I’m Jakub, the founder of RedStone. Thank you for the excellent questions. Please take a look at the answers and don’t hesitate to follow on if anything requires more information.
- Implementation Details: Can you provide a detailed breakdown of how the OEV technology will be integrated into Moonwell’s existing framework, and what steps are being taken to ensure it does not increase vulnerability to attacks or bugs?
I would say that the strongest advantage of our design is abstracting away all the OEV capture mechanics requiring no changes to the existing Moonwell code. This will reduce risk of introducing unforeseen vulnerabilities by modifying the logic of the lending process.
On the RedStone end any potential price update is offered to solvers which could bid for a possibility to bundle that with a liquidation transaction. The process takes ~300ms. In case no solvers are found the price is also updated on-chain following the standard commitments regarding heartbeat and deviation threshold.
- Security Measures: What specific security protocols will be implemented to safeguard against oracle manipulation or other forms of exploitation?
RedStone will fetch data from multiple on-chain pools where AERO is traded. RedStone designed a price discovery methodology that takes into account the real-time liquidity and slippage available on every venue eliminating the possibility of manipulating the price by making a single large trade. The approach is battle-tested in delivery of the most popular assets traded on-chain such as USDe from Ethena,weETH(ether.fi), ezETH(Renzo), swETH(Swell), puffETH(Puffer) and many otters (RedStone)
- RedStone’s Role: How will Moonwell maintain control over its operations with RedStone’s involvement? What are the exit strategies if the partnership does not meet expectations?
At any time Moonwell could switch back to the previous Oracle setup substituting a single address in their configuration.
- User Transparency: How will the changes be communicated to users, ensuring transparency, and how will you address potential concerns about fairness in value extraction?
RedStone proposed 50% of value share. All of the revenue will be publicly visible on-chain and the flow of funds could be audited by anyone.
- Testing and Assurance: What kind of testing and audits will be conducted before and after implementation to ensure the system’s integrity, especially during the initial AERO market trial?
RedStone went through 6 audits in total (Peckshield, ABDK three times, Holborn, Spearbit). Our partner that implements the auction logic also went through an audit with Spearbit.
During the integration process RedStone will provide regular reports on the performance of the OEV extraction logic.
- Scalability: What metrics will be used to decide whether to expand the OEV system to other markets, and how will scalability issues be managed?
Expanding to other markets could be implemented by switching to RedStone as data providers (single parameter) in the Moonwell configuration.
The decision could be made based on the performance of OEV capture on the AERO market. We recommend moving step by step to allow enough time for the solvers to implement efficient algorithms for detecting and executing liquidations.
- Financial Impact: How will the financial benefits be measured, and what mechanisms are in place for redistributing or reinvesting any captured OEV?
All the flow of funds will be transparent and visible on-chain. Initially, the funds will be directed to the pool benefiting all the participants.
In the future, we could direct the funds to other targets depending on the Moonwell governance.
- Governance and Oversight: How will the community be involved in oversight, and what governance structures will be in place to monitor the OEV system’s performance and impact?
At any point in time Moonwell is in full control of switching back from RedStone to previous oracles.
The results are visible onchain and RedStone will provide a full summary of the performance to inform the community about OEV capture efficiency.
- Market Impact Analysis: Have you studied potential impacts on market dynamics? If so, what are your findings, and what contingency plans are there for any negative market behavior?
The OEV mechanism is introduced in a backward compatible manner, meaning that if there is no liquidation triggered during the bidding process, the price update will still be executed. Existing liquidation bots will still be able to submit their transactions without any amendments. Therefore, the risk of the market acquiring bad debt due to the issues with the bidding process is eliminated.
However, we understand that it may take some time for the existing solvers to adapt to the new bidding mechanism. This means that the OEV capture will increase gradually when more and more actors will switch to the new model and the bidding fees will increase due to the increasing competition.
- Rollback Plan: What is the plan if significant issues arise post-implementation? Is there an easy way to revert or adjust the system without causing disruption?
As the solution doesn’t require any changes in the Moonwell code it could be easily reverted to the previous setup without causing any issues.