💸Oracle Extractable Value (OEV)

Putting a value on the data that oracles supply to destination networks has historically been challenging. As a result, oracles have adopted business models from web2. SEDA presents an opportunity to establish an additional revenue stream that can more accurately price the data provided by the system and data providers to various destination networks.

When an oracle pushes data to a network, a state change results: Whether it’s a price update, a deposit, or a generated random number, the difference in state between, before, and after the update creates an OEV opportunity. Today, we can observe these opportunities on any blockchain network. Whenever an oracle update results in an opportunity, a “gas war” commences from other network participants, known as “searchers,” who monitor the chain to spot current or imminent opportunities for value extraction. This gas war is the result of searchers bidding to be the first transaction to be executed after an oracle state change to extract the newly created value.

New data creates new opportunities. Searchers are, therefore, incentivized to pass a percentage of their potential profits to the validators of the SEDA network, a place with abundant opportunities for further value extractions.

Since searchers don’t have guaranteed execution, the gas war results in searchers, who sometimes don’t even get to execute their strategies, burning significant amounts of gas on the native destination network. This war means that a ton of value leaks as burned gas for failed transactions, and the destination network experiences unnecessary load.

SEDA’s solution removes this inefficiency and moves the opportunity for profit from the destination network to the SEDA Network. The SEDA Network can now split the profit between the network participants and data providers. SEDA achieves this by auctioning off the right to bundle transactions with the oracle updates. Searchers participate in this auction, and the highest bidder gets the guarantee that their transaction is executed as the first transaction after the oracle update is live. The result is searchers do not have to participate in “gas wars” on the destination network. As a result, there’s less value leaking through inefficient “gas wars”. SEDA’s network will now profit from the value of the data it provides, and destination networks will see less congestion around oracle updates.