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Blockchain oracle UMA has launched Oval, a solution that lets Decentralized Finance (DeFi) lending protocols capture Oracle Extractable Value (OEV) by auctioning the right to liquidate positions.
Uma Oval to Serve DeFi Protocols
Precisely, with Uma Oval, these DeFi protocols will be allowed to tap the value that emerges during Oracle updates via the OEV.
This particular OEV is a type of MEV created whenever protocols for a price update tease an oracle. Ordinarily, MEVs are involved in the extraction of value through the manipulation of transaction order in a block on the Ethereum (ETH) blockchain.
The operation of the MEV is usually completed with the use of automated bots. This MEV could be a product of either a lack of liquidity across several decentralized exchanges or from their front-running each other under certain market conditions. As captured by UMA, there is a type of MEV that is largely dedicated to oracles.
Lending protocols lose hundreds of millions of dollars to MEV.
It's time to capture that value.
Built with @chainlink Data Feeds and Flashbots, Oval is now live. 🥚 🧵 pic.twitter.com/lPJRuBS8Gt
— UMA 🥚 (@UMAprotocol) January 23, 2024
Oracles play a crucial role in the DeFi niche as well as in protocols that are associated with lending and borrowing. Their roles include the provision of external data like price feeds and even smart contracts. In a situation where there is an Oracle update, like a price feed, it is likely to create MEV opportunities.
Therefore, if a lending protocol depends on an oracle for an update on the prices of assets, there could be a short window post-update where a trader can utilize this information before the market responds and this is where the function of the OEV is seen.
While Chainlink retains its rank as the first and biggest Oracle in the Web3 world, Uma has gained tremendous traction in recent times. The newly launched Uma Oval will further position it as a valuable engine that can benefit DeFi operators around the world.
UMA Price Defying Gravity
The launch of the Uma Oval has proven to be a pivotal catalyst pushing the price of UMA in the face of a general market downtrend. Per on-chain data, UMA is changing hands for $5.76, up by 6.66% at a time when the price of Bitcoin (BTC) has plunged by 2.91% to $39,346.26.
The growth of UMA is a complement to its mega rally showcased over the past few weeks. Its impressive performance thus far has placed it among the top tokens to watch this year.
With the Uma Oval innovation, DeFi innovators now has another arsenal to maximize profit in their operations.
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