Research Summary
The report discusses the potential of API3, an underdog in the Oracle sector, which is pioneering a novel solution for capturing Oracle Extractable Value (OEV). The report highlights API3’s innovative approach to OEV capture, its competitive advantages, and how it compares to other oracle projects like Pyth, Chainlink, and UMA.
Key Takeaways
API3’s Innovative Approach to OEV Capture
- First-Party Oracle: API3 is built as a next-gen bridgeless first-party oracle solution. It allows API providers to run their own nodes directly within their existing cloud services or servers, eliminating the need for middlemen and reducing fees.
- OEV Capture: API3’s OEV capture helps protocols recover value typically lost to miners and improve performance. It can recapture value lost to Miner Extractable Value (MEV) and redirect it back into DeFi protocols.
API3’s Competitive Advantages
- Value Accrual for Token Holders: API3’s approach could lead to more value for token holders as more projects begin to realize the benefits of API3. The report suggests that API3’s OEV capture could potentially recover at least $100M in MEV for Aave alone.
- Partnerships: API3 has recently partnered with Manifold and DWF for marketing and business development partnerships, which could further enhance its market position.
Comparison with Other Oracle Projects
- Against Pyth and Chainlink: While Pyth and Chainlink have seen recent gains, API3 is poised to leapfrog the competition with its OEV capture technology.
- Against UMA: Unlike UMA’s Oval solution, which is a Chainlink/Flashbots wrapper, API3 has vertically integrated Oracle infrastructure for maximum decentralization and value capture. API3’s solution is also more flexible and less risky than UMA’s.
Actionable Insights
- Monitor API3’s Progress: Given its innovative approach to OEV capture and its potential to disrupt the Oracle sector, it would be prudent to keep a close eye on API3’s developments and partnerships.
- Research the Potential of OEV Capture: As OEV capture could potentially recover significant value lost to MEV, further research into this technology and its implications for DeFi protocols could be beneficial.
- Consider the Implications for Oracle Sector: API3’s approach could potentially reshape the Oracle sector. Stakeholders should consider the potential impacts of this on existing oracle projects and the broader DeFi ecosystem.
