Tackling 200 Million Dollar Problem: OEV Design That Works And Scales by Marcin Kazmierczak

Transcript

Hey everyone, uh Philip BD for Redstone here and today I wanted to shortly introduce you to the um Oracle extractable value um and tell you a little bit more uh about Redstone and how did we implement it. Um so for those of you that are not familiar with us, Redstone is the fastest growing oracle on the market right now. Um a couple of facts about us. Um last year we uh happened to raise 15 mil um from VCs and um angels in the space. Um we are um one of the major Oracle players that is currently focusing a lot also on RWA

narrative. um recently announced our deal with securityize and black rocks um build fund um where we basically deliver data for all future tokenized funds with securityize. Um we also recently introduced Redstone Vault which is the fastest onchain oracle that ever existed which delivers data to me with um I think 2.4 4 milliseconds. Um um latency and we're quite small team. Um most of us live in Warso. Um I'm generally like easygoing guys but have

fun here. Okay. So first of all, I'm not sure like um how technical the crowd is. Uh maybe the first question to you um who knows what an Oracle is and what an oracle does? you can like raise your hands. Okay, so pretty much most of you um in short an oracle delivers data for smart contract execution. Um currently it's mostly market data and around 95% um of data we deliver is basically price feeds of assets mainly crypto. I like to ask this question uh very often. Um, so like what is currently the most utilized

price feed in crypto? Anyone has any idea? No, I mean not the Oracle provider, but but that's true as well. I mean the actual asset. So let's say BTC USD or nope. EFUSD that's uh that's like around 90% of the queries are for EUSD and that's because one most of the defi still happens on if and all the L2s are also based on if and two uh there are a lot of if derivatives so like if LSDs if LRTs that are also usually if

denominated right so very often uh the if oracle is still needed for for those queries Okay. Um, so Redstone has currently 150 clients, supports 80 plus chains, secures it's 9 billion I think or 9.5 now. Um so what are the oracles used for right those are the lending markets like morpho or venus for example leverage protocols um gearbox or delta prime for example um staking and reaking um here we posted like um I think it's Lombard and puffer uh we did capitalize a lot on reaking uh because we introduced what we like to call contract

exchange fees so fundamental price feeds which basically Instead of just aggregating the liquidity sources of the asset, take out the smart contract exchange rate of particular if derivative which is usually way less prone to manipulation, right? Um because you don't rely on just liquidity resources instead on a smart contract uh security and then yield protocols like for example handle on or uh so going to the main topic of the presentation. Um what is Oracle extractable value?

Um first of all I'll give you like a little bit of the history here uh or maybe a background um how speed of the information is important. So does anyone know who that is? doesn't ring a bell like the famous pretty famous guy. So it's um PDP the uh Athenian courier that ran the first marathon um to deliver the information that the battle of marathon was won. Um and he

was basically like uh one of the first guys that were like speeding up to deliver important information. Now, modern example, um, if anyone knows the story of Flash Boys, it's basically a story of the Wall Street guys that had, uh, 1,300 km fiber optics cable. Um, that costed them around 300 mil uh, from Chicago to New Jersey and it allowed them to reduce latency um, from 17 to 13 milliseconds.

That way uh they were able to let's say me or front run the traders in trfy right because if a trader wanted to open up a position um on pers or on the stock market in stratfight they were just faster and could sandwich attack them let's say you don't call that you don't say that in chai but that's the mechanics more or less um using that optics cable and now um as you can see uh like speed of delivering information is very important since forever. Um and now we're going to liquidations in DeFi and how they work. Um so for example here we

imagine we deposited 90k of BTC into AB and borrowed 80K USDC using that Bitcoin as collateral. Right? So effectively that means we shorted Bitcoin because we did deposit 80k 90k USDC we borrowed 80k of bitcoin um and now if the price of bitcoin starts going up um the oracle update its price and we get liquidated and as you can see here if bitcoin goes to 100k in that example um your collateral gets liquidated but what is more um and what is probably even more important once Oracle delivers the price

and the protocol knows hey this position needs to be liquidated there is still some threshold um so there is still some money left that is used um to pay the fee to the liquidator itself right because there's some actual bot uh that provides and executes the liquidation from the protocol and now this is a part that is very extractive um and this is a part that have a lot of companies and me researchers make money on um and just to show you um how quick of a business liquidations are. Um here we uh

aggregated um liquidations data from Venus protocol. It's a protocol planning market on BMBB uh which is at around 2.5 billion and TVL total value locked and as you can see over the 30 days this is by the way like not the most volatile period. It's we could actually if we wanted to we could aggregate way more volatile period. Um and as you can see there is around 1.5 mil of liquidation fee in the protocol that were captured by those liquidator reports right only on majors right so we're talking only BTCB if rap here and now what if those liquidation fees could be raised and

actually the value could be delivered to the oracle and the protocol itself. So um okay a little bit more about the liquidation itself right so that's the standard liquidation um first the transaction from Oracle relier gets pushed on chain once it's there um the liquidator tries to get his transaction as the first first one right before the oracle update right so he needs to pay the me um me extractors to push his transaction as the the first one right after the Oracle updated the price. Um and what we did um is basically we call that crosschain

abstraction. Uh we use Atlas infrastructure for it and also um fast lane is the name of a company that helps us implement the whole OE process. um and realized as an Oracle provider you could both deliver the data um of the price update and also liquidate the remaining positions in one transaction and this is called um multi single multi call transaction that can be processed automatically. So now um this transaction works like every other EVM transaction. So it can be implemented on any EVM compatible chain. Um I think we already implemented IV on um BNB, Barra

Chain, uh probably Hyperlid like like basically it can be you know all arbitrums and any EVM compile chain that comes to your mind um it works with and on top of that you don't rely on MV infrastructure at all right because that's the same transaction that delivers data so you don't need to be fighting to be first later on as an equilator and Now um okay so maybe uh in short how it works right so now we as an oracle um constantly deliver the data on chain based on set conditions that is heartbeat and deviation right and now the fast lane so our enable um allows for a beating process

um to get the data faster um onchain so basically for liquidators to push data from our dirt distribution layer and now it depends um on the uh situation here. So basically if there is no one bidding for the price update we update the price based on the set conditions right so 0.5% deviation or let's say 1 hour heartbeat whatever that is but if there is actual beater in the beating process um then the and just so you know it lasts milliseconds right so the whole action process it's literal seconds and it's all automated there's like no one actually sitting and eating there's bots

Um but if they see that uh the oracle price is actually um below the liquidation threshold for a particular position they can decide the bot can decide itself to beat uh the action and if it wins um it's pushing the price on chain regardless of the set har and deletion and it's delivering the transaction first to the to the protocol and to the chain itself while also liquidating the particular ular position and getting the liquidation fees and when he gets the liquidation fees part of those fees go to us and the protocol depending on the deal we have. Um so what is so important about our

solution the whole process lasts up to 40 milliseconds. Um so but it basically means there's no delay right especially for like money markets or lending protocols this is the update frequency that doesn't change damn thing for them and this just blazing fast now here you can see how the atlas transaction works so uh main difference is basically here was the main one first relier update then transactional liquidation trying to get as pass as as close as possible to the relier update.

Here you basically the transaction is the same. So it's the same transaction that pushes the price on chain and the same transaction that actually liquidates the position. What is more from orac perspective and also from protocol perspective um because the liquidator needs to both beat to have the um to have the price delivered but also he pays the gas fee. So this effectively means that OEV in our example is actually um increasing the update frequency of the Oracle and top and like by that also increasing the security and on top of that the mutator is paying gas for this update. So we or

you know any asset issuer that we deploy the feed for isn't paying for that gas um which is like additional bonus. Um and now okay so now step by step uh guide of the um on the concrete example. Uh so user holds uh one BNB in collateral of 600 uh USD he takes a loan 400 USD uh redstone keeps pushing the price of of BNB based on uh deviation hard. So let's say every.1% I think we have on on BNB.

Um then fast lane so our oe enable keeps operating auction mechanism which allows anyone to beat the right to update the price and background it with the liquidation right if um the price for example it's a very volatile period right uh and let's say we didn't have 0.1 we had 0.5 division and price moved by 0.3% right um the threshold wasn't triggered so we wouldn't didn't update the price but the liquid uh liquidation threshold for particular position was triggered then the liquidator could push the price on chain before the deviation threshold hits and get the liquidation

fee for himself. So like the highest bidder would win the uh action and then he can just push and liquidate the positions. And now uh a couple of points about redstone IV. So uh first of all and this is I think probably like very important thing um there's no need to adjust your protocol to be able um to consume our or utilize our IV which is very important because if you have all those like big landing markets like for example Norfo compound Venus they are not going to change their code base uh just to get like a little bit of additional revenue stream. uh I I mean this revenue stream is all right but still like they they

don't want to risk it. Um second thing is you have no time added so basically auction happens in the offchain environment and it doesn't leave a price update. On top of that, it actually um is securing protocol from bad depth because if the bad depth were to occur um due to deation uh being too uh wide, it won't if you have OEV enabled for your protocol because the liquidator will push the price before it would happen with the standard conditions.

Anyway, and like the last thing is basically uh that you cannot pretty much do anything wrong with it because the price are just keep being updated on the regular basis and on top of that it's just a separate stream uh of pushing the prices more often if there is a situation where liquidator can get a fee and make money. Uh all right, that's pretty much it about the OEV itself. Uh just last thing we recently um launched our token actually that was last month. Um you can buy it, you can stake it in the uh layer uh redstone APS uh and join our community. So I invite you uh very much

to do that. Thank you very much. And if anyone has any questions,