Oval controls when a price is released to a downstream integration to give auction winners first access to a price update.
Oval is a system that wraps data from Chainlink and provides a venue to auction off the right to be the first to use it. Oval is built on top of the Flashbots MEV-Share backrun auction mechanism. This auction allows Oval to sell backrun rights to a searcher, and thus capture this OEV that would otherwise be passed on to builders and proposers. Oval leaves searcher profits untouched.
MEV-Share is an order flow auction service run by Flashbots that reveals some information about user transactions (e.g. target contract, function selector, logs, calldata) to searchers. Searchers can bid to backrun these transactions if they think they can profit from doing so. The winning bid is then split between the block builder and the user. This split is defined by the user when they submit their transaction to MEV-Share.
Oval works by controlling when to release a price update from Chainlink such that the winner of the Oval auction gets to backrun it. This part differs from MEV-Share, which uses "programmable privacy" described above.
The diagram below shows how Oval runs an auction for the right to be the first to use an update from Chainlink. At any point, anyone can place a bid to use the most recent price. This could be within the same block as the price update. These bids (bundles) are submitted directly to one or more Oval nodes by searchers, which act as proto MEV-Share nodes (implementing a similar API). When an Oval node receives a bundle, it places the unlock transaction ahead of it, adds instructions for how to split the payment, and forwards the unlocked bundle to MEV-Share. Part of the bid paid by the searcher is kicked back to the downstream protocol according to the added instructions.
Oval High Level Data Flow
This design enables the protocol to capture the MEV generated by the Chainlink price update. In this example, Compound receives some percentage kickback from the price update that produced liquidations within Compound. Put differently, this modifies the MEV supply chain to reallocate some of the revenue that typically goes to the builder, sending it to Compound instead.
Why leverage MEV-Share
Oval is designed to use MEV-share for three reasons:
No reinventing the wheel. Oval can leverage the existing Flashbots infrastructure to limit amount of extra components that need to be built and trusted. This is important because constructing a high-speed order flow auction system typically requires a centralized actor to facilitate connections between participants. Flashbots is already built, tested and trusted by the community.
Nothing new for searchers to integrate. Searchers have already done the work to integrate with the Flashbots ecosystem. Instead of asking them to integrate with a new system or API, they can use the auction infrastructure and APIs they are already familiar with.
Growing into a core constituent of the Flashbots ecosystem. By positioning Oval close to Flashbots, it can grow into becoming the de facto solution for OEV extraction and leveraging their network and connections within the ecosystem. In the future, Oval will become a Suave app.