Case Study #1

So, as promised, today we’ll dive into the first protocol and explore how it’s reclaiming value.

Without further ado, let’s talk about @UMAprotocol.

What's UMA Oval?

It's a wrapper around any oracle.
It delays the oracle update and lets someone else auction it off. Imagine Chainlink providing a price update.
Oval protects this.

Oval makes the price inaccessible unless unlocked.

The rights to unlock are auctioned off.
You buy the rights to back run this price transaction.
Only you can decide when the liquidation happens after the price update.

The beauty of Oval?

It can wrap any oracle.
@Chainlink, @ChronicleLabs, @API3DAO, you name it.
Oval just says, "Hey, wait. I want to sell that."

Oval collaborates with Flashbots.

It doesn't auction off itself.
It blocks the price and gives Flashbots the option to auction it off.

Oval has a fallback.

If no one buys the update for three blocks, it becomes accessible for anyone.
The worst-case scenario? A delay of three blocks, or 36 seconds on Ethereum.

The downside?

MEV share is only available on Ethereum mainnet.
This limits the potential of Oval.
You can only auction off when the Oracle updates, which is rarer on an L2.

The major con?

You're dependent on the goodwill of the underlying oracle.
They have the power to make or break you.
They can blacklist you or build their own OEV solution and kill you.

In conclusion, UMA Oval is a powerful tool, but it comes with its own set of challenges.

It's a fascinating development in the oracle landscape, but it's crucial to understand its potential and pitfalls.