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API3's OEV Network Transforms Lending Protocols with Next-Generation Oracle Solution

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The OEV Network was recently launched by API3 and is available on 37 networks, marking a significant milestone in the next evolution of oracle infrastructure used to secure DeFi protocols.

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API3's OEV Network Transforms Lending Protocols with Next-Generation Oracle Solution

The OEV Network is a major upgrade for the API3 Oracle Stack and is designed to address the pervasive issue of maximal extractable value (MEV) on lending protocols, which has historically led to millions of dollars of lost value each year. By offering lending protocols a solution to recapture this value, the OEV Network not only enhances the financial viability of these protocols but will likely disrupt the existing business models in this competitive onchain industry.

The Limitations of Current Oracle Solutions

MEV is unavoidable and can be understood as a hidden tax on protocols and users because it increases transaction costs, reduces liquidity provider profitability, and negatively impacts the user experience. On lending protocols, MEV arises when informed actors such as searchers or bots identify liquidation opportunities after price updates. MEV that arises in such a way is referred to as oracle extractable value, or OEV.

Existing oracle solutions are blind to the value that their updates create and play a major role in the value that leaks out of lending protocols. The OEV Network changes the game when it comes to how data is brought onchain by creating an efficient market for oracle updates. Instead of updating blindly under certain conditions, like push oracles, or allowing anyone to update for free, like pull oracle solutions, the OEV Network creates a market around oracle transactions giving the rights to price updates to those who are willing to bid the highest for them.

By creating a competitive market for oracle transactions the OEV Network allows every lending protocol to flip the MEV supply chain back to themselves, effectively sealing the leaks caused by traditional oracle infrastructure.

API3’s Solution: OEV Network

API3 built the OEV Network as a vertically integrated MEV solution, operating seamlessly with all data feeds on the API3 Market. The OEV Network introduces modern tooling that effectively eliminates the "leaking plumbing" associated with oracle infrastructure, ensuring that value tied to price updates does not leak out of the protocol. By integrating directly with these data feeds, the OEV Network not only recaptures the value leaking from lending protocols but also improves the latency of these data feeds when it matters most.

With OEV Network, API3 is the first oracle solution to create a revenue stream for the protocols that it secures. By fundamentally changing the business model of oracle providers, API3 moves from being a passive data provider to an active participant in ensuring the financial success of lending protocols. By transforming value loss into financial gains, the OEV Network protects protocols from the negative impact of MEV and opens up new avenues for innovation.

The revenue generated from the OEV Network could catalyze various innovations within lending protocols:

  • Increasing Yields: Higher returns for liquidity providers could lead to expanded investment activities and growth.
  • Lowering Fees: Reduced costs make platforms more attractive to users, potentially boosting adoption rates.
  • Expanding Asset Offerings: Protocols could diversify and broaden their range of financial products.
  • Funding Innovation: Increased funds could be allocated to new developments, research, and public goods, pushing the boundaries of what is possible in DeFi.

The Future Looks Bright for Onchain Lending

The integration of the OEV Network is set to redefine the boundaries of what’s possible within the realm of onchain finance. API3’s next-generation Oracle Stack not only addresses current inefficiencies but also paves the way for new avenues of growth and a more sustainable future for onchain lending.

By effectively recapturing MEV losses, the OEV Network ensures that value generated within these protocols is retained and reinvested within the ecosystem itself, rather than being leaked out of the protocol. This internal redistribution of value will likely catalyze a surge in innovation, as protocols are able to reinvest in their own systems and services.

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