Summary:
Yearn is introducing a new set of curated vaults that exclusively lend to markets secured by Api3 oracles. These vaults are designed to capture both base lending yield (e.g., USDC supply APR) and Oracle Extractable Value (OEV) rewards. Thanks to Api3’s unique oracle architecture, liquidation-related OEV is redirected back to users instead of external MEV bots. By depositing into these vaults, users opt into the Api3 oracle assumption and benefit from an additional reward stream.
Why:
- Better Yield: Api3’s OEV-enabled oracle system adds extra rewards for users, beyond base yield or token incentives.
- Clear Oracle Scope: Vaults are restricted to markets explicitly using Api3 oracles, making the oracle risk assumption transparent to depositors.
- Oracle Diversity: Yearn is committed to decentralization and diversity in oracle sources across Morpho markets. These vaults expand the spectrum of supported oracles and offer users more choice.
Implementation:
Yearn uses its own optimization and supply cap algorithm, which is fully automated to deliver the best risk alignment while maximizing APY for depositors. The system reallocates capital between eligible Api3 oracle markets based on yield and on-chain liquidity conditions.
OEV rewards will be distributed by the Api3 team through Morpho’s reward distribution system.
More on Api3 and OEV:
Api3 oracles don’t just provide data—they recapture value that lending protocols are currently losing by paying exorbitant fees to third parties for executing liquidations.
What’s often overlooked is that these fees rarely end up with the liquidators themselves. On Ethereum mainnet, it’s common for liquidators to pay up to 99.9% of the available incentive as bribes in blockspace auctions—just to ensure their transaction is included. In these cases, nearly all of the value ends up with block builders, while the liquidator retains only a marginal profit—and the protocol that originated the opportunity receives nothing.
But oracles determine when a liquidation occurs—which is why this is typically referred to as Oracle Extractable Value (OEV). So what if, instead of updating blindly, the data that enables a liquidation were sold to the highest bidder—and the proceeds returned to the protocol that generated the opportunity?
That’s exactly what Api3’s OEV Network enables.
Since going live in November 2024, the system has consistently operated without outages or malfunctions—recapturing over $300,000 in value and returning it to partner protocols across multiple EVM-compatible chains.
In the context of these Yearn vaults, OEV revenue will be distributed via Merkl, paid in either the native gas token or USDC, and shared with participants in markets secured by Api3.
By reclaiming value that others leave behind, Yearn and Api3 are pioneering self-incentivizing markets powered by Morpho.
Learn more:
→ Technical Overview: Auction Mechanics
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