Hart Lambur introduces Oval, a new DeFi primitive for efficient liquidations in lending markets. They discuss the inefficiencies of current liquidations and MEV share from Flashbots. Other topics include MEV impact on DeFi, Oval mechanism, adoption, Uniswap v4, and future implications.
Read more
AI Summary
AI Chapters
Episode notes
auto_awesome
Podcast summary created with Snipd AI
Quick takeaways
MEV share resolves the inefficiencies and centralization risks associated with MEV in the DeFi ecosystem, improving market efficiency and reducing value leakage.
Oval ensures that captured MEV is not lost to arbitrageurs or validators, promoting a more decentralized financial ecosystem and prioritizing transparency, audibility, and trust.
The adoption of the Oval Mechanism in protocols like Aave and Compound could significantly increase their revenue and enhance capital efficiency, while applying similar mechanisms could capture additional value and improve market efficiency in other contexts of decentralized finance.
Deep dives
The MEV share protocol enables order flow auctions to address MEV leakage
MEV share is an order flow auction protocol that allows applications to capture and distribute MEV. It introduces the MEV share node, which conducts order flow auctions to match searchers' bids with users' transactions. The protocol allows customization of privacy levels and distribution of surplus value. MEV share resolves the inefficiencies and centralization risks associated with MEV in the DeFi ecosystem, improving market efficiency and reducing value leakage.
The Oval protocol offers a solution to the MEV problem in lending markets
Oval is a new mechanism introduced to tackle MEV leakage in DeFi's lending markets. By incorporating an order flow auction through MEV share, Oval allows lending protocols to capture and redistribute MEV. The protocol ensures that captured MEV is not lost to arbitrageurs or validators, promoting a more decentralized financial ecosystem. Oval's design prioritizes transparency, audibility, and trust to assure lending markets they will receive their share of MEV revenue.
MEV share and Oval mitigate centralization risks and enable sustainable revenue models
MEV share and Oval address the centralization risks posed by MEV in the DeFi ecosystem. MEV share aims to decentralize its operations through SWAVE, a platform for private smart contracts and credible off-chain computation. Oval's design prevents the concentration of MEV revenue by ensuring captured value is redirected to DeFi applications and their users. By leveraging MEV as a revenue stream, DeFi protocols can promote sustainability, facilitate efficient markets, and offer improved services to their users.
The Oval Mechanism: Capturing MEV in DeFi Protocols
The Oval Mechanism is a solution for capturing Miner Extractable Value (MEV) in decentralized finance (DeFi) protocols. It works by running an auction for trading rights on chain-link price updates. Liquidity providers and users are required to participate in the auction to access the updated price feeds. This enables the protocols to set a market-clearing price for transactions and prevent the leakage of MEV. The captured MEV can then be utilized by the protocols for various purposes, such as revenue generation, better customer service, or reimbursement of users. The adoption of the Oval Mechanism in popular protocols like Aave and Compound could significantly increase their revenue and enhance capital efficiency.
Expanding the Oval Mechanism to Other Applications
The Oval Mechanism follows a pattern that can be applied to other contexts in decentralized finance. This pattern involves creating a gate or appendage to existing protocols, which allows for the extraction and redistribution of value. Similar mechanisms have been proposed for Uniswap V4 to address impermanent loss and enhance liquidity provider (LP) returns. By applying this pattern, DeFi protocols can capture additional value and improve market efficiency. Looking ahead, the adoption of this pattern in DeFi and layer two solutions, as well as its integration with other decentralized applications, may lead to increased revenue and expanded opportunities for protocols and users.
Today on the show, we’re talking about Oval, a new DeFi primitive that Hart Lambur from UMA is introducing to the world of DeFi’s biggest lending markets. Billions of dollars have been liquidated from protocols like Aave, Compound, and MakerDAO over the years, and these liquidations have been extremely inefficiently priced, due to reasons! Reasons that we will discuss here on the show today.
Hasu also joins us on this conversation today to discuss the way that MEV share from Flashbots is a part of this conversation, and he helps illuminate what this means for DeFi going forward as a whole.