Research Summary
The report discusses the concept of Oracle Extractable Value (OEV), a type of Miner Extractable Value (MEV) that focuses on the impact of Oracle updates in blockchain systems. It also explores the role of API3, an Oracle project that aims to create a financially viable model for Oracle services, and the launch of the OEV network.
Key Takeaways
Understanding Oracle Extractable Value (OEV)
- Concept of OEV: Oracle Extractable Value (OEV) is a specific type of Miner Extractable Value (MEV) that focuses on the impact of Oracle updates or the lack thereof in blockchain systems. It involves the strategic prioritization of Oracle transactions to extract value, particularly in scenarios where Oracles provide critical market data or trigger significant on-chain events like liquidations.
API3’s Role in the OEV Network
- API3’s Approach: API3 is an Oracle project that aims to create a financially viable model for Oracle services. It places significant emphasis on identifying self-sustaining niches, which led to the launch of the OEV network. The network focuses on creating a model where the provision of Oracle services can be profitable.
Transitioning to a Competitive Oracle Model
- Competitive Oracle Model: The report suggests transitioning from Oracles pushing data blindly to a competitive model where updates are made when most valuable. This involves creating a market for Oracle updates, allowing individuals to bid on the opportunity to update prices. This model aims to provide more timely and accurate data, potentially improving the execution of liquidations and other dependent functions.
Role of API3 Tokens in the OEV Network
- API3 Tokens: In the OEV network, the winning bidder is charged an additional 10% fee on top of their bid, which goes directly to API3. Half of this fee goes to API3 as the auction host and the other half is distributed among the Oracle providers. API3 utilizes its share of the fees for token buybacks and burns, aiming to directly reinvest revenue into the API3 token ecosystem.
First-Party Data Source Model
- First-Party Oracles: API3 OEV Network uses a first-party data source model. This model directly involves the data source in the Oracle process, allowing for verifiable and direct data provision. This method significantly reduces the number of entities a consumer needs to trust and cuts down on the overall cost by removing intermediary fees.
Actionable Insights
- Exploring the OEV Network: Businesses interested in blockchain technology should explore the OEV network and its potential for creating a profitable model for Oracle services.
- Understanding the Role of API3 Tokens: Investors and businesses should understand the role of API3 tokens in the OEV network, particularly their use in token buybacks and burns, which aim to reinvest revenue into the API3 token ecosystem.
- Considering First-Party Oracles: Businesses should consider the benefits of first-party Oracles, which directly involve the data source in the Oracle process, reducing trust requirements and costs.
