Summary
Type: RFP Response Assessment
Timeline: From 2025-06-09 To 2025-06-16
Introduction
The Compound DAO requested submissions for proposals relating to Oracle Extractable Value (OEV) solutions. Three submissions were received in total:
Key Differentiating Points
Detailed reviews of each solution can be found in their respective reports. For the DAO’s convenience, a table summarizing the key differentiating points for each option has been provided below.
| Proposal | Key Differentiators |
|---|---|
| RedStone | No added latency to existing liquidation logic. Escrow limited to gas cost, lowering participation barrier. Compatible with resilient oracle design (Chainlink fallback). |
| Chainlink SVR | Minimal new trust assumptions, leverages existing Chainlink Data Feeds as emergency fallback. Fully OFA, reducing on-chain gas costs. Currently mainnet-only deployment. |
| Api3 | Hybrid on-chain/off-chain auction model with on-chain signature verification. Configurable auction cadence (30 s) and price feed delay (60 s). Deployable across various high-throughput chains beyond Caldera L2 |
Conclusion
The three submissions to this RFP are from RedStone, Api3, and Chainlink SVR. Each represents a possible solution to the problem of value leakage due to MEV. No technical issues that would preclude the use of a specific OEV provider in Compound V3 Comet Markets have been identified. However, introducing a new component into the Compound ecosystem must be evaluated carefully and each of the proposed solutions comes with its own trade-offs. As such, we recommend that the community carefully evaluate the potential implications of each solution.
Three main areas of concern are highlighted below:
First, the timeliness of liquidations and the effect that delays (if any) might have on the accrual of bad debt to the protocol must be carefully considered. The Api3 implementation, in particular, differs in this aspect as it allows a searcher to update the price multiple times within a 30 second window - the searcher must update the price at least once within that window. However, they are not obligated to update the feed more than once within that timeframe. It is noted that the Api3 team has indicated that these delays are configurable and the DAO would need to consider, on a per-market basis, the most appropriate values for auction cadence and base price feed delay.
Secondly, for some markets, the OEV implementation necessitates switching to a different oracle provider. As the majority of Comet Markets utilize Chainlink oracles, implementing another vendor’s OEV solution would change the trust assumptions around price feeds. The RedStone solution has been shown to work in a resilient oracle design, which would still allow Chainlink oracles to be used as a fallback if desired. It is noted that while the Api3 solution has the shortest track record as an oracle provider, it has been used as such for the Comet Markets on Mantle and has already returned value back to the Community multisig on the Mantle network.
Lastly, the use of an OEV solution will necessitate additional trust assumptions. For Chainlink and RedStone these mainly relate to how the Order-Flow-Auction (OFA) is conducted. For Chainlink, Flashbots’ MEV-share constitutes this additional trust assumption when used on the Ethereum mainnet. RedStone uses Fastlane to host the auction logic, but notably uses the RedStone Relayer to send the price update transaction to the target mempool. On the other hand, Api3 facilitates their auction via an off-chain auctioneer with the bids taking place on-chain on the L2 OEV Network (hosted by Caldera). Thus, for their solution, the security characteristics of the OEV Network (and by extension, Caldera) are inherited. In this case, the DAO may wish to request that the auction contracts be deployed on another chain with stronger security characteristics.
Final Recommendations
The Api3 solution is OEV-first and presents the most compelling revenue split for the Compound Protocol. Conversely, its solution requires consideration of the additional trust assumption in the price update mechanism. The Chainlink solution presents the longest track record within the Compound Protocol, but has the least compelling revenue split among all the submissions. The RedStone solution offers a resiliently designed oracle while not introducing additional latency to price updates. The revenue split is slightly better than the Chainlink solution and a part of the costs are expected to be paid in COMP, aligning with incentives with the protocol.
It is important to note, however, that the DAO does not need to choose one solution for the entire protocol, nor does it need to be locked into it’s decision indefinitely. The implementation of an OEV solution may represent substantial value capture for the protocol. Crucially, OEV solutions are still relatively new and as the solutions evolve there may be changes in the risks presented by each solution. Regular re-evaluation by the DAO is recommended.
The DAO may consider initiating a pilot test period for the selected providers within specific Comet Markets on specific chains. This would help gauge the effectiveness of the solution. Ideally, the pilot Comet Markets would be similar in base assets and collaterals to allow for a better comparison of performance across the same assets. Rollouts to additional markets can then be considered based on performance during the pilot phase.
Edit: We have removed a statement which incorrectly characterized Api3 as having the shortest track record as an oracle provider.