The 90% Inefficiency In standard lending protocols, liquidations occur in the public mempool. When a borrower's position becomes undercollateralized, bots race to liquidate it. To win this race, they engage in "gas wars," often paying up to 90% of their profit to miners and validators!
The Flaw: The Protocol creates the opportunity, but external validators keep the profit. The DAO receives $0.
The Solution: Internalizing the Auction
WOOF! identified a critical, persistent leakage point within Compound’s liquidation mechanism. To solve this problem, we established a partnership with Chainlink to strategically deploy their novel Smart Value Recapture (SVR) solution.
Our role was to engineer the necessary technical linkage and configure Compound to switch from its traditional price feed to Chainlink’s SVR-enabled feed. This action successfully replaced the chaotic public gas war with an orderly, on-chain Order Flow Auction.
The Mechanism: This strategic integration activates Chainlink’s underlying Dual Aggregator architecture and connects the protocol to Flashbots MEV-Share, thereby privatizing the liquidation lane:
The Trigger: When the Oracle updates a price, the transaction is routed through the SVR architecture rather than the public mempool.
The Auction: Searchers (bots) must submit sealed bids via Flashbots to win the right to perform the liquidation.
The Capture: The winner is defined not by gas paid to miners, but by the highest bid paid directly to the Compound Protocol.
The Result: By forcing bots to bid for the privilege of liquidating, we recaptured value that used to vanish. We shattered the 40% projection with a ~57% recapture rate achieved during a period of significant market volatility in November 2025.
In just 17 days of activity on the USDC market, this mechanism generated 123 ETH in pure profit for the DAO!
Strategic Confirmation: This successful performance confirmed the system's robustness in active and stressful market conditions, which were prevalent during that November period.
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