Hello everyone, Raoul from Chainlink Labs.
As mentioned in this thread, Chainlink Labs will send Aave’s portion of the collected fees from Chainlink SVR (Smart Value Recapture) to the Collector V2 address on a weekly basis from the Gnosis Safe contract where fees accrue. The amount sent will align with the 6-month 65/35 fee split defined in the ARFC Addendum. At the same time, on a weekly basis, we will provide a financial update on the Aave forum to provide context on the payment and provide data for the treasury council. This post is the first update.
For the first three months of integration, we will also separately provide a performance report each month as we build toward a longer-term reporting solution. This gives insight into SVR’s in-production performance, including what we believe to be relevant key performance indicators.
To provide additional context for this first update, Aave activated Chainlink SVR on the Aave V3 Ethereum deployment on March 29, starting with an initial collection of markets including LBTC, tBTC, LINK, and AAVE. These 4 markets were responsible for approximately 5% of the total liquidation bonuses were paid out across all of Aave V3 markets since the activation of SVR which was roughly $4M. This initial activation serves as a pilot focused on validating the security and reliability of SVR on smaller markets, before pursuing expansion to additional asset markets such as ETH, WBTC, etc and maximizing the recapture rates.
Amid heightened market volatility following SVR’s activation, Aave V3 positions were successfully liquidated through SVR without any technical issues or bad debt accrual for the Aave protocol. Given the initial limited scope of the pilot markets, we saw positive results with SVR performance and expect continued growth as additional markets are added. With this validation of SVR’s security and reliability, we are now shifting focus to improving the long-term recapture rates, which can be achieved through the following methods:
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Aave can expand its usage of SVR to include more assets markets in the Aave V3 Ethereum deployment to create a more consistent searcher experience and increase the total profit opportunity for searchers (and the Aave DAO) from SVR. Currently, ~5% of addressable OEV on Aave V3 Ethereum is covered by SVR, as measured by TVL, limiting the incentive for searchers to participate in SVR.
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Chainlink Labs is continuing its outreach to searchers to increase awareness and drive participation in SVR. Aave expanding its use of SVR for additional markets would accelerate this process.
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Chainlink Labs will continue to onboard searchers with hands-on support, including providing code samples and work on creating an open-source, SVR-compatible searcher bot that anyone in the community can run, reducing onboarding friction.
Through a combination of the above efforts, we expect SVR’s recapture efficiency to increase as more of Aave’s OEV is covered by Chainlink SVR and more searchers are onboarded and become familiar with SVR.
For the period of this past week (March 29, 2025 - April 7, 2025), Chainlink Labs transferred 6.167 ETH to the Aave DAO, representing 65% of the recaptured OEV for this period, per the agreed-upon SVR fee split. During this period, 105 liquidations occurred on the SVR-activated markets of which 31 liquidations in 23 backruns went through SVR. ~$134,276 USD equivalent was paid in total liquidation bonuses on liquidations on the SVR-activated markets, of which ~$66,050 was paid to searchers on the liquidations that went through SVR, making the recapture chance 49.19%. Of the liquidation bonus paid to SVR searchers, ~$16,350 was recaptured in ETH equivalent at the time of the recapture, making the recapture rate 24.75%. As we pivot from initial testing, to further improving the financial performance, we expect the recapture rate to continue climbing through the effort outlaid above.