DeFi lending protocols use oracles to track collateral and loan values. When the price drops enough, loans get liquidated. The protocol pays a bonus to the person who closes the loan (liquidator). Today, almost all of that bonus is captured by automated liquidation bots that race to be first. The protocol without OEV gets nothing.
This is Oracle Extractable Value (OEV): the subset of MEV that exists because an oracle price update enabled a liquidation. Cumulative leakage across DeFi has already passed $500 million.
The Mechanics: How Every Oracle Price Update Leaks Value
Most lending protocols rely on the push model: an oracle posts a new price onchain either on a heartbeat or when the deviation threshold is crossed.
The bonus paid to liquidators on liquidation typically runs from 5% to 15% of loan value, depending on collateral volatility.
For example, take a Morpho Blue position. A user borrows 0.87 ETH against 1 pufETH (a liquid restaking token) of collateral, with a liquidation LTV of 86%. Oracle provider posts a pufETH price update that drops the collateral past the threshold. Whoever closes the position first claims roughly a 10% bonus, around $300 on this loan. In practice, over 90% of that $300 ends up paid to the block builder as a priority fee. The borrower loses collateral. The protocol captures none of the value its price update just generated.
Across major lending protocols, this dynamic has played out across hundreds of thousands of liquidations totaling billions of dollars in cleared value.
Why Push Oracles Cannot Capture OEV
The push model delivers prices, not auctions. Once a price hits the chain, anyone can act on it and the fastest bot wins.
To reclaim OEV, an oracle has to do something a standard price feed is not built for. It has to run an auction off-chain, before the price reaches the public mempool, and bundle the price push, the liquidation, and the OEV transfer into a single atomic transaction. Standard push and pull feeds do not.
RedStone Atom: A Liquidation-Aware Oracle
RedStone Atom closes that gap. When a price movement would trigger a liquidation, Atom opens a 300 ms off-chain auction. Solvers / Liquidators bid for the right to liquidate. The highest bid wins, and a single atomic transaction bundles three actions: the price update, the liquidation execution, and the OEV payment to the protocol.
FAQ:
What is the difference between MEV and OEV?
MEV (Maximal Extractable Value) is the broad category of value extractable from transaction ordering within a block. OEV is the subset that exists only because an oracle posted a new price. OEV today comes from liquidation bonuses on lending protocols, where the protocol that paid for the oracle has a legitimate claim on it.
How much value do liquidation bots extract from DeFi liquidations?
Cumulative OEV leakage across DeFi has already passed $500 million. Single-day spikes during volatile market events can reach eight figures.
How does a 300ms auction window prevent MEV extraction on price updates?
The window is shorter than a competing public-mempool transaction’s round-trip, and bids are sealed. Atom then bundles the price push, the liquidation, and the bid transfer into one atomic transaction, leaving no gap for a frontrun.
Do protocols and liquidators both earn money with Atom?
Yes. The liquidation bonus is routed to the protocol, which most often splits it with liquidators and RedStone in varying proportions depending on its configuration. Liquidators still earn, just through the auction, but most of the value goes back to the protocol.
