standing and user incentives. As Aave continues to evolve, its partnership with Chainlink sets a precedent for other DeFi projects considering similar MEV recapture solutions.

Aave’s integration of Chainlink’s Smart Value Recapture introduces a new standard for reclaiming oracle-related MEV. It not only secures additional revenue for DeFi protocols but also helps create a more sustainable economic environment. This pioneering move, supported by BGD Labs, Aave Chan Initiative, and Flashbots, underscores the collaborative spirit in DeFi to reduce wasted value and bolster protocol treasuries for ongoing development.