Revenue Sharing

How Oval shares funds with integrations.

Oval's key innovation is enabling protocols that use oracle price updates to sell the right to be the first to use a new price within the protocol; i.e backrun the publication of new prices. In this way, Oval acts as Mev-Protect for oracles. This docs page outlines how the revenue sharing logic works within Oval.

Leveraging MEV-Share refund for Oracle auction kickbacks

Oval runs OEV auctions within MEV-Share and uses the refund & kickback logic that MEV-Share exposes to perform the payment kickbacks. From a cash flow perspective, this works as follows:

1. Searchers detect an OEV opportunity worth $\epsilon$, such as a liquidation in Aave. In the case of money markets, $\epsilon$ is the liquidation bonus.

2. Searchers bid to backrun this price update by submitting bids to the Oval Node (see Oval Update Lifecycle & Oval Node). Assuming a competitive market, the bids will approximate the value of the opportunity, minus whatever efficiency advantage the top liquidator has over the second liquidator. This means the top bid will be $\epsilon-\delta$ where $\delta$ is the top searchers efficiency advantage over the second best searcher. This is also their profit.

3. Bids are forwarded from the Oval Node to MEV-Share, along with the unlockLatestValue transaction. MEV-Share forwards these bundles to all connected block builders, along with the refund transactions to pay from the builder to the associated integration, as defined in the refund config (more details below). Block builders run an auction for the block space, choosing the bundles a) that pay them the most and b) don't revert.

4. Block builder includes the transactions in a block and publishes them. Below are the payments and their size:

   1. The winning searcher pays the builder (block.coinbase ) their bid size of $\epsilon-\delta$.

   2. The block builder pays the refund address defined in the refundConfig.address

      the builder payment, multiplied by the refundConfig.percent. By default, the Oval refund percentage is set to 90%, meaning 90% of the overall builder payment is sent as a refund to for searcher bids. The builder also subtracts the ETH spent on gas for the refund transaction.

The refund address receives 90% of the searcher block builder payment, minus transfer fees.

Where the revenue goes:

At the launch of Oval the refund will be sent to a multisig. This multisig is controlled by a combination of UMA and the associated integration (eg: 2 of 2 multisig between UMA and Aave). Off-chain computations can then be done to find the split of the net OEV captured by this contract to distribute according to the distribution table defined below.

How the revenue is split:

To start with, UMA proposes the following revenue split of OEV captured by Oval:

Actor	Percentage
Integration	50%
UMA and its partners	50%

This positions UMA and its partners to capture 50% of the >$100m in OEV lost each year by DeFi protocols, in accordance with OEV Data.