A new oracle-developed system dubbed OEV is looking to put measures in place that will help DApps recover funds lost to maximal extractable value (MEV).
A new oracle method seeks to recover the extra money users of decentralized applications (DApps) pay to miners, known as maximal extractable value (MEV). It is the highest profit a miner can get from transactions that are in motion when creating a block on a blockchain network.
The maximum value that may be taken from block production above the typical block reward and gas fees is known as MEV. The MEV includes, among other things, arbitrage and liquidation fees that could reach millions and are frequently taken by block producers.
Oracle Extractable Value (OEV), a new Oracle solution, claims to change this by giving the extra money to the DApp rather than to outside parties and block makers.
API3, a Web3 decentralized oracle service provider, has developed the idea of OEV, which aims to provide decentralized finance (DeFi) protocols with an extra revenue stream.
Participating in blockspace auctions, which were frequently conducted by third parties and block producers, is the conventional method of obtaining MEV.
However, OEV-enabled oracles conduct auctions off-chain and sell the right to extract on-chain value to the same third-party searchers who previously bid for the blockspace.
Burak Benligiray, key technical team lead at API3, discussed the operation of the OEV oracles and how it will benefit the DeFi ecosystem in the following way :
“OEV auctions will happen off-chain, which means even when there is a lot of value being extracted, gas prices will not be affected. Furthermore, proceeds of blockspace auctions are claimed by block validators, while OEV proceeds can be redirected to the dApps that create them.”
Flashbot data indicates that block producers have amassed around $653 million in MEV. Flashbots is a centralized organization committed to effective and transparent MEV extraction.
The earnings from these auctions are subsequently returned to the DApps that originally created the value using OEV-enabled data feeds.
By precisely updating when necessary, the OEV-enabled data feeds not only assist in collecting the MEV but also minimize it, achieving a zero deviation threshold.
Several networks that are compatible with the Ethereum virtual machine (EVM), including Ethereum, Polygon, Arbitrum, Optimism, BNB Chain, Avalanche, Milkomeda, Fantom, and many others, offer OEV oracle services.
