[Direct-to-AIP] Aave <> Chainlink SVR v1 activation. Phase 3

Development
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Simple summary

Proposal for activating more Chainlink SVR feeds on Aave Ethereum, given the successful activation of the first batch after the Phase 1 proposal and the second batch on the Phase 2 proposal.



Motivation

The initial two Phases of Aave <> Chainlink SVR activation serve as progressive steps to cover pricing of different asset types with the SVR system: low-size BTC-correlated assets and AAVE+LINK on Phase 1; expanding to all other BTC-correlated assets, plus all ETH-correlated on a smaller pool like Aave v3 Prime with Phase 2.

In parallel, as can be observed on the periodic updates by Chainlink Labs (like this last), the Chainlink/Flashbots off-chain infrastructure and adoption of it by market participants (e.g., more searchers) have been improving steadily, reflected in progressively higher recapture rate.

This led us to propose this new Phase 3, focusing now on all other ETH-correlated assets and USDC on v3 Core after the “soaking” of the feeds on all ETH-correlated on Prime.

This proposal is done via Direct-to-AIP, as no fundamental aspect of Aave <> SVR changes, only implies a pre-approved expansion to new assets.



Specification

In terms of high-level specification, this new Phase follows the same architecture as what was described in the initial SVR Phase 1 post.

Regarding the assets proposed, the full list and rationale are the following.

Aave v3 Ethereum Core

Asset Current feed Post SVR activation feed
WETH ETH/USD Chainlink feed ETH/USD SVR Chainlink feed
wstETH CAPO feed, composing wstETH/stETH exchange rate + ETH/USD Chainlink CAPO feed, composing wstETH/stETH exchange rate + ETH/USD SVR Chainlink
weETH CAPO feed, composing weETH/ETH exchange rate + ETH/USD Chainlink CAPO feed, composing weETH/ETH exchange rate + ETH/USD SVR Chainlink
rsETH CAPO feed, composing rsETH/ETH exchange rate + ETH/USD Chainlink CAPO feed, composing rsETH/ETH exchange rate + ETH/USD SVR Chainlink
osETH CAPO feed, composing osETH/ETH exchange rate + ETH/USD Chainlink CAPO feed, composing osETH/ETH exchange rate + ETH/USD SVR Chainlink
ETHx CAPO feed, composing ETHx/ETH exchange rate + ETH/USD Chainlink CAPO feed, composing ETHx/ETH exchange rate + ETH/USD SVR Chainlink
rETH CAPO feed, composing rETH/ETH exchange rate + ETH/USD Chainlink CAPO feed, composing rETH/ETH exchange rate + ETH/USD SVR Chainlink
cbETH CAPO feed, composing cbETH/ETH exchange rate + ETH/USD Chainlink CAPO feed, composing cbETH/ETH exchange rate + ETH/USD SVR Chainlink
USDC CAPO feed, with USDC/USD Chainlink CAPO feed, with USDC/USD SVR Chainlink

The rationale of this sub-set of new assets is:

  • Cover all ETH-correlated currently listed and USDC, given that both ETH/USD and USDC/USD feeds have been in production for more than 1 month without any problem.
  • Leave other assets like governance tokens (e.g., UNI, MKR), lower-size stablecoins (e.g., USDS), or assets with more sophisticated layers (e.g., PTs) for a follow-up proposal, as they require extra due diligence and setup effort, while not carrying too big a percentage of liquidations volume.
    Additionally, USDT and Ethena-related assets are not included either, for a combination of the previously commented sophisticated layers, lack of liquidations, and finally because of their interdependence (USDe priced based on USDT/USD, which has synchronisation implications for price feeds).


Similar to Phases 1 and 2, the SVROracleSteward contract active for Core will receive support for the new assets, providing redundant protection and allowing for a seamless transition to non-SVR if any very edge scenario arises.



Next steps

After some days in this forum and while we finish our internal security review procedures, we will proceed with the creation of an on-chain AIP of Aave <> Chainlink SVR Phase 3.

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Summary

LlamaRisk supports the proposed SVR Phase 3 rollout. We have observed consistent improvements in the system’s reliability and optimal mechanism functioning throughout previous phases. The successful onboarding of additional searchers has significantly increased recapture rates, generating incremental revenue for Aave’s DAO. Furthermore, the conservative parameter setup has effectively addressed the risks highlighted in our extensive analysis. The system is ready for expansion with minimal incremental risks based on historical risk performance.

We will continue to monitor the system’s performance across Aave’s Core and Prime markets and provide the DAO with regular updates. All financial and technical data related to SVR on Aave is publicly available on our dashboard at svr.llamarisk.com.

Overview of Changes

Phase 3 will substantially expand the SVR mechanism’s asset coverage within Aave’s Core market. This expansion will create more liquidation paths for SVR searchers, enabling a comprehensive approach where the SVR price feed will be adopted for both borrow and collateral-side assets.

Assets & Feeds

The ETH/USD and USDC/USD SVR price feeds launched on Aave’s Prime market have demonstrated stable functioning of their price update mechanisms. The USDC/USD price reported by the SVR feed has not deviated from the original non-SVR USDC/USD price by more than 2 basis points. Additionally, ETH/USD SVR price deviations have remained within a 2% margin, with the most significant deviations occurring during volatile market periods, returning to zero within 1-5 blocks.

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Source: LlamaRisk SVR Dashboard, June 21, 2025

Given these positive performance results, we believe all ETH-correlated assets and the USDC stablecoin on Aave’s Core market are suitable for SVR price feed integration. While the USDT/USD SVR price feed will not be enabled in Phase 3, this asset represents a substantial portion of the Core market and is expected to be included in subsequent phases.

TVL Coverage Increase

The proposed adoption will increase Core market coverage from 2.6% to 58.6% of the total market size. This significant increase in coverage means that most liquidations are now expected to be routed through SVR auctions. The direct result will be incremental revenue for Aave’s DAO, which is anticipated to largely outweigh the incremental risks associated with reliance on this mechanism.

SVR Performance

Over the past months, SVR’s efficiency has steadily improved, accompanied by decreases in key risk metrics such as feed update delays and price deviations. The system has successfully onboarded many searchers actively participating in Flashbots SVR auctions, thereby increasing recapture rates.

Financial Insights

SVR has recaptured $65.5k across 72 liquidation events, contributing $42.6k to Aave’s Treasury. Notably, more than half of this revenue was generated in the last 30 days due to a significant increase in the SVR recapture rate.

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Source: LlamaRisk SVR Dashboard, June 21, 2025

The all-time recapture rate currently stands at 45.11%, averaging 65.66% over the last 30 days. On a per-asset level, liquidated CBTC collateral exhibits the highest recapture rates at 69.6%, followed by WBTC (53.5%) and LINK (50.2%). While assets like WETH and WBTC are not directly priced using SVR yet, they were part of collateral in SVR-liquidated loans and still achieved recapture rates exceeding 40%, signaling substantial potential as SVR expands further.

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Source: LlamaRisk SVR Dashboard, June 21, 2025

Technical & Risk Insights

The currently deployed SVR feeds have exhibited an average inclusion delay of 0.5 blocks, with the maximum delay limited to 6 blocks as defined by the corresponding parameter.

Significant progress has also been made in the number of SVR-connected searchers; 11 have successfully executed SVR liquidations, and potentially more are participating in Flashbots auctions. A larger number of participating liquidators has the potential to recapture larger fractions of the total value while introducing minimal increases to auction resolution times.

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Source: LlamaRisk SVR Dashboard, June 21, 2025

SVR feed inclusion delays have been consistent with expectations, with most updates pushed on-chain within a 0-1 block delay, sometimes even preceding non-SVR feed updates by 1 block. The longest delays were observed for more volatile asset feeds, specifically LINK/USD and AAVE/USD, reaching the 6-block delay threshold and requiring a fallback to the non-SVR reported price update.

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Source: LlamaRisk SVR Dashboard, June 21, 2025

Nonetheless, as indicated by the price deviation metrics, even with longer price update delays, the deviation between SVR and non-SVR price feeds has remained significantly lower than the assets’ liquidation bonuses. This confirms that the risk margin for these feeds is sufficient to cover periods of increased volatility and does not necessitate immediate changes.

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Source: LlamaRisk SVR Dashboard, June 21, 2025

Recommendations

Based on our analysis, we recommend proceeding with the SVR expansion as planned without adjusting any risk-related parameters for Aave’s Core market. Furthermore, the maximum delay parameters of corresponding SVR feeds should also remain unchanged, as supported by the positive deviation metrics.

Given the significantly increased coverage and utilization of the SVR mechanism in Aave’s Core market, we will closely monitor any changes and keep the DAO informed.

Disclaimer

This review was independently prepared by LlamaRisk, a community-led decentralized organization funded in part by the Aave DAO. LlamaRisk is not directly affiliated with the protocol(s) reviewed in this assessment and did not receive any compensation from the protocol(s) or their affiliated entities for this work.

The information provided should not be construed as legal, financial, tax, or professional advice.

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Following the Direct-to-AIP framework, we have created a proposal for this Aave <> Chainlink SVR Phase 3 activation, including all assets we initially proposed.

Voting will start in approximately 24 hours, participate :ghost:
https://vote.onaave.com/proposal/?proposalId=330

4 Likes
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Can we get a dashboard on Dune showing the value recapture now? now that phase 3 is active we need to see how much activity there really is, on AAVE and SVR really.

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There’s this one which has been there since pretty much the start of the recapture.

https://dune.com/pull/chainlink-svr

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yes, we need it updated to include all the new feeds that got flipped on 3 days ago

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Our dashboard includes the latest Phase 3 assets:

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ZERO SVR capture since it has been added to over 50% of AAVE liquidations?

how active is aave really?

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Hello everyone, Raoul from Chainlink Labs. These past two weeks, due to low market volatility, there were very few liquidations on SVR-activated markets, which is reflected in the fact that no OEV recapture events occurred. This is expected behavior for SVR during low volatility when liquidations are infrequent and small, and thereby minimally profitable for searchers.

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Hello everyone, Raoul from Chainlink Labs.

For the period of this past week (2025-07-01 - 2025-07-07), Chainlink Labs transferred 0.18415 ETH to the Aave DAO, representing 65% of the recaptured OEV for this period, per the agreed-upon SVR fee split.

During this period, 10 liquidations occurred on the SVR-activated markets of which 3 liquidations in 3 backruns went through SVR making the absolute recapture chance 30.00%.

~$1,070.54 USD equivalent was paid in total liquidation bonuses on liquidations on the SVR-activated markets, of which ~$1,046.59 was paid to searchers on the liquidations that went through SVR, making the dollar recapture chance 97.76%.

Of the liquidation bonus paid to SVR searchers, ~$650.82 was recaptured in ETH equivalent at the time of the recapture, making the recapture rate 62%.

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Hello everyone, Raoul from Chainlink Labs.

For the period of this past week (2025-07-08 - 2025-07-14), Chainlink Labs transferred 0.28668 ETH to the Aave DAO, representing 65% of the recaptured OEV for this period, per the agreed-upon SVR fee split.

During this period, 20 liquidations occurred on the SVR-activated markets of which 4 liquidations in 4 backruns went through SVR making the absolute recapture chance 20.00%.

~$3,152.69 USD equivalent was paid in total liquidation bonuses on liquidations on the SVR-activated markets, of which ~$2,971.39 was paid to searchers on the liquidations that went through SVR, making the dollar recapture chance 94.25%.

Of the liquidation bonus paid to SVR searchers, ~$1,263.56 was recaptured in ETH equivalent at the time of the recapture, making the recapture rate 43%.

2 Likes
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Hey everyone, Raoul from Chainlink Labs.

For the period of this past week (2025-07-15 - 2025-07-21), Chainlink Labs transferred 3.66034 ETH to the Aave DAO, representing 65% of the recaptured OEV for this period, per the agreed-upon SVR fee split.

During this period, 37 liquidations occurred on the SVR-activated markets of which 13 liquidations in 13 backruns went through SVR making the absolute recapture chance 35.14%.

~$36,308.91 USD equivalent was paid in total liquidation bonuses on liquidations on the SVR-activated markets, of which ~$34,311.21 was paid to searchers on the liquidations that went through SVR, making the dollar recapture chance 94.50%.

Of the liquidation bonus paid to SVR searchers, ~$19,743.54 was recaptured in ETH equivalent at the time of the recapture, making the recapture rate 58%.

2 Likes
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Hey everyone, Raoul from Chainlink Labs.

For the period of this past week (2025-07-22 - 2025-07-28), Chainlink Labs transferred 9.29245 ETH to the Aave DAO, representing 65% of the recaptured OEV for this period, per the agreed-upon SVR fee split.

During this period, 42 liquidations occurred on the SVR-activated markets of which 23 liquidations in 18 backruns went through SVR making the absolute recapture chance 54.76%.

~$64,181.77 USD equivalent was paid in total liquidation bonuses on liquidations on the SVR-activated markets, of which ~$63,444.16 was paid to searchers on the liquidations that went through SVR, making the dollar recapture chance 98.85%.

Of the liquidation bonus paid to SVR searchers, ~$53,153.70 was recaptured in ETH equivalent at the time of the recapture, making the recapture rate 84%.

3 Likes
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Hey everyone, Raoul from Chainlink Labs.

For the period of this past week (2025-07-29 - 2025-08-04), Chainlink Labs transferred 49.62350 ETH to the Aave DAO, representing 65% of the recaptured OEV for this period, per the agreed-upon SVR fee split.

During this period, 93 liquidations occurred on the SVR-activated markets of which 67 liquidations in 38 backruns went through SVR making the absolute recapture chance 72.04%.

~$343,248.85 USD equivalent was paid in total liquidation bonuses on liquidations on the SVR-activated markets, of which ~$342,015.16 was paid to searchers on the liquidations that went through SVR, making the dollar recapture chance 99.64%.

Of the liquidation bonus paid to SVR searchers, ~$268,239.07 was recaptured in ETH equivalent at the time of the recapture, making the recapture rate 78%.

2 Likes
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Hey everyone, Raoul from Chainlink Labs.

For the period of this past week (2025-08-05 - 2025-08-11), Chainlink Labs transferred 20.33109 ETH to the Aave DAO, representing 65% of the recaptured OEV for this period, per the agreed-upon SVR fee split.

During this period, 36 liquidations occurred on the SVR-activated markets of which 24 liquidations in 23 backruns went through SVR making the absolute recapture chance 66.67%.

~$184,241.20 USD equivalent was paid in total liquidation bonuses on liquidations on the SVR-activated markets, of which ~$183,862.35 was paid to searchers on the liquidations that went through SVR, making the dollar recapture chance 99.79%.

Of the liquidation bonus paid to SVR searchers, ~$127,610.68 was recaptured in ETH equivalent at the time of the recapture, making the recapture rate 69%.

Continuing in the edit as I reached the posting limit:

For the period of this past week (2025-08-12 - 2025-08-18), Chainlink Labs transferred 15.32793 ETH to the Aave DAO, representing 65% of the recaptured OEV for this period, per the agreed-upon SVR fee split.

During this period, 70 liquidations occurred on the SVR-activated markets of which 51 liquidations in 37 backruns went through SVR making the absolute recapture chance 72.86%.

~$130,487.84 USD equivalent was paid in total liquidation bonuses on liquidations on the SVR-activated markets, of which ~$130,201.23 was paid to searchers on the liquidations that went through SVR, making the dollar recapture chance 99.78%.

Of the liquidation bonus paid to SVR searchers, ~$106,759.46 was recaptured in ETH equivalent at the time of the recapture, making the recapture rate 82%.

Continuing in the edit as I reached the posting limit:

For the period of this past week (2025-08-19 - 2025-08-25), Chainlink Labs transferred 62.18729 ETH to the Aave DAO, representing 65% of the recaptured OEV for this period, per the agreed-upon SVR fee split.

During this period, 73 liquidations occurred on the SVR-activated markets of which 64 liquidations in 46 backruns went through SVR making the absolute recapture chance 87.67%.

~$472,274.41 USD equivalent was paid in total liquidation bonuses on liquidations on the SVR-activated markets, of which ~$472,351.49 was paid to searchers on the liquidations that went through SVR, making the dollar recapture chance 100.00%.

Of the liquidation bonus paid to SVR searchers, ~$432,233.32 was recaptured in ETH equivalent at the time of the recapture, making the recapture rate 92%.

Continuing in the edit as I reached the posting limit:

Hey everyone, Raoul from Chainlink Labs.

For the period of this past week (2025-08-26 - 2025-09-01), Chainlink Labs transferred 7.36288 ETH to the Aave DAO, representing 65% of the recaptured OEV for this period, per the agreed-upon SVR fee split.

During this period, 49 liquidations occurred on the SVR-activated markets of which 33 liquidations in 27 backruns went through SVR making the absolute recapture chance 67.35%.

~$70,251.75 USD equivalent was paid in total liquidation bonuses on liquidations on the SVR-activated markets, of which ~$64,157.77 was paid to searchers on the liquidations that went through SVR, making the dollar recapture chance 91.33%.

Of the liquidation bonus paid to SVR searchers, ~$49,711.38 was recaptured in ETH equivalent at the time of the recapture, making the recapture rate 77%.

Continuing in the edit as I reached the posting limit:

For the period of this past week (2025-09-02 - 2025-09-08), Chainlink Labs transferred 0.82068 ETH to the Aave DAO, representing 65% of the recaptured OEV for this period, per the agreed-upon SVR fee split.

During this period, 12 liquidations occurred on the SVR-activated markets of which 10 liquidations in 10 backruns went through SVR making the absolute recapture chance 83.33%.

~$8,556.67 USD equivalent was paid in total liquidation bonuses on liquidations on the SVR-activated markets, of which ~$6,196.04 was paid to searchers on the liquidations that went through SVR, making the dollar recapture chance 72.41%.

Of the liquidation bonus paid to SVR searchers, ~$5,517.68 was recaptured in ETH equivalent at the time of the recapture, making the recapture rate 89%.

Continuing in the edit as I reached the posting limit:

For the period of this past week (2025-09-16 - 2025-09-22), Chainlink Labs transferred 67.11893 ETH to the Aave DAO, representing 65% of the recaptured OEV for this period, per the agreed-upon SVR fee split.

During this period, 96 liquidations occurred on the SVR-activated markets of which 39 liquidations in 17 backruns went through SVR making the absolute recapture chance 40.62%.

~$630,623.40 USD equivalent was paid in total liquidation bonuses on liquidations on the SVR-activated markets, of which ~$608,557.88 was paid to searchers on the liquidations that went through SVR, making the dollar recapture chance 96.50%.

Of the liquidation bonus paid to SVR searchers, ~$431,944.23 was recaptured in ETH equivalent at the time of the recapture, making the recapture rate 71%.

Continuing in the edit as I reached the posting limit:

For the period of this past week (2025-09-23 - 2025-09-29), Chainlink Labs transferred 23.10998 ETH to the Aave DAO, representing 65% of the recaptured OEV for this period, per the agreed-upon SVR fee split.

During this period, 103 liquidations occurred on the SVR-activated markets of which 82 liquidations in 25 backruns went through SVR making the absolute recapture chance 79.61%.

~$164,678.42 USD equivalent was paid in total liquidation bonuses on liquidations on the SVR-activated markets, of which ~$163,944.32 was paid to searchers on the liquidations that went through SVR, making the dollar recapture chance 99.55%.

Of the liquidation bonus paid to SVR searchers, ~$140,570.24 was recaptured in ETH equivalent at the time of the recapture, making the recapture rate 86%.

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