Blockchain project Uma has rolled out a solution called Oval, which aims to enable DeFi protocols to capture value that emerges during oracle updates by using what is known as oracle extractable value — a type of MEV generated when protocols request price updates from an oracle.
MEV involves extracting value by manipulating the transaction order in a block on the Ethereum network, often using automated bots. This type of MEV arises from the lack of liquidity between different decentralized exchanges or from the fact that they are ahead of each other under certain market conditions.
There is one type of MEV related to oracles, as Uma notes. In the decentralized finance niche – and in protocols such as lending or borrowing – oracles are crucial because they provide external data, such as price feeds, to smart contracts. When an oracle update occurs, such as a price feed update, it can create MEV opportunities. For example, if a credit protocol relies on an oracle for the latest asset prices, there may be a short period after the update during which a trader can use this information before the market reacts.
This is where OEV comes into play.
“MEV is a major problem for Ethereum, with tens of millions of dollars being withdrawn annually. OEV accounts for a large part of this, because protocols need price updates,” said Hart Lambur, co-founder of Uma. “Oval is tackling a real problem by helping protocols capture OEV. It was a privilege to work with the best team at Flashbots to bring Oval to the mainnet.”
Oval’s goal is to enable protocols, such as lending, to use this solution to retain and benefit from this value rather than losing it to bots. In this setup, MEV seekers participate in an auction system, bidding for the right to access data from Chainlink oracles related to a particular protocol. The auction proceeds will then benefit the protocol.
Flashbots collaboration
The Oval rollout is a collaboration between Uma and Flashbots, one of the leading MEV research and development companies. “Oval is building on that insight to finally return Oracle Extractable Value (OEV) to DeFi protocols and their users. We look forward to supporting them on that journey,” said Hasu, Strategy Lead for Flashbots.
Uma started in 2017 as an Ethereum-based DeFi protocol focused on synthetic assets. Now it primarily operates a product that allows users to verify data on-chain through economic incentives and dispute resolution. Oval would further expand the existing product stack.
The Uma token has seen a 230% surge after hinting at Oval’s release last week, rising from $2 to its current price of over $6.60, according to The Block’s Price Page. Uma’s market capitalization has reached almost $510 million, the highest since 2022.
