Reference → OEV Network → Collateral And Protocol Fee

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Collateral And Protocol Fee

In the context of the OEV Network's auction mechanism, collateral plays a critical role in ensuring that oracle updates get triggered upon being awarded.

For a searcher to win an auction for oracle updates, they are required to deposit ETH into the OevAuctionHouse contract. The value the searcher can win is limited by the amount they have deposited. On winning a bid, the searcher locks up a percentage of the bid amount as collateral.

In the event that the oracle update is fulfilled, the searcher is refunded the collateral and is charged a protocol fee. The protocol fee is also a percentage of the bid amount.

The collateral and protocol fee rates are configurable parameters within the OevAuctionHouse contract and are configured by the API3 DAO.

Parameter	Value
collateralInBasisPoints	1000
protocolFeeInBasisPoints	0000

WARNING

If the oracle update is not fulfilled, the collateral is slashed

Fee Calculation

The value that a searcher bids is in the native currency of the chain on which the oracle update is to be made. The collateral and protocol fee are calculated in basis points (1/100th of a percentage point) of the bid amount in ETH.

The "Collateral Rate in basis points" and the "Protocol Fee in basis points" are parameters configured within the OevAuctionHouse contract. Searchers can query the getCurrentCollateralAndProtocolFeeAmounts function to get the current collateral and protocol fee rates for the specified bidAmount and chainId before placing a bid. Internally, the function uses dAPIs to fetch the value of the target chain native currency in ETH.

const { JsonRpcProvider } = require('ethers');
const api3Contracts = require('@api3/contracts');

const oevNetworkProvider = new JsonRpcProvider(OEV_NETWORK_RPC_URL);
const OevAuctionHouseArtifact =
  await hre.artifacts.readArtifact('OevAuctionHouse');
const OevAuctionHouse = new Contract(
  api3Contracts.deploymentAddresses.OevAuctionHouse['4913'],
  OevAuctionHouseArtifact.abi,
  oevNetworkProvider
);

const collateralAndProtocolFee =
  await oevAuctionHouse.getCurrentCollateralAndProtocolFeeAmounts(
    BID_AMOUNT,
    CHAIN_ID
  );