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.
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.
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.
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.
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.
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.
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.
