Oracle extractable value (hereinafter OEV) references those oracles which utilize their position to extract the value that in their absence would run to the benefit of third parties. The oracles in question are capable of either extracting the value themselves, or, by auctioning off the right to extract the OEV (resulting in an equivalent financial outcome). Traditionally, the way MEV was obtained was through gas wars between the third parties. Flashbots has demonstrated that accomplishing this off-chain is practicable in practice having extracted some $650 million so far. OEV provides the next logical step in the growth progression as it imagines providing a service that does not store the data used to change state (as in traditional oracles), but rather changes the state directly. This maximal extraction of OEV by competitive auctions and the return of value to the DApps provides said DApps a novel as well as substantial revenue source. [See, e.g. Benligiray, B. Oracle extractable value (OEV). (Accessed November 3, 2022)].

OEV is the brainchild of API3, a Web 3 decentralized oracle service provider. The very concept of OEV claims to offer a novel additional revenue source for DeFi protocols. In discussing the workings of OEV, core technical team lead at API3, Burak Benligiray, stated:

OEV auctions will happen off-chain, which means even when there is a lot of value being extracted, gas prices will not be affected. Furthermore, proceeds of block space auctions are claimed by block validators, while OEV proceeds can be redirected to the DApps that create them.

[Jha, P. New oracle system to help DApps retrieve millions lost to MEV. (Accessed November 3, 2022)].

Data feeds that are OEV enabled route the proceeds derived from the off-chain auctions back to the DApps which created the value in the first place. These OEV enabled data feeds do more than just retrieve the MEV, but they also minimize it by creating accurate updates only as needed thereby obtaining a zero drift threshold. [See, e.g. Baxter, A. New oracle system to help DApps recover millions lost from MEV. (Accessed November 3, 2022)].

As such, these OEV updates provide a benefit for the DApps even in situations where the DApps do not directly receive auction proceeds. Traditionally within the existing system, the quality of a data feed is measured by its exhibited deviation threshold. Herein, smaller values are preferred as they result from fewer events. Utilization of OEV enabled updates render the deviation threshold obsolete as this process of updating as needed, in practice, achieves a zero deviation threshold. [See, e.g. Benligiray. supra].

Presently, several networks that are Ethereum virtual machine (EVM) compatible offer OEV services. These networks include, but are not limited to, Ethereum, Polygon, Arbitrum, Optimism, BNB Chain, Avalanche, Fantom, and many others. [See, e.g. Dahunsi, J. Oracle system OEV to help DApps recover money lost to MEV. (Accessed November 3, 2022)].

In a sub Reddit posted by u/stanley9528, he notes:

I don’t think big block producers will be happy if OEV becomes commonplace! Certainly a step in the right direction for the everyday man in crypto though.

[u/stanley9528. New oracle system to help DApps retrieve millions lost to MEV. (Accessed November 3, 2022)].

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