Blockchain project Uma has launched a solution called Oval. It aims to enable DeFi protocols to capture the value that appears during oracle updates by leveraging oracle extractable value, a type of MEV that is generated when a protocol requests a price update from an oracle.
MEV involves extracting value by manipulating the order of transactions in blocks on the Ethereum network, often with the help of automated bots. This type of MEV arises from lack of liquidity on various decentralized exchanges or from out-fronting each other under certain market conditions.
As Uma pointed out, there is one type of MEV related to oracles: In the decentralized finance niche and protocols such as lending and borrowing, oracles are very important as they provide external data, such as price feeds, to smart contracts. MEV opportunities may be created when an Oracle update occurs, such as a price feed update. For example, if a lending protocol relies on an oracle for up-to-date asset prices, there may be a short post-update window in which traders can leverage this information before the market reacts.
This is where OEV comes into play.
“MEV is a major issue in Ethereum, with tens of millions of dollars extracted every year. The protocol requires price updates, so OEV is a big part of that,” said Uma co-founder Hart Lambur. “Oval solves a real problem by enabling protocols to capture OEV. It was a privilege to work with the best-in-class team at Flashbots to bring Oval to mainnet.”
Oval’s goal is to enable protocols such as lending to leverage this solution to retain and benefit from this value without losing it to bots. In this setup, MEV seekers participate in an auction system, bidding for the right to access data from Chainlink oracles associated with a specific protocol. Auction proceeds benefit the protocol.
Flashbot Collaboration
The launch of Oval is a joint effort between Uma and Flashbots, one of the leading MEV research and development companies. “Oval is building on these insights to finally return Oracle Extractable Value (OEV) back to DeFi protocols and users. We look forward to their support on this journey,” said Hasu, Head of Strategy at Flashbots.
Uma launched in 2017 as an Ethereum-based DeFi protocol focused on synthetic assets. Currently, we mainly operate products that allow users to verify on-chain data through economic incentives and dispute resolution. Oval will add additional functionality to the existing product stack.
According to The Block’s pricing page, the Uma token has surged 230% since hinting at Oval’s launch last week, rising from $2 to its current price of over $6.60. Uma’s market capitalization reached $510 million, its highest since 2022.
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