Ethereum stake income permanently declining? Aava integrates Chainlink SVR or reshapes the Decentralized Finance landscape

Ethereum lending protocol Aave proposed to integrate Chainlink's Smart Value Recapture (SVR) technology, which aims to recover MEV in the liquidation process and redistribute it to protocol users and ecosystems, conservatively estimating that 40% of the leaked MEV can be recovered, or the amount may reach k$10,000. This pilot program may redefine the distribution model of MEV and reduce the benefits of Ethereumvalidators. (Synopsis: Aave and Lido's total TVL exceeded $70 billion for the first time, occupying half of the world in Decentralized Finance) (Background supplement: The Trump family increases the position Decentralized Finance again!) Buy ONDO, AAVE, ENAToken, position exceeded 8k million magnesium) Ethereum lending protocol Aave recently proposed a community interest survey, planning to integrate Oracle Machine leader Chainlink's new feature - Smart Value Recapture (SVR). This feature is designed to reclaim non-malicious maximal extractable value (MEV), helping Aave recover MEV from the liquidation process and redistribute it to the Aave ecosystem for the benefit of users. The proposal received a generally positive response from the community, believing that the partnership would bring significant economic opportunities to both the Aave and Chainlink communities. Note: Maximal extractable value (MEV) refers to the maximum profit that a block producer (such as Miner or validators) can make by reordering, inserting, or deleting exchanges within the blocks they produce. Therefore, MEV is one of the sources of income for Block producers. MEV behavior may cause user transaction costs to increase, transaction failures or Slippage to increase, affecting the user experience. Very bullish development for $LINK and $AAVE with the introduction of @Chainlink’s new non-toxic MEV recapture solution Chainlink SVR (Smart Value Recapture)—designed to recapture liquidation MEV in Decentralized Finance—will feature a revenue split between integrating Decentralized Finance protocols and the… pic.twitter.com/sSTabhrH8c — Zach Rynes | CLG (@ChainLinkGod) December 23, 2024 Reasons to integrate SVR According to the proposal, Aave's reasons for integrating SVR include: Reduce MEV churn: MEV issues lead to an uneven distribution of Aave's liquidation rewards, with too much profit going to Block producers, while Searchers and protocol users who actually perform liquidation receive less rewards. Improving protocol economics: Through SVR, Aave can recycle these MEVs, enhance the economics of the protocol, and redistribute the value of the recovery to the Aave community and users. SVR works on Flashbots' MEV-Share infrastructure, and through the auction mechanism, the rights to follow-up operations after the price Oracle Machine update are sold to searchers. The successful bidder needs to return part of the value to the protocol, thus realizing the recovery of the MEV. The following diagram outlines how the SVR integration works in Aave V3 on Ethereum: The process in the diagram works as follows: The price report generated by Chainlink Data DON is transmitted twice: once through the public mempool to update the standard price data (such as an existing process), and once through the RPC endpoint of Flashbots Protect to the SVR price data contract. Next, MEV-Share plays a key role. The protocol allows searchers to bid for follow-on deal opportunities with price Oracle Machine updates and bundle those deals to pass on to Block producers. Block producers select the highest bidder to include the relevant transactions in the Block. If there is no hunter bidding, the price update will go directly to the chain, but will not include clearing transactions. When the price update and clearing transaction are successfully listed on the chain, SVR data will update the price and use the price to complete the clearing operation of the relevant part. Much of the value generated by these operations will be recovered by Aave and Chainlink, boosting the protocol's revenue. If the MEV-Share system fails, the Aave data contract activates a fallback mechanism to obtain the price from the standard Chainlink price data, ensuring that the protocol operation is not interrupted. Impact on Aave and Chainlink According to Aave's proposal, the recovered MEV value will be received in ETH, which is consistent with the situation where liquidated collateral assets are typically denominated in ETH. After the completion of the pilot program, one of Aave's goals is to build a more sophisticated system that allows for the receipt of multiple forms of recovered assets. In terms of the estimated size of the recovery value, according to Chainlink, conservative estimates can recover at least 40% of the leaked MEV, which may reach the scale of kk dollars. However, the exact amount of recovery depends on the scope of assets to which the scenario is applied, and these estimates are based on a hypothetical scenario of enabling SVR across all Aave assets and are not intended for the pilot phase. Regarding the distribution of value, Aave stated that after the end of the pilot phase, the specific allocation of recovered value will be discussed separately. The core of this proposal is limited to the operation and technical details of the system. At present, the initial discussions between Aave and Chainlink Labs suggest that within the first six months of the pilot program, 65% of the recovery value will be allocated to Aave DAO and 35% to the Chainlink community ecology; After six months, the distribution will be adjusted to 60% and 40%, with Chainlink's share mainly used to cover infrastructure-related costs. The final allocation ratio is subject to approval by Aave Community Governance. In addition, Aave expects the recovered value to be used to enhance user benefits, such as providing incentives for upcoming Umbrella stakers. For Ethereumvalidators, if Chainlink's SVR technology is widely used in multiple decentralized finance protocols, it may reduce validators' MEV earnings, resulting in lower stake returns. This could change the economic model of validators so that they have to consider other strategies for supplementing earnings. At the same time, as the Decentralized Finance protocol captures more MEV and redistributes it to ecosystem users, the governance tokens of these protocols may increase in value due to their fundamental enhancements, which makes the governance token or a "hedging tool" for Ethereumvalidators to balance the decline in stake returns in the face of future stake returns. Part of the Ethereum test...