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George Hristov

On July 10th, 2023, After a successful  [governance vote](https://app.aave.com/governance/proposal/?proposalId=267)  from Aave DAO, CoW Swap processed a large LP position trade for Aave using the exchange’s signature intent-based trading design and Milkman contract.

Since then, Aave completed another trade totaling $1,948,000 with the goal of  [treasury diversification](https://app.aave.com/governance/proposal/282/).

## 1st Trade Details

Aave DAO acquired a direct position in the B-80BAL-20WETH Balancer pool by swapping their entire aBAL & aWETH balances. The trade occurred over two transactions ([Transaction 1](https://explorer.cow.fi/orders/0xb8534a7890442f38394224acea0b894e734175f9dbb17130d444ffcf3c096f438a2e3cef438049b4176186468d3a095d9e24973b64ac2280?tab=overview)) ([Transaction 2](https://explorer.cow.fi/orders/0x825de9ff6963afd5a6e1ab63712f60a749b8750a023e2e49089003d9fee9128b176f00c370f77bdc6c3079296ff89391ccb26bca64ac625e?tab=overview)).

-   **USD value of the trade**: $2,026,573.69
-   **Amount the DAO received**:  [157,169.86 B-80BAL-20WETH](https://governance.aave.com/t/analysis-of-b-80bal-20weth-acquisition/14005), with an average BPT price of $12.89
-   **Slippage tolerance:** 1.5%
-   **Actual slippage**: 1%
-   **Positive difference compared to direct deposit**: 1,918.72 units of B-80BAL-20WETH
-   **Positive difference due to slippage**: 556 units of B-80BAL-20WETH

## 2nd Trade Details

Aave DAO swapped DAI to USDC for treasury diversification purposes. This trade also occurred over two transactions ([Transaction 1](https://explorer.cow.fi/orders/0x03a16efc858c41dd476b8270ed7cdeac00718dd72902493e13c4ec4931a8543d944ea54ae648ceebbdc3e643e8a993a0c4e8dae564ca6b2a?tab=overview)) ([Transaction 2](https://explorer.cow.fi/orders/0xffa61ae864eeaa228ca19195887303d278bbd40f75a9c70493737eb3dbcd0280264fe3292fc2a05500d638093d88adbca487e36864ca6b31?tab=overview)).

-   **USD value of the trade**: $1,937,476
-   **Amount the DAO received**: 1,937,476 USDC
-   **Price Surplus**: $9,699.15

## Why CoW Swap?

CoW Swap’s solver competition ensured that Aave received the best possible execution price, even after announcing trade details publicly in a governance proposal ahead of time.

Compared to a direct deposit, CoW Swap provided several benefits for this trade:

1.  Protection from attack vectors caused by the delayed execution
2.  The minimum amount in a direct deposit proposal would have been uncertain, requiring a high slippage tolerance to successfully execute the trade, which in turn would expose the trade to MEV bots
3.  Use of the Milkman bot for protection against MEV, slippage, and re-entrancy risk

## Milkman

The CoW Grants Program-funded, and Yearn.fi-developed  [Milkman bot](https://github.com/cowprotocol/milkman-bot)  was critical to the Aave trade.

The Milkman bot ensures that trades execute for the real-time price or better by utilizing a price checker, such as a Uniswap v3 pool, Chainlink oracles, or a custom price checker. Instead of setting a slippage tolerance, DAOs can utilize Milkman to determine a maximum percentage deviation from the price checker, guaranteeing that their trade will finalize at a fair market price. Milkman also simplifies governance for trades as DAOs don’t have to define a fixed price re-vote if the market moves significantly.

For this swap, Aave DAO chose the Chainlink oracle as their price checker, guaranteeing that they would receive no less than the minimum specified in the governance proposal.

## CoW Swap: The leader in DAO trading

The largest DAO trades take place on CoW Swap, and the exchange is single-handedly responsible for more than 30% of all DAO trades. Check out  [CoW Swap for DAOs](/learn/cow-swap-for-daos)  to learn why DAOs such as  [ENS](/learn/ens-trade-breakdown),  [Nexus Mutual](learn/nexus-mutual-trade-breakdown), and more trust CoW Swap with their large trades.

If you’re a DAO looking to make a large trade on CoW Swap, get in touch with us on  [Twitter](https://twitter.com/CoWSwap)  or through our  [Discord](https://discord.com/invite/cowprotocol). You can check out CoW Swap for yourself  [here](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=aave-trade).

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The smartest DAOs trust CoW Swap with their most-important trades


Aave Trade Breakdown

Slippage is the difference between the price at which a cryptocurrency order is submitted and the price at which it’s executed.

Since crypto prices fluctuate constantly, it’s necessary to set a “slippage tolerance” for every trade which allows users to accept a slightly higher or slightly lower price for their trades at execution time.

## What is Slippage?

Slippage is the amount that a trade price may vary by between the time the trade is placed and the time it actually executes.

To better understand slippage, let’s take a look at an example.

Let’s say a user places an order to buy 1 ETH while the price of ETH is exactly $3,000. By the time the order executes, however, ETH has shifted slightly in price and the user ends up only paying $2,980 for 1 ETH. The $20 difference between the $3,000 that they initially placed their order at and the $2,980 per ETH price that the order eventually executed for is known as slippage.

## What is a Slippage Tolerance?

![1-what-is-slippage.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_what_is_slippage_0b1a557216.webp)

_The slippage setting on_ [_CoW Swap_](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=slippage-article)

Decentralized exchanges require users to set a “slippage tolerance” percentage every time they make a trade. This determines how much deviation the trader is willing to accept in the price of the asset they are trading.

For example, if a user wants to buy 1 ETH, it might cost them $3,000 at the time they place their trade, but by execution time that price may have changed to $2,950 (approximately 2% less). If they had no slippage tolerance, their trade would fail, potentially still incurring gas fees and forcing them to resubmit the transaction.

Meanwhile, if they set a slippage tolerance of 2% when they place their trade, their trade would be able to execute at prices 2% below or 2% above the quoted price. In this example, this would allow the trade to go through as long as 1 ETH is between $2,940 and $3,060 at execution time.

All decentralized exchanges use slippage tolerances for user trades, so it’s important to understand the concept and know what percentage to use.

## What Slippage Tolerance Should I Use?

As a rule, you should try to use the smallest slippage you can get away with. On most exchanges, the default slippage tolerance is between 0.5% and 2%, however, the optimal slippage tolerance depends on the type of asset you’re trading.

Generally speaking, the more volatile a crypto asset is, the higher a slippage tolerance you’ll need to use.

**For stable assets**: Assets like stablecoins generally require a low slippage tolerance because their prices don’t fluctuate by much. Exchanges specializing in stablecoins (such as Curve) set the default slippage tolerance for these assets at between 0.25% and 0.5%.

**For standard assets**: The standard slippage tolerance for most trades is between 0.5% and 2%. This is a good range to stick to when trading established assets with medium volatility profiles such as Ethereum.

**For volatile assets**: When it comes to cryptocurrencies whose prices jump wildly — such as memecoins or new token launches — users will often need to use a higher slippage tolerance than 2%. There is no hard and fast rule here. Depending on the volatility of the asset, user trades may require a double-digit slippage, maybe even in the high double-digits, in order for the trade to go through.

It’s important to understand, however, that setting a high slippage tolerance leaves you vulnerable to price exploitation in the form of maximal extractable value (MEV).

## The Dangers of High Slippage

While setting a high slippage tolerance helps ensure that your transaction goes through, using too high of a slippage tolerance can be dangerous.

Blockchains like Ethereum process transactions sequentially, meaning that transactions in a block execute one after the other. This, combined with the mechanism of  [automated market makers (AMMs)](/learn/cow-protocol-glossary#:~:text=amm), means that value-extracting bots can strategically place transactions before and after your trade to exploit your slippage tolerance and extract value from you. This type of price exploitation is known as maximal extractable value (MEV).

### Sandwich Attacks

![2-what-is-slippage.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_what_is_slippage_e0af2a8fb5.webp)

_The flow of a sandwich attack_

A  [sandwich attack](/learn/what-is-a-sandwich-attack-and-how-can-you-protect-yourself)  is a form of MEV that can occur whenever a user places a trade with a high slippage tolerance. Specifically, this is a slippage tolerance that is larger than what the market price may call for.

When a user places this trade, an MEV bot (known as a “searcher”) places another transaction before the user transaction, pushing the price of the traded asset up to the original user’s maximum slippage tolerance. The original user’s transaction then goes through, pushing the price up even further. Finally, the searcher sells the asset, cashing out on the price difference.

In the end, the user loses out because their transaction could have gone through at a lower slippage. Instead, the searcher forced the user’s transaction to execute at the limit of its slippage tolerance and kept the difference for themselves.

This isn’t a rare occurrence either, MEV is a systemic problem for chains like Ethereum where MEV losses total over $1.3 billion to date.

## What is Auto-Slippage?

Unfortunately, there is no perfect way to predict what the ideal slippage should be for every trade. In crypto, users are often competing against more sophisticated trading parties and bots who can take advantage of their sub-optimal traders for their own profit.

To protect users from MEV, some exchanges offer auto-slippage functions which automatically calculate the slippage tolerance that trades should use based on the assets they are trading and market conditions.

## CoW Swap: Premium Auto-Slippage and Delegated Trade Execution

![3-what-is-slippage.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_what_is_slippage_4170bdeb89.webp)

One of the exchanges with the most advanced auto-slippage features is CoW Swap. CoW Swap is an intents-based DEX aggregator that uses third parties known as “solvers” to execute trades on behalf of users. Solvers calculate the optimal slippage tolerance for user trades and take on all the risks of MEV.

![4-what-is-slippage.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_what_is_slippage_4f3c2ce1e4.webp)

In fact,  [data shows](https://blog.cow.fi/do-cows-slip-age-less-389150154f84)  that CoW Swap offers a low default slippage the overwhelming majority of the time compared to 0x and 1inch.

On CoW Swap, you can make the perfect trade every time, even if you’ve never heard of “slippage” before!

Trade worry-free at  [swap.cow.fi](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=slippage-article).

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Slippage occurs in most crypto trades, and it’s an important concept for traders to understand


What is Slippage in Crypto?


# How to create a LVR Protected Liquidity Pool on CoW AMM

## Accessing the creation page UI

CoW AMM is a new type of AMM built from the group up to protect LPs from price exploitation in the form of [LVR](https://cow.fi/learn/what-is-loss-versus-rebalancing-lvr). Liquidity providers expect their tokens to earn yield, but most liquidity pools are actually not profitable after accounting for stale prices. Arbitrageurs exploit these stale prices at the expense of LPs. CoW AMM fixes LVR once and for all, with liquidity pools proven to outperform reference Balancer and Uniswap pools.

Now, you can create your own CoW AMM pools too! To get started, navigate to the [Balancer CoW AMM pool creator](https://pool-creator.balancer.fi/cow).

You can access the pool creator in several ways. The first is to navigate to the [CoW AMM liquidity pools page](https://balancer.fi/pools/cow), scroll down to the bottom, and click “create a pool.”

![Cowamm_poolguide_1.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_1_8dcf4f3760.png)
![Cowamm_poolguide_2.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_2_9e8feff94c.png)
  
You can also open the pool creator from the banner on the [CoW Swap](https://swap.cow.fi/) homepage.

![Cowamm_poolguide_3.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_3_70c3bd8093.png)

The third way is to access the pool creator directly at [https://pool-creator.balancer.fi/](https://pool-creator.balancer.fi/) and click the icon to enter the pool creation page.

![Cowamm_poolguide_4.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_4_0aef667f89.png)

Once inside, you’ll see the following interface:

![Cowamm_poolguide_5.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_5_fb12211f1f.png)

## Configuring your own LVR Protected pool for deployment

To get started, select the tokens you want to use to create your LVR-protected pool.

![Cowamm_poolguide_6.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_6_542472caad.png)

After selecting your tokens, specify the deposit amounts. Keep in mind that the pool creator currently only supports 50/50 pools so add an equivalent dollar amount of both assets.

![Cowamm_poolguide_7.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_7_124b34dcdb.png)

After selecting your assets and amounts, tick the checkbox confirming that you understand assets must be added proportionally or you risk loss of funds via arbitrage. Once you’ve done this, click the “Preview” button.

![Cowamm_poolguide_8.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_8_84c160ab40.png)

## Deploying your LVR Protected pool onchain

Creating a pool requires several approval and swap steps through your wallet. The first is the actual pool creation, to initiate this click the “Create Pool” button and check your connected wallet interface.

![Cowamm_poolguide_9.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_9_7a477d22d7.png)

In your wallet, approve the pool creation by signing. Remember to double check that you are signing the correct transaction!

![Cowamm_poolguide_9.1.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_9_1_bed5d89c73.png)

Once you’ve created the pool, click “Approve” to approve the first token you want to create a pool for.

![Cowamm_poolguide_9.2.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_9_2_bfdabb689f.png)

Sign the transaction in your wallet.

![Cowamm_poolguide_9.3.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_9_3_08ff4c5184.png)

The next step is to approve the second asset you’re adding to the pool by clicking the “Approve” button once again.

![Cowamm_poolguide_9.4.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_9_4_1cf27aeeaa.png)

Sign the transaction in your wallet.

![Cowamm_poolguide_9.5.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_9_5_2493187384.png)

The next transaction adds the initial funds for your first asset to the pool.

![Cowamm_poolguide_9.6.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_9_6_0717143d89.png)

Sign the transaction in your wallet.

![Cowamm_poolguide_9.7.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_9_7_3ad3877cea.png)

The transaction after that adds the initial funds for your second asset to the pool.

![Cowamm_poolguide_9.8.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_9_8_f05506ce78.png)

Sign the transaction in your wallet.

![Cowamm_poolguide_9.9.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_9_9_4dd69d06c0.png)

Almost there! The second to last transaction sets the swap fee for the pool. Currently, all CoW AMM pools must set the swap fee to the maximum amount (99.99%)

![Cowamm_poolguide_9.91.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_9_91_3d71ad96df.png)

Sign the transaction in your wallet.

![Cowamm_poolguide_9.92.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_9_92_f8caadd193.png)

Last, click the “Finalize” button to make your last transaction and finalize the pool creation.

![Cowamm_poolguide_9.93.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_9_93_f703a7b940.png)

Sign the transaction in your wallet.

![Cowamm_poolguide_9.94.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_9_94_02c63b4721.png)

Once created, you can view your pool by clicking the “View on Balancer” button.

![Cowamm_poolguide_9.95.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_9_95_377e64c199.png)

Your new pool will now appear in the [list of CoW AMM pools on Balancer](https://balancer.fi/pools/cow)! Once created, users can LP their own tokens, growing the size of the pool for the two assets you’ve selected.

![Cowamm_poolguide_9.96.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_9_96_6c0d9f5c17.png)

You can click on the pool to view its current size, APR, yield, and more.

![Cowamm_poolguide_9.97.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_9_97_374dca4ee9.png)

The interface also showcases the exact amount of liquidity you specifically have added out of everyone for this pool, as well as the pool composition split between assets.

![Cowamm_poolguide_9.98.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_9_98_2fd5e07452.png)
![Cowamm_poolguide_9.99.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_9_99_1636bf73fd.png)

Congratulations! You’ve created your first CoW AMM Balancer pool.

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A step-by-step guide to creating a LVR Protected Liquidity Pool using CoW AMM on Balancer. CoW AMM safeguards liquidity providers from price exploitation due to stale prices, ensuring better yield protection and profitability than traditional pools.

How to create a LVR Protected Liquidity Pool on CoW AMM

When it comes to making high volume trades, experts love CoW Swap. In the last few months, several high profile traders have all taken advantage of CoW Swap’s unique feature set to settle trades involving large amounts of tokens. DAOs and multisig wallets have also used CoW Swap to complete large volume trades. But why?

  

This article is going to explain why CoW Swap has become the go to meta-DEX for pros.

  

TL:DR it’s because CoW DAO has a number of unique features that gives traders more control over their assets.

  

## CoW Swap Reduces Slippage

[Slippage](https://cow.fi/learn/what-is-slippage-in-crypto) is the amount the price of an asset may vary between the time the trade is placed and the time it actually executes.

  

To better understand slippage, let’s take a look at an example.

  

Let’s say a user places an order to buy 1 ETH while the price of ETH is exactly $3,000. By the time the order executes, however, ETH has shifted slightly in price and the user ends up only paying $2,980 for 1 ETH. The $20 difference between the $3,000 that they initially placed their order at and the $2,980 per ETH price that the order eventually executed for is known as slippage.

  

In the world of decentralized exchanges, users can set what’s called their slippage tolerance, how far from the price they want they are willing to accept - as a percentage.

  

When it comes to high volume trades, the amount of slippage that has to be set in order for a trade to complete can become prohibitive, especially when the trade is with a token with low liquidity. It’s also a key area for exploitation. MEV bots look for trades with high slippages in order to exploit price differences. But on CoW Swap, that doesn’t have to be the case, thanks to solvers.

  

Solvers are specialized actors that search for the best prices on transactions you want to execute. One of their roles is finding the best liquidity pathway for the tokens you want to trade. They do that in two distinct ways.

  

The first is aggregation. CoW Swap solvers search all major sources of liquidity. That includes the likes of 1inch, Uniswap, 0x, and Paraswap. A CoW Swap solver does the hard work of searching through all these sources looking for the best price. But solvers go one step further. They search off-chain liquidity sources, accessing liquidity pools that aren’t found on other DEXes. If they find the right source off-chain, they can secure a better price.

  

Another key function Solvers perform is they can and do split large trades between multiple liquidity sources to reduce price impact. If a trader went to one DEX and attempted to make one single transaction, it would have a bigger impact on price. With CoW Swap, a solver will look for the most effective way to make your transaction by splitting it into smaller chunks across multiple DEXes.

  

Traders, too, have the option of breaking up their transactions into smaller chunks. They can do that via [TWAP Orders](https://cow.fi/learn/why-twap). Time-Weighted Average Price transactions, or TWAPs split the trade into lots of smaller trades over time. This helps manage the amount of slippage each trade will incur if you had made a large, single trade, thanks to a reduction in price impact.

## Protecting Slippage Tolerance

  

As we discussed in the previous section, slippage is a key part of trading in the DeFi space. Because markets never close, prices are always moving, meaning the price you sell and ultimate price you receive can often be different. While that’s a core part of the DeFi experience, another part is MEV.

  

Maximum Extractable Value is a feature that allows sophisticated actors to search the mem pool for transactions they can profit from. One of the most common attacks is to search for high slippage trades in the mem pool, and exploit them by placing trades in the queue either before or after your trade. For a full explanation of how [MEV works, step this way](https://cow.fi/learn/what-is-mev). With CoW Swap, traders do not have to worry: MEV protection is built in.

  

One of the key ways CoW Swap does that is with its Solver system. When solvers receive an order request, it is hidden from the mem pool, meaning no one can swoop in and exploit your slippage setting to make a quick buck.

  

Additionally, because the Solver system is a competition between different entities trying to find the best price, the system ensures the best prices - with the lowest slippage tolerance - wins. In other words, solvers are incentivised to find the best prices, and help achieve the biggest surplus, by finding paths that help protect against slippage tolerance attacks.

  

Lastly, when there’s a Coincidence of Wants - an economic phenomenon where two parties swap assets with one another peer-to-peer - buyers and sellers are matched directly, meaning the transaction cannot be attacked by bots lurking in the mem pool.

## Gives traders more than they ask for

The price we want and the price we get in crypto can and often is, different. On CoW Swap, there are a number of features that help traders get as close to the prices they want as possible - and sometimes even more!

  

This section explores one of the many ways CoW Swap helps give traders more than what they ask for.

### Coincidence of Wants (CoWs)

  

As discussed in the previous section, Coincidence of Wants are moments when a buyer and seller can complete a transaction directly. When this happens, sellers and buyers don’t incur the same fees or run the same risks as they might trying to complete an order on a DEX or centralized exchange.

  

That means better prices. How? When a buyer and a seller are involved in a CoW, they don’t incur the usual fees to use an AMM - which can add up if it's a large transaction.

### Privileged Pricing for Traders

  

Using CoW Swap directly often means traders can gain access to prices only reserved for pros! CoW Swap’s unique relationship with projects like Balancer allows traders to access reduced fees, [by as much as 75%](https://forum.balancer.fi/t/bip-295-fee-discount-for-cowswap-solvers/4785) when Solvers use liquidity on the network.

  

If Solvers complete their trades using CoW AMM pools meanwhile, no fees are added. That’s because CoW AMM liquidity pools are treated as standing limit orders; if they're included in a batch, it's a CoW with no AMM fees. If you want to understand how CoW AMM works, [head this way.](https://cow.fi/cow-amm)

### Batch Pricing

  

Thanks to the unique Batch Auction feature found on CoW Swap, traders get improvements on prices thanks to transactions being processed in blocks rather than one at a time. Let’s explain. The process starts with traders signaling they want to trade by sending what’s called an “intent to trade” message to CoW Swap.

  

The DEX takes these orders and groups them together into something called batches. Those batches are then sent to solvers, whose job it is to find the best prices for those transactions. The solver that finds the best price for the batch executes the order. Any surplus - the difference between the price quoted and the final price - is partially returned to the traders.

## Better UX for advanced traders

  

When traders are performing lots of trades, the last thing they need is complicated UX. CoW Swap has refined the experience to give traders ultimate control of how they execute their trades. Let’s take a look at a few examples.

### Improved multisig experience

  

Large traders, which can often include DAOs and other types of organisations, typically require transactions to be signed by more than one wallet for security purposes. On many DEXes that can be a time-consuming experience. But not on CoW Swap! That’s because traders using CoW Swap get the price at the time of execution instead of at the time of submission. What does that mean?

  

Let’s say you have to gather the signatures of five different wallets to execute a trade. Meanwhile, prices are constantly moving. By the time you have gathered your signatures, the price might have changed significantly enough to either lead to a transaction failing, or it being exploited by MEV bots. Not on CoW Swap.

  

Because it uses a solver system, the price of the trade is only confirmed when the trade is completed, not when it is started. Because solvers are working on your behalf, the user experience means you’re less likely to experience a failed transaction because you’ve missed your price.

### Milkman, CoW Swap’s secret UX sauce

  

For traders looking to trade at some point in the future, on traditional DEXes that’s a challenge. That’s why CoW DAO built [Milkman](https://cow.fi/learn/what-is-milkman-cow-swaps-solution-for-delayed-execution-trading). Milkman is a specialized smart contract for advanced traders that lets them set their slippage tolerance for trades in the future.

  

Many smart contract wallet users, such as DAOs, frequently need to create these types of orders. Take the following examples:

-   DAOs that need trades to execute after passing a governance process
    
-   Groups that need hours to collect signatures to execute trades from a multisig wallet
    
-   Applications that process automated swaps years in the future (e.g. for payroll or treasury management).
    

  

Milkman is a smart contract that solves all of this. Let’s take a look at an example.

  

Let’s say you want to sell 1000 ETH for USDC, but you want to do it far in the future. To protect yourself from volatile price movements, you can ask Milkman to create the order and specify a minimum amount you’re willing to accept for the trade. Milkman tracks prices using oracles.

  

When the time comes to execute your trade, CoW Protocol will receive it and solvers will compete to improve the price on top of that, as they always do.

It’s why DAOs like [Aave](https://cow.fi/learn/aave-trade-breakdown) and [ENS](https://cow.fi/learn/ens-trade-breakdown), have already used Milkman to trade over $20M worth of tokens. Beyond allowing these DAOs to count on reliable prices, Milkman lets them reduce their overall number of governance votes and gives them standard CoW Swap benefits like best price execution and [best-in-class](https://eigenphi.substack.com/p/sandwich-mevs-impact-on-cow-swap) MEV protection — critical for large trades.

### Programmatic Orders

  

When trades are submitted directly to CoW Protocol, via CoW Swap, traders can take advantage of programmatic orders: or orders with certain conditions that have to be met before they are executed.

  

For example, if a trader wants to set and forget a trade like a stop loss or trailing stop, they can on CoW Swap. But there’s more.

  

Wallets of all sizes can automate recurring actions using programmatic orders. DAOs can automate payroll, diversify their treasuries, collect fees and more. Individuals, meanwhile, can automate portfolio rebalancing, yield farming, and hedge market positions.

  

Users can even bundle multiple actions together into one single order. For example, if a trader wanted to withdraw and swap a token for another in the future, it can do so using programmatic orders. No need to create multiple transactions, thanks to [Hooks](https://docs.cow.fi/cow-protocol/concepts/order-types/cow-hooks). This is a unique feature of CoW Swap. How does it work?

  

They allow any user to to pair multiple steps together into a single transaction. Let’s say you want to unstake tokens to take advantage of a price movement, sell a token and swap it for another. With Hooks that can be created and executed in one single transaction. No more multiple transactions, no more multiple fees. Find out more about how to [use Hooks here](https://docs.cow.fi/cow-protocol/concepts/order-types/cow-hooks).

## In summary: Why Traders Trust CoW Swap

  

When making large transactions in crypto, there are a number of things users need to be aware of. Whether it’s slippage, what order type you’re looking to execute, MEV attacks, to the user experience of different platforms.

  

CoW Swap is designed to do the hard work for you. It combines class-leading protection from MEV attacks, alongside its unique solver system which helps find you the best prices, and also gives you the chance to earn a surplus from every trade.

  

For pros it goes even further. CoW Swap’s unique specialised smart contracts give traders the chance to set their slippage tolerance and create programmatic orders that trigger when certain conditions are met.

  

Riding the crypto waves has never been so s-moooo-th! 🐮

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Experts love using CoW Swap for high-volume trades, but why? This article explores the key features that make CoW Swap unique. 

Why Traders Trust CoW Swap for High Volume Trades

## TL;DR

-   During the month of  **December**, CoW Protocol handled a total volume of  **$1.73B**  and generated a surplus of  **$14.9M**
-   In exciting news, the  [Crypto.com wallet integrated MEV Blocker](https://x.com/CoWSwap/status/1732776869584396433?s=20), we teamed up with  [Chain Patrol for our Discord](https://x.com/CoWSwap/status/1740387210090987525?s=20), and we welcomed traders to CoW Swap with a special holiday “Moo-ho-ho” 🎅

## Protocol Stats

This month, CoW Protocol settled a total of  **$1.73B.**

![1-december-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_december_2023_highlights_08516ca0a3.webp)

The top 3 batches worth highlighting are the following:

-   **Batch with the highest % of CoW trades**  **(**[**Transaction details**](https://explorer.cow.fi/tx/0xc0fa0316df77f61da1976094d5cb117f76dc47b1d93b855bc404b231a7a448d0?tab=graph)**):**  The total batch volume was  **$4,924,638.28**, and it was created by two traders who were perfectly CoWed for  **$4,923,442.30 (99.8%)**  of the total batch volume. One trader was selling ~**59K of wNXM for WETH**, and the other trader was buying  **~50K of wNXM for WETH.**  Even more interesting, one of the orders was a partially fillable limit order which was filled 87% of the way by this CoW.

![2-december-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_december_2023_highlights_d74c092297.webp)

-   **Batch containing the highest volume**  **(**[**Transaction details**](https://explorer.cow.fi/tx/0x82851a56f09e1d10643d7ec5369f35cc9f50bc36a3a29e0a13ee5d781198ce09?tab=graph&vis=transfers)**)**: The total batch volume was  **$20,423,856.02** and it was created by three traders who were swapping the following tokens: ~**$9K of ETH to GEAR**, ~**$3K of USDC to BEND,**  and ~**$20.4M of USDC to DAI**.

![3-december-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_december_2023_highlights_7861b0ae2e.webp)

-   **Batch with the highest amount of surplus**  **(**[**Transaction details**](https://explorer.cow.fi/tx/0xd6013c8d24db365330e054fb665755d0c4d50f726b08a7afa34671678c13daf8?tab=graph)**)**: The total batch volume was  **$94,152.64** and it was created by two traders who were swapping ~**$4.7M**  of  **ETH**  **to**  **wstETH** and ~**$1K USDC** to **LIT**. The first trader achieved the largest surplus for the month of  **December**  by getting  **$94,152.64** back, which represented 2.04**%**  of their order size.

![4-december-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_december_2023_highlights_03cc8845fa.webp)

During the month of  **December**, the top 10 traders traded a total of  **$35M.**

![5-december-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/5_december_2023_highlights_87f4c2b0cb.webp)

In the table below you can see the total volume for this month’s biggest trades. The most active trader executed a whopping  **$10M**  in trades with CoW Protocol this month.

![6-december-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/6_december_2023_highlights_3c9dc56e0c.webp)

## Solvers

In  **December**, solvers generated a total of  **$14.9M** in surplus, which is money in the pockets of traders.

![7-december-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/7_december_2023_highlights_5b78c0a1b3.webp)

Below you can find a breakdown of how each solver performed in December.

![8-december-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/8_december_2023_highlights_ce0ebfda05.webp)

## Governance

It was a relaxed month in terms of governance! The CoWs had time to play in the snow 💪

![9-december-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/9_december_2023_highlights_f723d72fd8.webp)

## Executed Proposals

The DAO did not execute any proposals.

## Draft Proposals

There were  **no new proposals**  this month, but two important proposals from last month are still looking for feedback before moving into the next phase, final CIPs, in their current form:

-   [CIP-Draft: Testing Fee Models for CoW Protocol](https://forum.cow.fi/t/cip-draft-testing-fee-models-for-cow-protocol/1984)
-   [CIP-Draft: Solver Computed Fees & Rank by Surplus](https://forum.cow.fi/t/cip-draft-solver-computed-fees-rank-by-surplus/2061)

Make sure to read them and leave comments — your feedback is highly appreciated and will help move these important topics forward. If you are interested in submitting a proposal to the CoW DAO, make sure to use the following  [template](https://forum.cow.fi/t/cip-0-template/28).

## CoWmunity News

-   Installed the new  [Chain Patrol Discord bot to make reporting scammers easier](https://twitter.com/CoWSwap/status/1740387210090987525?s=20)
-   Participated in the following podcasts and twitter spaces:  [Blockmates, “The Future of Decentralized Trading](https://twitter.com/CoWSwap/status/1738177889026101653?s=20),”  [Native, “The Future of DEX Spot Trading](https://twitter.com/CoWSwap/status/1737824044773151140?s=20)” and a  [Steak Capital DEX Panel](https://twitter.com/CoWSwap/status/1733124589364838586?s=20)
-   Got featured in a fantastic podcast  [covering intents](https://twitter.com/CoWSwap/status/1732089015199797307?s=20)
-   Wrote two recaps of CoW DAO member talks from Dappcon: “[MEV Transparency: Ensuring Fairness In DeFi Markets](https://twitter.com/CoWSwap/status/1736768910371016898?s=20)” and “[Navigating the Evolution of CoW Swap: From Market Orders to Programmatic Orders](https://twitter.com/CoWSwap/status/1740786005538746656?s=20)”
-   Gathered all the talks, panels, and discussions that CoW DAO members participated in during  [Devconnect IstanBULL!!](https://twitter.com/CoWSwap/status/1737130917272187119?s=20)
-   The lion from Crypto.com incorporated the best protection under the sun by  [integrating MEV Blocker natively into the Crypto.com DeFi wallet app](https://twitter.com/CoWSwap/status/1732776869584396433?s=20)
-   Reminder that in November, CoW Swap launched a Widget which also comes embedded with an  [enticing integration rewards program funded by CoW Grants DAO](https://twitter.com/CoWSwap/status/1731711217230565465?s=20)
-   [Did you know that 69% of all trades this year had a better execution price than originally quoted](https://twitter.com/CoWSwap/status/1734565064810889506?s=20)?
-   [CoW Swap gave a random CoW a new addiction :)](https://twitter.com/BixbiteOfficial/status/1737349265649758270?s=20)
-   Watched people YOLO their trades —  [this user traded with 50% slippage and got twice as much as they asked for](https://twitter.com/CoWSwap/status/1739277374565580822?s=20)!
-   Reminded people that the only venue where  [limit orders get price improvements is CoW Swap](https://twitter.com/CoWSwap/status/1740631237788868653?s=20)

## Product Updates

**Backend**

The backend team has been working hard to improve the product infrastructure. In  **December**, we:

-   Fixed a memory leak that caused the colocated driver to be restarted very often
-   Fixed a bug that could cause incorrect internal buffer trading optimizations
-   Did lots of bug fixes and performance improvements + added metrics for colocation (inflight order filtering, track time to solve and other solver metrics, optimize fetching token metadata and debugging information)
-   Made progress towards deploying on Sepolia
-   Made improvements for faster settlement times
-   Worked on backend deployment for Sepolia testnet
-   Worked on backend documentation for the refreshed docs.cow.fi release

**Frontend**

The frontend team has been pushing hard for several improvements on the UI front as well as the overall UI infrastructure. In  **December**, we:

-   Implemented theme colors for widget customizations
-   Polished and fixed items related to wallet balances and allowances
-   Released CoW Swap v1.51 (Token Lists: v2 of pre-calculated permit, permit improvements, improved loading of balances, and more)
-   Worked on frontend documentation for the refreshed docs.cow.fi release
-   Disabled Ledger Live in a hotfix due to their exploit
-   Worked on a variety of fixes including UI issues (Safe via WC, Ledger Live integration (now removed), classic ETH flow, fixes on TWAP orders not being shown (edge case), and fixes on buy orders
-   Deployed the Christmas theme 🎅 — Moo-ho-ho-ho!

## Open Job Positions

The CoW Protocol team is currently not hiring

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Welcome back to another CoW Update, where we break down the most notable developments of the last few weeks at CoW Protocol.


CoW Protocol December 2023 Highlights


## TL;DR

-   During the month of  **February**, CoW Protocol handled a total volume of  **$1.8B**  and generated a surplus of  **$15.1M**.
-   In terms of Governance, CoW DAO executed CIP-36,37 & 38.
-   In exciting news, CoW Protocol launched the 1st MEV capturing AMM (CoW AMM), got COW token listed in tokenunlocks, and started playing around voiceover videos!

## Protocol Stats

This month, CoW Protocol settled a total of  **$1.80B.**

![1-february-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_february_2024_highlights_8bc23c3684.webp)

The top 3 batches worth highlighting are the following:

-   **Batch with the highest % of CoW trades (**[**Transaction details**](https://explorer.cow.fi/tx/0x070c090c7fd7e371c170f2e381cdbd4f4ab81553a9d74469aa32a5e89b5748d1?tab=orders)**):**  The total batch volume was  **$1,502,953.2**, and it was created by three traders. Two of these traders were CoWed for  **$374,483.44, (99%)**  of the total batch volume. One trader was buying  **$374K of LINK**  and the other trader was selling  **$374M of LINK**  (Getting settled via partial fills from their total of  **$1.1M LINK**  sell order)**.**

![2-february-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_february_2024_highlights_124f5c0396.webp)

-   **Batch containing the highest volume (**[**Transaction details**](https://explorer.cow.fi/tx/0xa50f8b71fff77e767e333401e5caca468860b21ea9d2e15e81e9d52fe41cee7b?tab=orders&vis=transfers)**):**  The total batch volume was  **$11,038,754.45** and it was created by a trader who was swapping  **ETH**  to  **stETH**.

![3-february-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_february_2024_highlights_99850e7562.webp)

-   **Batch with the highest amount of surplus (**[**Transaction details**](https://explorer.cow.fi/tx/0x40850075f7c6fda7c27abe24f8f49e0b52ff5222fe3c737da4457ab768f2b522?tab=orders)**):**  The total batch volume was  **$567,243.73** and it was created by a single trader who was swapping  **ETH**  **to**  **USDT**. This trader achieved the largest surplus for the month of  **February** by getting  **283,933.46 USDT**  extra, which at the time of trade was roughly **50.05% surplus**.

![4-february-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_february_2024_highlights_6cadcb51cc.webp)

During the month of  **February**, the top 10 traders traded a total of  **$21.8M.**

![5-february-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/5_february_2024_highlights_da09bce9a4.webp)

In the table below you can see the total volume for this month’s biggest trades. The most active trader executed a whopping  **$6.4M**  in trades with CoW Protocol this month.

![6-february-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/6_february_2024_highlights_06a8c9ba99.webp)

## Solvers

In  **February**, solvers generated a total of  **$15.17M**  in surplus, which is money in the pockets of traders.

![7-february-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/7_february_2024_highlights_f5eb61a440.webp)

Below you can find a breakdown of how each solver performed in February.

![8-february-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/8_february_2024_highlights_2144302bca.webp)

## Governance

It was a hectic month in terms of governance! The CoWs cannot be stopped 💪

## Executed Proposals

The DAO  **executed two important proposals**  this month:

-   [CIP-36: Adjusting and renewing the solver rewards budget](https://snapshot.org/#/cow.eth/proposal/0x4e58f9c1208121c0e06282b5541b458bc8c8b76090263e25448848f3194df986)
-   [CIP-37: Increasing liquidity for the COW token via Programmatic Order Framework and FM-AMM](https://snapshot.org/#/cow.eth/proposal/0xbe6a5e04cc284cc88adb0cee505b7bf090e5aabf4e21b2d2168b29cb03d90404)
-   [CIP-38: Solver Computed Fees & Rank by Surplus](https://snapshot.org/#/cow.eth/proposal/0xfb81daea9be89f4f1c251d53fd9d1481129b97c6f38caaddc42af7f3ce5a52ec)

## Draft Proposals

This month,  **there were no new proposals.**

Make sure to read the proposal and leave comments — your feedback is highly appreciated and will help move this important topic forward. If you are interested in submitting a proposal to the CoW DAO, make sure to use the following  [template](https://forum.cow.fi/t/cip-0-template/28).

## CoWmunity News

-   Launched  [CoW AMM](https://x.com/CoWSwap/status/1757783798601986400?s=20), the first live AMM which solves LVR. The new AMM aimed at protecting liquidity providers from the dangers of MEV got quite coverage in the media and across various influencers:  [The block](https://www.theblock.co/post/277425/cow-dao-amm-exchange-mev?utm_source=twitter&utm_medium=social), [DL news](https://www.dlnews.com/articles/defi/new-cow-swap-amm-will-stop-mev-bots-and-save-users-millions/?utm_source=twitter&utm_medium=organic_social&utm_campaign=), [Blockworks](https://blockworks.co/news/cow-dao-mev-capturing-amm), [Binance](https://www.binance.com/en/feed/post/2024-02-14-cow-dao-launches-mev-capturing-automated-market-maker-to-address-lvr-problem-4118740461410), [Delphi Digital](https://members.delphidigital.io/feed/cow-swap-releases-lvr-aware-amm), [CoinMarketCap](https://coinmarketcap.com/community/articles/65cd7aa4639eda40936e4b80/), [EthDailly](https://ethdaily.io/cow-protocol-mev-capturing-amm/), [CoinLive](https://www.coinlive.com/news-flash/442186), [Cryptonews](https://cryptonews.net/news/other/28559567/), [CryptoEconomy](https://crypto-economy.com/cow-dao-launches-automated-market-maker-to-fight-arbitrage-bots/), [OutlierVentures](https://x.com/OVioHQ/status/1758534586881942002?s=20),  [CryptoCondom](https://x.com/crypto_condom/status/1757785824484102356?s=20), [Martin K](https://x.com/koeppelmann/status/1757794954586329217?s=20), [Shoal Research](https://x.com/pt1mfv_/status/1757963151222440096?s=20), [0xKermo](https://x.com/0xKermo/status/1758892911796658541?s=20), [0xSalazar](https://x.com/0xSalazar/status/1759333374865682742?s=20), [PaulIronFinance](https://x.com/paul_ironforce/status/1757784723370160393?s=20)
-   [Revamped the UI](https://x.com/CoWSwap/status/1762153353956766022?s=20)  to make it easier for users to understand what they are trading and the amounts they are expected to receive
-   Hosted a  [twitter space to explain all things CoW AMM](https://x.com/CoWSwap/status/1761035749636362532?s=20)  and the inner workings of how it actually solves LVR.
-   To boost CoW AMM outreach, marketing prepared a pair of meme videos to get everyone’s attention around the first MEV capturing AMM.  [Jamie Dimon](https://x.com/CoWSwap/status/1760740193773212031?s=20) &  [Wolf of Wall street](https://x.com/CoWSwap/status/1763232025081753674?s=20)
-   [COW token got listed on tokenunlocks](https://x.com/CoWSwap/status/1762522857697911089?s=20)  and now all the information regarding the COW tokenomics can be easily found there.
-   [COW Tokens can now be leveraged to borrow DAI thanks to Ajnas permissionless pools](https://x.com/CoWSwap/status/1759132605335601201?s=20)
-   Said goodbye to our longtime  [Goerli Network friend](https://x.com/CoWSwap/status/1753099953403310084?s=20)  which was replaced by the new Sepolia Testnet
-   Prepared a new  [monthly stats summary for MEV Blocker](https://x.com/CoWSwap/status/1754539321359806696?s=20)  stats throughout the month
-   [MasterCoW´s treasure hunt](https://x.com/CoWSwap/status/1754877940175688106?s=20)  came to an end as someone was able to decipher all the clues and claim the prize
-   Felix went on  [Leviathian News](https://x.com/CoWSwap/status/1755158002720444619?s=20)  to cover all things CoW Swap
-   Started gathering UX research and feedback on how can CoW Swap Limit orders improve ([Poll 1](https://x.com/CoWSwap/status/1755565833739292693?s=20),  [Poll 2](https://x.com/CoWSwap/status/1759989378066038957?s=20),  [Poll 3](https://x.com/CoWSwap/status/1762619014369407131?s=20))
-   Worked on multiple blogspost aimed at improving CoW Swap´s SEO results:  [January 2024 Monthly highlights](https://x.com/CoWSwap/status/1756486330627084549?s=20),  [What does an MEV Blocker do?](https://x.com/CoWSwap/status/1756828056134754522?s=20),  [CoW DAO launches 1st MEV Capturing AMM](https://blog.cow.fi/cow-dao-launches-the-first-mev-capturing-amm-bc7199e217a3),  [What is LVR?](https://x.com/CoWSwap/status/1761070004844511477?s=20)
-   Anna & Andrea jumped on  [Strange water podcast to discuss](https://x.com/CoWSwap/status/1759899359095709866?s=20)  how a fair competition of solvers fixes DeFI.

## Product Updates

**Backend**

The backend team has been working hard to improve the product infrastructure. In  **February**, we:

-   Simplified transaction submission logic for solvers
-   Implemented several changes in the backend to make it compatible with CoWAMM
-   Looked into providing more attractive quotes by allowing internalization of trades to Solvers
-   Developed a new automated spam protection system for the backend
-   Removed goerli infra
-   Worked on adapting all backend solver logic to rank by surplus instead of score
-   Moved the entire node infra to Reth.

**Frontend**

The frontend team has been pushing hard for several improvements in the UI front, as well as the overall UI infrastructure. In  **February**, we:

-   Deprecated Goerli from the front end
-   Revamped the entire UI with a new modal: Display confirmation information while signing to be able to compare values in the app and in the wallet, Custom recipient displaying unification, “Order submitted” popup styles fixes, “Order confirmed” screen styles fixes
-   Shipped the new CoW AMM landing page
-   Worked on several fixes such as handling errors, Sepolia crash, Twap order cancelation issue, Issue with localstorage growing too much
-   Made several improvements to the Widget
-   Events from widget to integrator (order submitted, order filled, etc.)
-   Sounds and images customization
-   Hide connect/account button in the header
-   Option to disable “Connect wallet” button
-   Improve wallet provider integration between app and integrator

## Open Job Positions

There are currently no open positions.

Convinced you can contribute to Cow Protocol?  [Get in touch](https://discord.com/invite/cowprotocol)

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CoW Protocol February 2024 Highlights

![CoW-Case-Study-Qantura-main-image.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Co_W_Case_Study_Qantura_main_image_3519f259be.png)
TL:DR

  

-   [Qantura](https://www.qantura.com/) provides a seamless integration layer that transforms how smart wallets engage with blockchain applications.
    
-   In order for their service to work, it needed a Meta DEX with built-in MEV protection to allow users to swap their yield tokens whenever they tap the VISA card to spend money on real-world items.
    
-   The Qantura team chose CoW Protocol to create a seamless way to rebalance customer wallets.
    
-   The result was a first-of-its-kind application that enables frictionless payments with yield-bearing assets.
    
-   Within the first month after the release, the project saw more than $100,000 USD settled.
    

## Introduction

  

CoW DAO builds products that help keep users safe. But it also builds products that other people can use and integrate. One of those is CoW Protocol. With its built-in MEV protection, simple user interface, customized order functionality, and ease of integration, projects looking for a way of providing better prices for its users while keeping them safe look no further.

## The client

  

[Qantura](https://www.qantura.com/) provides a seamless integration layer that transforms how smart wallets engage with blockchain applications. The company leverages account abstraction to simplify complex blockchain interactions while maintaining the highest security standards. Founded by crypto OGs and security experts, they're making it effortless for wallets to expand their capabilities using their plug-and-play modules. They have already partnered with industry leaders like [Zeal Wallet](https://www.zeal.app/) and [Gnosis Pay](https://gnosispay.com/).

## Identifying the problem and challenges

  

Historically, if someone wanted to pay in crypto, the merchant would have to accept that token directly or use a service provider that performed the conversion from cryptocurrency to cash. With Gnosis Pay, that’s no longer the case.

  

Gnosis Pay is the world’s first on-chain spending account with a Visa Debit Card linked to a self-custodial blockchain wallet, and thanks to [Monerium](https://monerium.com/), users with EURe, or GBPe stablecoins can now spend their currency anywhere where Visa is accepted, with a series of on-chain transactions taking place in the background. However, if a user leaves stablecoins sitting in their wallet, they’re not only missing out on yield farming but also on any capital appreciation they expect in other crypto assets.

  

Instead of simply having customers sit with idle capital on their Gnosis Pay account, Qantura wanted to offer users the opportunity to earn yield and spend that yield on whatever they liked. Qantura teamed up with Zeal and Gnosis Pay, to build a unique feature: allow customers to switch stablecoins to yield-bearing tokens in order to capture such yield, while still being able to spend money on real-world transactions.

  

While that sounds simple in theory, the devil was in the details. In order for all this to work, Qantura “needed a flexible system that worked for swapping any ERC20 token and that ensured users got competitive prices” says a member of Qantura’s team. Additionally, because most of their system is based on smart contracts, they needed a protocol that worked with [ERC1271](https://cow.fi/learn/eip-1271-explained) orders. This allowed them to have their smart contract sign the intent to trade transactions whenever the user actually tapped the card on a payment terminal.

  

Based on all these requirements, the team needed a solution that offered smart contract orders that could be customised to suit what they were building. So they turned to CoW Protocol.

## Working with CoW

  

The team were already familiar with CoW DAO’s suite of products and services, and had been regular users of CoW Swap already.

  

“CoW Protocol offered the flexibility we needed as far as token breadth goes via ERC1271 orders, and its off-chain solver competition did it for us in terms of offering a mechanism that incentivised competitive pricing in rebalancing trades.”  
  
Qantura systems use ERC-1271 smart contract signature verification for order placement. This means that when the user account is deployed, (aka the user wants to earn yield on the funds sitting on their Gnosis Pay card), the yield token is immediately approved on the CoW Protocol settlement contract.

  

This means that now, any third party can create an order as long as it satisfies the wallet’s isValidSignature() function, which in this case would be “Swap my yield token to EURe/GBPe with the best price you can find so that the user can rebalance their card after paying for the coffee bill”. For this to happen, the system places the order via CoW Protocol’s orderbook, which is eventually forwarded to solvers as part of the batch auction process.

  

While monitoring performance, Qantura analyzed nearly 4,000 trades and compared their settled sDAI/EURe prices with a proxy oracle. There’s no oracle in Gnosis chain for sDAI/EURe, so they built a sDAI/EURe proxy oracle instead.  
  

CoW Swap’s unique solver system delivered the most competitive prices than any other venue, and was on par to the comparison model.
![cow-protocol-case-study-qantura.jpeg](https://celebrated-gift-f83e5c9419.media.strapiapp.com/cow_protocol_case_study_qantura_4232e2e475.jpeg)


The graph above highlights Cow Swap’s performance against the price oracle. The median percentage difference between the price of the proxy oracle and CoW Protocol´s found price was just 9 basis points, meaning users typically paid just 0.09% more than the oracle. In the figure, the blue outliers are small amounts of around 1 sDAI.

## The solution

  

The finished product? Recharge. Built in partnership with Zeal Wallet and Gnosis Pay, it allows users to spend yield-bearing tokens via Gnosis Chain in the real world with a Visa card. In the backend, meanwhile, a complex rebalancing takes place to ensure assets are able to be converted for a competitive price and moved to the right places at the right time. It’s a unique showcase of what happens when TradFi meets DeFi composability.

  

Where does CoW Protocol feature in this unique solution? CoW Protocol was integral to ensuring that when rebalancing happens, the execution cost is as low as possible and the best price is achieved.

How does Recharge work? Let’s look at an example. But before you do, we need to clarify a few terms:

  

-   EURe - this is the first fully authorized and regulated euro stablecoin.
    
-   sDAI - or Savings DAI is a token that allows users to earn yield from holding DAI.
    
-   Recharge Smart Contracts - Recharge is a feature that allows Zeal wallet users to maintain a minimum amount of a given currency at any time via the Coordinator. When the amount drops below a threshold, the wallet automatically rebalances itself by swapping one currency for another. In this example, we’ll be using sDAI and EURe. The Coordinator is a smart contract that starts the rebalance once a threshold has been reached.
    

  

### Let’s take a closer look at an example:
![Screenshot 2024-10-25 at 8.39.00 AM.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Screenshot_2024_10_25_at_8_39_00_AM_db0ac99d12.png)


-   (1) Alice pays 5 EURe with her Gnosis Pay card. Before that, Alice had set up rebalance with sDAI and EURe.
    

  

-   (2) Prior to the transaction at the coffee shop, Alice had 1,000 EURe in her Gnosis Pay safe account.
    

  

-   (3) She had also set up her Coordinator smart contract to top up whenever her wallet dropped below 1,000 EURe.
    

  

-   (4a) Qantura's automation service detects Alice’s setup and notices that the new balance of the account is 995 EURe. This takes her below the threshold.
    

  

-   (4b) The service sees that Alice holds 5K sDAI, enough to top up the account.
    

  

-   (4c) The bot drafts the rebalance order, making sure that it meets all conditions specified by the sDAI account including that the order is:
    

  

-   Selling sDAI
    
-   Buying EURe
    
-   Issuing a buy order for 5 EURe
    
-   Sending the funds to the intended receiver; i.e., the user’s Gnosis Pay Safe
    

  

-   (4d) A bot posts the order to CoW Protocol’s orderbook.
    

  

-   (5) The order is forwarded to all solvers as part of the auction process, where they compete to provide the best possible price at the lowest execution cost.
    

  

-   (6) CoW Protocol executes the winning solution, sending 5 EURe to the Gnosis Pay Safe and pulling the sDAI from Alice's sDAI account. The amount pulled is determined by the auction.
    

  

-   (7) Alice's Gnosis Pay Safe is now balanced again.
    

  

CoW Protocol is instrumental in allowing this to happen smoothly. CoW Protocol´s competition pushes solvers to get as much surplus as possible. In the case of Alice, solvers will submit a solution that gets 5 EURe for the least amount of sDAI.

  

## The result

  

Since Recharge launched, more than $100,000 USD has been settled. At the time of writing, there is more than 300k USD generating yield for users. You can follow live metrics on [Qantura's Recharge Dashboard](https://dune.com/steakhouse/qantura-rebalance).

  

Qantura is revolutionizing the payments industry by allowing users to remain capital-efficient in a self-custodial setup. That’s a tall order. But then again, CoW DAO is the place people go to build big things.

## CTA

  

Want to get in touch with Qantura for more details about their solution powered by CoW Swap? [Get in touch with Qantura](https://x.com/QanturaTech).

  

Want to work with CoW DAO’s class-leading suite of products? [Head this way](https://forum.cow.fi/).

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Welcome to CoW Case Studies: in this series we explore how partners used CoW Protocol to build their products.

How Qantura Harnessed CoW Swap To Power the Future of Payments

An MEV blocker is a piece of blockchain infrastructure that protects orders from price exploitation resulting from MEV (Maximal extractable value).

Under the hood, it’s  [RPC endpoints](https://www.quicknode.com/docs/ethereum)  that function as MEV Blockers by routing transactions through specialized mempools which protect them from MEV and even send rebates back to traders when their trades leave money on the table.

There’s a lot of moving parts when it comes to MEV blockers, so let’s break the topic down one step at a time.

## What is MEV?

An MEV blocker is a piece of software that protects user transactions from suffering MEV exploitation… but what is MEV?

MEV (Maximal extractable value) is a hidden tax on all types of Ethereum transactions. Any time you make a large trade, mint a valuable NFT, or even provide liquidity to a liquidity pool, you are at risk of experiencing price exploitation through MEV. To date, MEV has caused over $1 billion in trading losses and continues to increase by the millions each day.

![1-what-does-an-mev-blocker-do.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_what_does_an_mev_blocker_do_80b9b36ca6.webp)

MEV is carried out by traders known as “searchers” who monitor pending Ethereum transactions and  bribe block builders  to order the transactions in a specific order, extracting profit in the process.

Find out more about the specifics of how MEV attacks work in our  [“Understanding MEV” series](/learn/understanding-mev-protection).

## How do MEV Blockers Work?

Since MEV relies on  [reordering transactions](/learn/understanding-mev-protection)  from the order in which they were submitted to a new, more profitable order, it’s possible to cut the process short by sending transactions to a specialized network of searchers bound by unique rules that ensure favorable execution for users.

These searchers cannot frontrun or sandwich transactions. Rather, they capture value by  [backrunning](/learn/what-is-backrunning-mev-attacks-explained)  large orders and sending a large portion of the backrunning profits back to the users as a rebate. So, as a user, you’re not only protecting yourself from harmful price exploitation in the form of frontrunning and sandwich attacks, you also have someone looking out for you any time you leave money on the table.

## What is an RPC endpoint?

We mentioned earlier that under the hood, MEV blockers run through RPC endpoints. An RPC endpoint is a communication layer between the blockchain and a user’s wallet. RPC endpoints relay messages from the wallet that  [RPC nodes](https://www.alchemy.com/overviews/rpc-node)  use to add orders to the blockchain.

RPC endpoints are the perfect place for MEV protection because they are an intermediary layer between the wallet and the blockchain, safely re-routing transactions towards the specialized network of searchers we mentioned earlier, rather than letting them end up in the public  [mempool](https://www.blocknative.com/blog/mempool-intro)  where malicious searchers lie in wait.

## Order Flow Auctions for MEV Blockers

![2-what-does-an-mev-blocker-do.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_what_does_an_mev_blocker_do_7de134111f.webp)

MEV Blocker RPCs rely on an emerging blockchain mechanism known as  [order flow auctions](/learn/understanding-order-flow-auctions). Order flow auctions are bidding mechanisms used at various levels of the Ethereum stack which pit multiple execution parties against each other to find the one that can provide users with the best value for their transaction.

Currently, block building incentivizes MEV extraction by awarding the privileges of creating the next block to the builder who can extract the most value from the trades. Order flow auctions invert this dynamic — incentivizing auction participants (in the case of MEV blockers, this is the specialized network of searchers) to instead find as large of a rebate as possible for the user submitting the transaction. The searcher who bids the most to backrun a trade wins the auction, capturing some small value of the proceeds for themselves and sending the rest back to the user as a rebate.

## Should you use an MEV Blocker?

While many people have yet to learn about MEV blockers, they’re quickly being adopted by some of the most savvy traders to protect their trades, NFT swaps, LP positions, and more. MEV is an increasingly significant problem for traders of all sizes and MEV blockers are designed to outsmart the searchers with the latest innovations in market mechanics.

You may have heard that MEV is only a problem for large trades, but as searchers get more and more sophisticated, this is becoming less true. Searchers can also extract value from small trades, especially in volatile markets, and beginner traders are especially susceptible to price exploitation as they may not yet know how to protect themselves.

MEV blockers provide robust protection without many downsides. As a user, you install the MEV blocker through your wallet and forget about it, meanwhile it’s quietly protecting you from price exploitation and even forwarding rebates from any money your trades leave on the table.

## MEVBlocker.io — CoW DAO’s Approach to MEV Blocking

![3-what-does-an-mev-blocker-do.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_what_does_an_mev_blocker_do_cc9833e466.webp)

[CoW DAO](https://cow.fi/)  became a first mover in the MEV blocker space when it introduced  [MEV Blocker](https://mevblocker.io/)  (yes, we coined the term) in April of 2023.

MEV Blocker (capital “B”) is an RPC endpoint developed by CoW DAO in collaboration with  [Beaver Build](https://beaverbuild.org/)  and  [Agnostic Relay](https://agnostic-relay.net/)  that’s built to protect Ethereum transactions from frontrunning and sandwich attacks. MEV Blocker sends transactions to a mempool of searchers who bid for the opportunity to backrun the trades, sharing any profits 90/10 with users (90% to users, 10% to searchers.)

To join  [over 600,000 Ethereum users receiving more than 1,000 ETH](https://dune.com/cowprotocol/mev-blocker)  in rebates, add MEV Blocker to your wallet by following the instructions  [here](https://mevblocker.io/).

large_What does a MEV Blocker do.png

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MEV blockers have made headlines in the blockchain space, but what are they and how do they work?


What does an MEV Blocker do?

CoW DAO, which builds user-protective products like CoW Swap and MEV Blocker, is launching the first MEV-capturing AMM — CoW AMM.

While CoW DAO’s other products protect traders from MEV, CoW AMM is the first product from CoW DAO built to protect liquidity providers. CoW AMM is the first product on any blockchain to tackle the LVR problem head on.

## The LVR Problem

First described by Jason Milionis, Ciamac C. Moallemi, Tim Roughgarden, and Anthony Lee Zhang in the paper  [Automated Market Making and Loss-Versus-Rebalancing](https://arxiv.org/abs/2208.06046), LVR is defined as the losses LPs incur due to arbitrage bots constantly rebalancing liquidity pools.

Research suggests that:

-   Liquidity providers for major token pairs lose 5–7% of their liquidity due to LVR¹
-   In aggregate, arbitrageurs are responsible for well over $500M in LP losses every year²
-   LVR accounts for more MEV than frontrunning and sandwich attacks combined

LVR disincentivizes liquidity provision in DeFi, restricting its potential utility and growth. And LVR is a contributing factor to block-builder centralization, which many people consider undesirable for Ethereum as a whole.

## How CoW AMM Works

The CoW AMM is a special kind of automated market maker designed to help liquidity providers capture MEV from arbitrageurs. According to research by Andrea Canidio and Robin Fritsch in the paper “[Arbitrageurs’ profits, LVR, and sandwich attacks: batch trading as an AMM design response](https://arxiv.org/pdf/2307.02074v3.pdf),” the most promising way to capture LVR is by using batch auctions to rebalance liquidity pools based on surplus.

![1-cow-dao-launches-cow-amm.gif](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_cow_dao_launches_cow_amm_303d6058bb.gif)

CoW AMM, therefore, works as follows:

1.  Liquidity providers deposit tokens into protected CoW AMM liquidity pools
2.  This liquidity becomes available to CoW Swap traders, who can access it similarly to other sources of liquidity
3.  Solvers bid to rebalance CoW AMM pools whenever there is an arbitrage opportunity
4.  The solver that offers the most surplus to the pool wins the right to rebalance the pool

This design eliminates LVR by capturing arbitrage value for LPs and shielding it from MEV bots.

Said another way: while most AMMs allow arbitrageurs to make money at the expense of their LPs, CoW AMM protects this money for the LPs instead.

## Expected Outcomes

Research suggests that CoW AMM LPs will fare as well if not better than CFAMM LPs.  [Backtesting over 6 months in 2023](https://arxiv.org/pdf/2307.02074v3.pdf)  shows that LP returns on CoW AMM would have been equal to or greater than returns on Uniswap in 10 of the 11 most liquid, non-stablecoin pairs.

## Why is CoW DAO launching CoW AMM?

Launching CoW AMM is a natural extension of CoW DAO’s mission to protect Ethereum users from MEV. With two successful products (MEV Blocker and CoW Protocol) aimed at traders, the time is right to extend MEV protection to liquidity providers.

LVR is a large problem, estimated to be responsible for over $500M in value lost to MEV bots every year — more than all trading-related forms of MEV combined.

CoW DAO is uniquely capable of bringing an FM-AMM design to market, as it relies on a surplus-capturing solver network to balance liquidity pools. CoW Protocol currently runs the largest solver competition on Ethereum, with 19 active solvers.

**Find out more about CoW AMM here:** [**cow.fi/cow-amm**](http://cow.fi/cow-amm)

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The novel AMM design protects liquidity providers from MEV bots by eliminating LVR (loss-versus-rebalancing), which costs LPs more than $500M every year


CoW DAO launches the first MEV-capturing AMM

## TL;DR

-   During the month of October, CoW Protocol handled a total volume of  **$998M**, and generated a surplus of  **$6.3M**
-   In exciting news, CoW Protocol launched  [fully gasless transactions](https://twitter.com/CoWSwap/status/1714633297408696409?s=20),  [dressed up for Halloween](https://x.com/CoWSwap/status/1717873465028682130?s=20), got some  [love from Binance Research](https://x.com/CoWSwap/status/1714387540457947396?s=20), and much more

## Protocol Stats

This month, CoW Protocol settled a total of **$998M.**

![1-october-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_october_2023_highlights_132809a9ad.webp)

The top 3 batches worth highlighting are the following:

**Batch with the highest % of CoW trades**  [(Transaction details)](https://explorer.cow.fi/tx/0x924c98ee2a6da650ce0828a2bc722c35f6924e4b490c5ed41f4153f75d85f8aa?tab=orders): The total batch volume was  **$3,078,084.40,** and it was created by two traders who were perfectly CoWed for  **51% ($1,576,169.65)** of their volume. One trader was buying  **DAI for FRAX**, and the other trader was buying  **FRAX for DAI**.

![2-october-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_october_2023_highlights_d343c2eba3.webp)

**Batch containing the highest volume**  [(Transaction details)](https://explorer.cow.fi/tx/0x9b86f6189c18116fadccb4f262b6cd5bb41c77ab5a988663dc8424b6f89809b3?tab=orders&vis=transfers): The total batch volume was  **$9,150,950.72** and it was created by three traders who were swapping  **DAI**  to  **USDC, DAI** to **ETH, and ETH** to **JOE**.

![3-october-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_october_2023_highlights_a69b0be379.webp)

**Batch with the highest amount of surplus**  [(Transaction details)](https://explorer.cow.fi/tx/0x6413df8b8351d6177af1da8b0bc0440e01b7a5f160d3d3802c3f784636c7f165/?tab=orders&vis=transfers): The total batch volume was  **$9987,355** and it was created by a single trader who was swapping  **USDC**  **to ETH**. This trader achieved the largest surplus for the month of October by getting 62 ETH, which was roughly  **$100K (11% surplus),**  extra.

![4-october-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_october_2023_highlights_00ed78e3c6.webp)

During the month of  **October**, the top 10 traders traded a total of  **$71M.**

![5-october-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/5_october_2023_highlights_1b9fdad0ec.webp)

In the table below you can see the total volume for this month’s biggest trades. The most active trader executed a whopping  **$66M**  in trades with CoW Protocol this month.

![6-october-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/6_october_2023_highlights_81ec197430.webp)

## Solvers
In  **October**, solvers generated a total of  **$6.3M**  in surplus, which is money in the pockets of traders.

![7-october-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/7_october_2023_highlights_04c5a108b4.webp)

Below you can find a breakdown of how each solver performed in October.

![8-october-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/8_october_2023_highlights_8a1bd1b03b.webp)

## Governance

It has been a hectic month in terms of governance. CoW DAO executed 3 proposals! After a relaxing month in September, the CoWs came back in force for October 💪.

![9-october-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/9_october_2023_highlights_c5eeb5d39e.webp)

### Executed Proposals

This month the DAO executed three important proposals:

-   [CIP-31: Change CoW DAO’s (cow.eth) Snapshot space settings](https://snapshot.org/#/cow.eth/proposal/0x6dd13bfc9eae35a5f597cea373f21947d4c701ba7ce065c66934c560847484cc)  (As well as  [CIP-31.2: Change CoW DAO’s (cow.eth) Snapshot space settings](https://snapshot.org/#/cow.eth/proposal/0xf6ff58bd97c8c591d0fd4db3a9082864b7fa85c45734234af49f61f7f770cfb8))
-   [CIP-32: MEV Blocker Funding](https://snapshot.org/#/cow.eth/proposal/0x18ed839f7e3f10615ca28fe05b164856ba4e9cfa5f7d7f7a5fcbc89523392560)
-   [CIP-33: Should the CoW Treasury Core unit be added to the MEVBlocker Rebates Safe?](https://snapshot.org/#/cow.eth/proposal/0x999a4840ecb71e7edb4102caf19ea5f9ee7b237ece649a0d22eec74f7c1f1c16)

### Draft Proposals

This month, there was one new proposal asking for feedback before moving into the next phase, a final CIP, in its current form:

-   [CIP-Draft: Testing Fee Models for CoW Protocol](https://forum.cow.fi/t/cip-draft-testing-fee-models-for-cow-protocol/1984/1)

Make sure to read the CIP draft proposal and leave comments — your feedback is highly appreciated and helps move these important topics forward. If you are interested in submitting a proposal to the CoW DAO, make sure to use the following  [template](https://forum.cow.fi/t/cip-0-template/28).

## CoWmunity News

-   Announced  [gasless approvals](https://twitter.com/CoWSwap/status/1714633297408696409?s=20), reducing CoW gas emissions and enabling fully ETH-less trading for a wide range of tokens
-   For Halloween, the CoW Swap website got a  [spooky makeover](https://x.com/CoWSwap/status/1717873465028682130?s=20)  including a custom theme,  [Halloween-themed fortune cookies](https://x.com/CoWSwap/status/1718609373973324187?s=20), and a  [special Layer3 Quest](https://x.com/CoWSwap/status/1719021671372533793?s=20)
-   Stackly launched a  [DCA solution built on top of CoW Protocol](https://x.com/CoWSwap/status/1716533044117389624?s=20)  to Mainnet
-   CoW Swap received coverage in a Binance Research report on  [intents](https://x.com/CoWSwap/status/1714387540457947396?s=20)
-   The team hosted an Intent.wtf  [Twitter space](https://x.com/CoWSwap/status/1716762010442940724?s=20)  with Particle Network and the Enso solver
-   The team  [hosted a happy cow-hour](https://x.com/CoWSwap/status/1715321314594955532?s=20)  on Discord unveiling the new solver-driver architecture. As a special community treat, the team waived all CoW Swap fees for the duration of the hour
-   A grant proposal for the development of a Milkman Safe App  [passed in voting](https://snapshot.org/#/cowgrants.eth/proposal/0x37cb0d505bed0e78283b69779dc6e963382f3a0f050026c4e3ced565a48d3710)  on Snapshot
-   The CoW Protocol team published several articles to the blog:  [Announcing Gasless Approvals on CoW Swap](https://blog.cow.fi/announcing-gasless-approvals-on-cow-swap-0bb803d900c2),  [What is Backrunning? — MEV Attacks Explained](https://blog.cow.fi/what-is-backrunning-mev-attacks-explained-38692250690c), and  [Understanding Order Flow Auctions](https://blog.cow.fi/understanding-order-flow-auctions-5532d4ef2f40)

## Open Job Positions

The CoW Protocol team is currently not hiring





Welcome back to another monthly CoW update, where we break down the most notable developments of the last few weeks at CoW Protocol.


CoW Protocol October 2023 Highlights


When CoW DAO released [CoW AMM](https://cow.fi/cow-amm), its goal was simple: help liquidity providers keep hold of their liquidity. Why was this a problem? Outside of stable-to-stable pools, liquidity providers typically lose 5-7% of their liquidity each year. It’s the dirty secret of automated market making: [hundreds of millions of dollars](https://cow.fi/cow-amm) of LP funds are stolen by arbitrageurs every year.

  

These losses are known as loss-versus-rebalancing (LVR). LVR is a bigger source of MEV than frontrunning and sandwich attacks combined. [CoW AMM](https://cow.fi/cow-amm) is the first product CoW DAO built that directly keeps LVR out of liquidity pools.

  

Since its inception, LPs have been protected from LVR, and also benefited from [CoW AMM](https://cow.fi/cow-amm)’s batch auction and solver system. This has meant LPs have enjoyed [additional surplus](https://dune.com/cowprotocol/cowamms), as solvers work to find the most effective way of rebalancing liquidity pools.

  

Providing liquidity on [CoW AMM](https://cow.fi/cow-amm) has changed the liquidity provider game to such an extent, CoW AMMs behave more like Enhanced Index Funds than the leaky pools of old.

  

In this article we explain why that’s happened, and what doors [CoW AMM](https://cow.fi/cow-amm)s open for more sophisticated pools in future. CoW AMMs are evolving, fast, meaning the possibilities for liquidity providers are changing too.

## What is an Index Fund?

  

An index fund is a type of mutual fund (a professionally managed investment portfolio that pools money from many investors to purchase securities) or exchange-traded fund (ETF) that tracks the performance of a specific index by buying stocks of every company in that index.

  

Index funds are a popular choice for investors because they are a low-cost way to diversify their investments, all the while being passive: no fund manager is actively creating an investment strategy, and charging hefty fees for the privilege. They are so popular, index funds, as well as other kinds of passive investors [hold 33.5% of the US stock](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4188052) market.

  

Index funds typically outperform hedge funds running fancy investment strategies. So much so, legendary investor Warren Buffett made a [$1 million bet](https://www.bloomberg.com/news/videos/2024-07-30/buffett-s-famous-bet-on-the-s-p-500-and-hedge-funds?sref=23bomWKL) in which he wagered that an S&P 500 index fund would outperform a hedge fund over ten years.

  

These funds can be designed to track anything from the price of a commodity to a large and diverse collection of securities. ETFs, or exchanged traded funds meanwhile, can be designed to track specific investment strategies. Those strategies could be for different purposes: income generation to speculation or to partly offset risk in an investor’s portfolio.

  

But these aren’t the only types of Index Funds. There are also Enhanced Index Funds, which we explore in the next section.

## What is an Enhanced Index Fund?

  

If an Index Fund is a passive fund, an enhanced index fund (EIF) is a fund that uses active management to improve returns. They typically use a combination of active and passive investing strategies to generate returns that are higher than the benchmark while keeping risk within a controlled level.

  

The ‘enhanced’ part of the Index Fund is where experts assess which assets inside an index are performing strongly, and which are performing poorly. Once identified, an EIF can be rebalanced, to increase the weighting of one asset, and reduce the asset for another to help the overall fund perform better.

  

This management falls under a broader category called portfolio theory. It is a branch of finance that studies how people should design their portfolios. At a super high level, it says that:

-   People should care both about expected returns and risk.
    
-   Holding multiple assets instead of a single asset (i.e., diversification) is valuable because it reduces risk.
    
-   The problem with diversification is deciding how much to invest in each asset, and several theories exist on how to do so. But broadly speaking, an asset should constitute a higher share (or weight) of the portfolio if its expected future return is high, its volatility is low, and its correlation with the rest of the portfolio is also low.
    

  

Now that we understand the principles behind Index Funds and Enhanced Index Funds, let’s turn to how [CoW AMM](https://cow.fi/cow-amm)s behave like EIFs, and what that means for crypto more broadly.

## What is a CoW AMM?

  

[CoW AMM](https://cow.fi/cow-amm) is the first product on any blockchain to tackle the Loss-Versus-Rebalancing problem head on.

  

LVR is a form of maximal extractable value (MEV) responsible for more price exploitation than all other forms of MEV combined. Many liquidity providers haven’t even heard of LVR, but it costs them 5–7% of their liquidity, resulting in hundreds of millions lost each year. In fact, when accounting for LVR, many of the largest liquidity pools are not profitable for LPs at all.

  

The [CoW AMM](https://cow.fi/cow-amm) is a special kind of automated market maker designed to help liquidity providers capture MEV from arbitrageurs.

  

Here’s how it works:

1.  Liquidity providers deposit tokens into protected [CoW AMM](https://cow.fi/cow-amm) liquidity pools
    
2.  This liquidity becomes available to CoW Swap traders, who can access it similarly to other sources of liquidity
    
3.  Solvers bid to rebalance [CoW AMM](https://cow.fi/cow-amm) pools whenever there is an arbitrage opportunity
    
4.  The solver that offers the most surplus to the pool wins the right to rebalance the pool
    

  

This design eliminates LVR by capturing arbitrage value for LPs and shielding it from MEV bots.

Said another way: while most AMMs allow arbitrageurs to make money at the expense of their LPs, CoW AMM protects this money for the LPs instead.

## Why does a CoW AMM act as an Enhanced Index Fund?

  

As highlighted in earlier sections, Index Funds passively follow an asset or strategy. Because LVR is removed, whenever prices change the AMM will be rebalanced so to make sure that its total TVL is split between the different assets in a pre-specified way: 50/50 for standard constant product, and 80/20 for 80/20 pools.

  

The AMM therefore behaves like a simple index with two components. But CoW AMM pools go one step further: liquidity providers earn trading fees whenever liquidity in the AMM is used to fulfil a user order.

  

Does this mean all liquidity pools can be considered to behave similarly to an Enhanced Index Fund. Not exactly. The simple answer is LVR. CoW AMM was the first on-chain product that solves this. Other pools leak liquidity meaning they aren’t as viable an option as a CoW AMM for investors looking for more consistent returns.

  

With the launch of 80/20 pools, LPs have more options. These pools now offer features including:

  

- Asymmetric upside

- Reduced impermanent loss

- Hedging

  

In essence, these pools can maximize exposure to the native token while providing an avenue to boost returns via trading fees and token rewards.

## But this is just the beginning

  

For now, this is limited to simple, fixed-weight rebalancing strategies, but in the future, more complex passive investment strategies will be possible. For example, a multi-token [CoW AMM](https://cow.fi/cow-amm) could have a “manager” who can change its weights and add and remove assets.

  

At present CoW AMM pools feature just two assets. But in future, CoW AMMs will be capable of hosting multi-asset pools. Over on Balancer, there are already [8-asset pools](https://medium.com/balancer-protocol/the-benefits-of-multi-token-pools-653eea3ef03a) featuring multiple tokens within a single pool.

  

Liquidity providers are able to set up their own pools with custom token splits and weights. This level of customization helps providers have full control over their portfolios and plan to reduce their exposure to risky assets. It also enables low-fee swaps for traders using those same pools.

  

CoW DAO has plans to bring multi-asset pools with customisable weights to liquidity providers in future with its class-leading LVR protection. They’re called Decentralized Trading Funds or DTFs.

  

The Decentralized Traded Fund offers the chance for holders to earn a passive income. It combines the ability to gain exposure to assets, but also the ability to enter and exit the fund whenever it is convenient. On top of that, a DTF does not require holders to pay a fee to CoW DAO. More on that in the coming weeks.

  

The end game is a market mechanism that allows retail investors who want to run simple passive investment strategies to do so by contributing liquidity to AMMs, while earning additional returns.

  

If traditional finance is an indication, these AMMs could attract up to a third of the total market cap of various assets as liquidity, providing super-efficient trading at close to zero slippage.

  

Decentralized finance will finally provide better market mechanisms than traditional finance, opening the door to rebuilding the financial system on blockchain rails.

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Thanks to CoW AMM's LVR busting capabilities, LPs can earn passive income, in new and exciting ways.

Why CoW AMMs Act as Enhanced Index Fund


A DEX aggregator is a platform that searches multiple decentralized exchanges to find the best prices for crypto trades.

The rise of permissionless trading venues known as decentralized exchanges (DEXs) allow users to swap between virtually any cryptocurrency assets. Navigating multiple decentralized exchanges, however, can be cumbersome and inefficient.

This is where a decentralized exchange (DEX) aggregator comes in.

DEX aggregators are decentralized applications that search decentralized exchange trading platforms (like Uniswap, Balancer, and others) to find the best prices for any given trade. DEX aggregators have become pivotal to the world of decentralized finance (DeFi) by providing a single trading platform for users looking to get the best deal on their swaps.

## How does a DEX aggregator work?

DEX aggregators search various sources of liquidity to find the best trade route for on-chain assets.

Since liquidity is often fragmented across various sources, different decentralized exchanges may quote different prices for the same asset. DEX aggregators “aggregate” quotes from decentralized exchanges and fulfill user orders at the best available price. Sometimes, DEX aggregators may even route a single trade across multiple decentralized exchanges to reduce  [price impact](/learn/cow-protocol-glossary#:~:text=Price%20impact)  and provide better execution.

There are multiple types of DEX aggregators and the last few years have seen ever-more advanced versions of these platforms become available.

### Traditional DEX Aggregators

![1-what-is-a-dex-aggregator.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_what_is_a_dex_aggregator_b90efd4ea4.webp)

_1inch DEX Aggregator_

Traditional DEX aggregators such as 1inch have been around for years. Their interfaces look very similar to those of regular decentralized exchanges. A user is presented with a swap module that takes in two cryptocurrencies: a sell token and a buy token. After the user clicks “swap,” the aggregator automatically finds the best liquidity for the trade and executes the transaction on-chain.

### Meta DEX Aggregators

![2-what-is-a-dex-aggregator.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_what_is_a_dex_aggregator_2323d5b3ed.webp)

_DeFi Llama Meta DEX Aggregator_

Meta DEX aggregators are a step up from traditional aggregators. As the “meta” name implies, they aggregate DEX aggregators. This leads to better liquidity coverage across more venues, while still providing users with a single interface for their trades.

### Intent-Based DEX Aggregators

![3-what-is-a-dex-aggregator.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_what_is_a_dex_aggregator_198d1d6719.webp)

_CoW Swap Intent-Based DEX Aggregator_

Intent-based aggregators are the most advanced type of DEX aggregator out there.

They not only aggregate on-chain liquidity across exchanges and other aggregators, they also delegate execution to third parties known as “solvers.” These third parties provide additional sources of liquidity by including private inventory and, in certain cases, even matching trades peer-to-peer. This avoids protocol fees and makes for the most efficient trades in DeFi.

## Benefits of Using a DEX Aggregator

DEX aggregators provide a number of benefits, simplifying trading and providing better outcomes for users.

**Better Prices**: DEX aggregators look across multiple on-chain decentralized exchanges to find the best prices for any given token pair. Since most on-chain trading relies on  [automated market makers (AMMs)](/learn/cow-protocol-glossary#:~:text=amm), liquidity may be fragmented across various exchanges. As their name suggests, aggregators collect this liquidity in one place, giving traders the best deal for their swaps.

**Convenience**: By using a DEX aggregator, traders can reliably get good prices for their trades in one place without having to check multiple exchanges.

**Price Impact Protection**: Fragmented liquidity can sometimes make for shallow pools, meaning large trades experience significant  [price impact](https://blog.cow.fi/cow-protocol-glossary-ad7313a2c71#:~:text=Price%20Impact). Aggregators can break up trades across multiple exchanges, reducing price impact and providing better prices.

**MEV Protection**: In the case of intent-based DEX aggregators, solvers execute trades on behalf of users—protecting them from price exploitation in the form of  [maximal extractable value (MEV)](/learn/understanding-mev-protection).

Fragmented liquidity often makes finding the best route for trades difficult. DEX aggregators bring this liquidity back together and take the work of finding the best prices off the backs of users.

## What is the Best DEX aggregator?

There are a number of DEX aggregators on the market today. By market share, the most popular DEX aggregator is 1inch. However, when it comes to innovation, intent-based protocols like CoW Swap go the furthest.

## CoW Swap: The Leading Intent-Based Aggregator

![4-what-is-a-dex-aggregator.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_what_is_a_dex_aggregator_8768b6d9fb.webp)

CoW Swap is a leading innovator in the intent-based aggregator space. It’s the second most popular DEX aggregator after 1inch, and a leader among DAO & Safe wallets.

Whales and DAOs (as well as retail users) rely on CoW Swap as their aggregator of choice because CoW Swap does more than just aggregate liquidity. It also provides comprehensive  [MEV protection](/learn/understanding-mev-protection)  and enables price optimizations — such as  [CoWs](/learn/what-are-cows-on-cow-swap)  — that traditional aggregators can’t. Thanks to its intent-based architecture, CoW Swap supports 22 solvers that compete with each other to find the best prices for each user trade, and even provide price surplus on top.

While other aggregators claim to provide the best prices, CoW Swap’s architecture is built from the ground up to incentivize the best prices and the most surplus for trades, all in an easy-to-use, worry-free interface.

Give CoW Swap a try for yourself at  [swap.cow.fi](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=dex-aggregator-article).

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Decentralized exchange (DEX) aggregators are used to find the best prices for user trades


What is a DEX Aggregator

To celebrate the  [recent launch of TWAP orders](https://blog.cow.fi/cow-swap-launches-twap-orders-d5583135b472), the CoW team is running a trading raffle with several prizes up for grabs. To enter,  **all you have to do is make at least one TWAP trade during the month of September (TWAP-tember)**!

At the end of the month, the CoW team will select one Safe address to receive the grand prize:

> **_🏆 FREE CoW Swap orders for the month of October (aka, Up-tober_**_📈_**_)*_**

That’s right, Swap for free all month long… how’s that for greener pastures?

But we’re not done milking the fun, while only one lucky winner will receive the grand prize, there’s still more up for grabs:

-   **⌚5 people**  will receive CoW Swap-branded watches, to help time your trades
-   **💳 10 people**  will receive custom CoW Swap-branded  [Gnosis Pay](https://gnosispay.com/)  cards

Keep in mind, Ethereum mainnet TWAPs start at a minimum of $5k per part, but you can  [TWAP on Gnosis Chain](https://swap.cow.fi/#/100/advanced/WETH?utm_campaign=twap-tember-medium)  with only $5 per part! **In fact, TWAPs on Gnosis Chain have lower fees (thanks to lower gas costs) and lower $$ minimums than mainnet** (which should also come in handy for Safe deployment).

So what are you waiting for anon? Grab your  [Safe](https://safe.global/)  wallet and head over to  [CoW Swap](https://swap.cow.fi/#/1/advanced/WETH?utm_campaign=twap-tember-medium)  to get your TWAP on. If you’re new to TWAP, we’ve created a handy  [how-to guide](/learn/how-to-use-cow-swap-twap-orders-via-safe-wallet)  to help you with your first trade.

## 🐮 Let TWAP-tember begin! 🐮

Visit  [CoW Swap today to TWAP](https://swap.cow.fi/#/1/advanced/WETH?utm_campaign=twap-tember-medium)  your way to the top.

The winning addresses will be announced on the  [CoW Swap Twitter](https://twitter.com/CoWSwap)  so keep an eye on it for instructions on how the winners can claim their physical prizes!

_Terms & Conditions: To receive waived fees, orders must take place between the 1st and 31st of October, 2023. A maximum of $5000 in fees will be refunded._

**———————————————————————**

**UPDATE:**  The winners of TWAP-tember have been announced!

**Grand Prize Winner:** 0x4cb5eE1ad8Bf1B9d75422f9aD086Da2F84BD91B4

**Winners of the CoW-branded Watch & Gnosis Pay Card:**

1.  0xef5e42549886b9b060ee0381a3819ecaf0fdaeda
2.  0x38fe3792cea65f37cac5474dca8fff887e6d90b1
3.  0x2a4e4ab5e6680b76e00ad4555e39d2dcca42a659
4.  0x23a02d9e5d6ad9419128663976315689204be895
5.  0xf4a82a72faf46b2c55cdad3bcf7c0c1b564bab30

**Winners of just the Gnosis Pay Card**:

1.  0x3bc0cb287f74504347d50fe3ada6d90214e6f512
2.  0x952656cb0121d79a320bb0a7188fb4abb2b5dd94
3.  0x2855159d938d09d00d4fccf42f69ccb8f5b620e2
4.  0xdb72b7dc6ddf0c95468ce19b6539b9a44e561679
5.  0x3e23fd468f65e77aea8f548ebd382e86e7a99309

Congratulations to the winners and thank you to everyone who participated!

To claim your prize, please  [DM us on Twitter](https://twitter.com/CoWSwap)  by November 1st.



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Attention all traders, the CoW Swap herd is thrilled to announce TWAP-tember, the greatest trading extravaganza of the year!


Introducing TWAP-tember

On February 9th, 2023, After a successful  [governance vote](https://www.tally.xyz/gov/ens/proposal/45461903078948131870051132081249892009497709518413744958551889217805827301425)  from ENS, CoW Swap processed a large trade for the ENS DAO using the exchange’s signature intent-based trading design and Milkman contract.

## Trade Details

[ENS DAO sold 10,000 ETH](https://twitter.com/CoWSwap/status/1623680760522612738)  in exchange for USDC in order to reduce its exposure to ETH.

-   **USD value of the trade**: $16,145,549.60
-   **Slippage tolerance:**  2%
-   **Actual slippage**: 0.5%
-   **Price surplus**: $80,992.87

## Why CoW Swap?

CoW Swap’s solver competition ensured that ENS received the best possible execution price, even after announcing trade details publicly in a governance proposal ahead of time.

CoW Swap provided several benefits for a trade of this size:

1.  Protection from attack vectors caused by the delayed execution
2.  Allowing ENS to create a governance proposal that includes the exact swap parameters and protects the trade with a price checker — guaranteeing that the trade receives some minimum amount determined at the moment of swap execution (not during the creation of the governance proposal)
3.  Use of the Milkman bot for protection against MEV, slippage, and re-entrancy risk

## Milkman

The CoW Grants Program-funded, and Yearn.fi-developed  [Milkman bot](https://github.com/cowprotocol/milkman-bot)  was critical to the ENS trade.

The Milkman bot ensures that trades execute for the real-time price or better by utilizing a price checker, such as a Uniswap v3 pool, Chainlink oracles, or a custom price checker. Instead of setting a slippage tolerance, DAOs can utilize Milkman to determine a maximum percentage deviation from the price checker, guaranteeing that their trade will finalize at a fair market price. Milkman also simplifies governance for trades as DAOs don’t have to define a fixed price re-vote if the market moves significantly.

For this swap, ENS DAO chose to use a Uniswap v3 ETH/USDC pool, with a maximum slippage of 2%, guaranteeing that they would receive no less than the minimum specified in the governance proposal.

## CoW Swap: The leader in DAO trading

The largest DAO trades take place on CoW Swap, and the exchange is single-handedly responsible for more than 30% of all DAO trades. Check out  [CoW Swap for DAOs](/learn/cow-swap-for-daos)  to learn why DAOs such as  [Aave](/learn/aave-trade-breakdown),  [Nexus Mutual](/learn/nexus-mutual-trade-breakdown), and more trust CoW Swap with their large trades.

If you’re a DAO looking to make a large trade on CoW Swap, get in touch with us on  [Twitter](https://twitter.com/CoWSwap)  or through our  [Discord](https://discord.com/invite/cowprotocol). You can check out CoW Swap for yourself  [here](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=ENS-trade).



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ENS Trade Breakdown

Since its inception, DeFi has relied on  [automated market makers (AMMs)](/learn/cow-protocol-glossary#:~:text=amm)  directly to facilitate the majority of trading volume. More recently, however, auctions have emerged as an innovative trading mechanism that addresses some of the major shortcomings of AMMs.

Below, we examine these shortcomings and compare and contrast two popular auction solutions— Dutch auctions and batch auctions.

## The Shortcomings of AMMs

CF-AMMs, first proposed by Gnosis in 2017 and later popularized by protocols like Uniswap, are a natural fit for a world of frequent token launches and volatile assets. The core function of a CF-AMM is the rebalancing of token prices as orders come in. These AMMs rely on permissionless liquidity pools to facilitate trades for any ERC-20 token pair.

Due to their design, however, CF-AMMs leave traders exposed to price exploitation in the form of  [maximal extractable value (MEV)](/learn/understanding-mev-protection). Since orders on AMMs get executed sequentially, malicious parties can re-order trades in the Ethereum mempool and take advantage of users. MEV has become a lucrative industry for the most resourceful traders out there, but those profits come directly out of the pockets of everyday users.

The propensity of AMMs to be exploited indicates that continuous-time venues may not be the ideal solution for trading on decentralized exchanges.

## The Benefits of Auctions

![1-batch-auctions-vs-dutch-auctions.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_batch_auctions_vs_dutch_auctions_20effdf8c3.webp)

At its core, Ethereum is an auction — each block is limited in space, so validators auction off “blockspace” to the highest bidders. It turns out that a similar mechanism works well when it comes to trading. Auctions have presented a viable alternative to continuous-time trades in a new field known as “[Order Flow Auctions](/learn/understanding-order-flow-auctions).”

There are several points to consider when examining how auctions make sense in the context of blockchains:

1.  Blockchains aren’t continuous, so trading on a continuous system doesn’t make sense. It only leads to a “first come, first serve” mode of operation that ultimately becomes a race to the bottom.
2.  Auctions work to benefit traders as there can be multiple bidders for any given order, providing better prices by aggregating fragmented liquidity.
3.  Grouping multiple orders together in an auction presents opportunities for matching liquidity peer-to-peer rather than having to tap on-chain AMMs.

Auction mechanisms are not monolithic however. There are multiple types of auctions to take into account when considering what may make the most sense for Ethereum traders.

## Dutch Auctions

![2-batch-auctions-vs-dutch-auctions.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_batch_auctions_vs_dutch_auctions_fbaf900f7b.webp)

_([Source](https://medium.com/coinlist/a-primer-on-dutch-auctions-525036d24d10))_

One of the most common auction mechanisms is the Dutch auction. Dutch auctions work by offering an asset at a high starting price and then lowering the price over time until a willing bidder is found. This method identifies buyers quickly, making for a fast settlement.

Trading solutions like  [UniswapX](https://blog.uniswap.org/uniswapx-protocol)  employ Dutch auctions to settle trades with the speed of a traditional AMM, but with some added benefits.

### Pros

**Solver Competition**: Multiple parties, or “solvers,” can bid on a given asset, finding the most competitive price for the user’s assets.

**MEV Protection**: Dutch auctions protect users from MEV by relying on a third party for execution, meaning the user is never exposed to an AMM where their trade could be front-run or sandwiched.

### Cons

**Centralized**: Market makers have to have the assets in their inventory, leading users to essentially be at the mercy of the liquidity that the bidding parties have on hand.

Dutch auctions provide important benefits over continuous order trading. However, they only support auctioning one token at a time and they suffer from liquidity fragmentation as liquidity for a single token is spread across various venues.

It was this problem that inspired the creation of Gnosis Protocol V1 — the precursor to CoW Swap. This protocol relied on a different auction mechanism: the batch auction.

## Batch Auctions

![3-batch-auctions-vs-dutch-auctions.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_batch_auctions_vs_dutch_auctions_7431306f4d.webp)

_An illustration of the batch auction mechanism on CoW Swap_

A batch auction groups together a set of orders intents and executes the entire batch as a single transaction.

This allows multiple users to trade multiple assets within a single auction (unlike Dutch auctions). Having multiple orders in a single batch even enables  [peer-to-peer swaps](/learn/what-are-cows-on-cow-swap)  which provide better prices than any on-chain venue.

Finally, while Dutch auctions rely on a price-decay bidding process, batch auctions encourage solvers to find the best execution route for each trade, incentivizing better execution rather than just the quickest settlement.

### Pros

**Solver Competition & MEV Protection**: Just like Dutch auctions, batch auctions rely on a delegated execution model where solvers compete to find the best prices for users and protect orders from MEV.

**Surplus Capturing Orders**: Batch auctions provide an extra layer of efficiency over Dutch auctions by grouping multiple orders together. This allows liquidity to be shared between orders peer-to-peer, providing better prices than any on-chain venue. When orders  _do_  have to go on-chain, batching provides gas efficiency, further contributing to savings.

**Multiple Trades Per Auction**: Batch auctions aren’t limited to just a single asset per auction. This means that a single settlement may include multiple traders, each trading a different asset.

### Cons

**Speed**: While other modes of trading settle orders instantaneously, batches have to be open for some period of time to collect orders before executing them on-chain. Speed issues can be mitigated by executing one batch per Ethereum block, making batch auctions run at the speed of Ethereum block settlement.

Batch auctions make sense as a natural fit for Ethereum, mirroring the Order Flow Auction mechanism of the block but at the dApp level. Today,  [CoW Swap](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=dutch-vs-batch)  is the largest production-scale implementation of batch auctions for DeFi trades.

## The CoW Approach to Batch Auctions

![4-batch-auctions-vs-dutch-auctions.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_batch_auctions_vs_dutch_auctions_eb922dc3cf.webp)

[CoW Swap](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=dutch-vs-batch)  utilizes batch auctions to ensure traders get optimal prices while being protected from MEV.

The process starts with traders sending signed “intent to trade” messages to an order book, which CoW Swap then groups into batches. Solvers then search both on-chain and off-chain liquidity pools for the best prices. An auction is conducted for each batch to select the solver that provides the highest price surplus (the difference between the quoted and actual execution prices) for the orders. Finally, the winning solver executes these orders on-chain, ensuring users benefit from a uniform clearing price for all assets.

The future of batch auctions lies in targeting smaller batches where one batch is equal to one Ethereum block. This mitigates all speed issues related to batch auctions, making them execute as quickly as any other type of DeFi trade.

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Auctions are all the rage these days… but which auction method is really the best?


Batch Auctions vs. Dutch Auctions in Crypto

A smart contract is an executable program on a blockchain network. Smart contracts make up the backbone of the web3 industry as they enable many of the use-cases that blockchains are known for including staking, swapping, lending, borrowing, and much more.

Blockchains eliminate the need for a central authority or intermediary when it comes to running a mass, decentralized network of nodes. Smart contracts bring these benefits to specific use-cases by enabling the creation of decentralized apps (dApps).

Smart contracts were first popularized with the launch of the Ethereum blockchain in 2015. Ethereum also includes a programming language for creating smart contracts known as “Solidity.”

## How do Smart Contracts Work?

Smart contracts are created as computer code that is hosted and executed on a blockchain network. A decentralized set of nodes keep a copy of the entire state of the blockchain, including all deployed smart contracts, in order to ensure that the smart contracts are executed in a reliable and transparent way.

Let’s take a look at the process of creating and deploying a smart contract:

**Contract Creation**: Developers write smart contracts using programming languages compatible with the blockchain, such as Solidity for Ethereum. The code within the smart contracts include rules for execution and the logic necessary for the smart contract to perform its function — such as lending, swapping, borrowing, etc.

**Compiling**: After it’s written, the smart contract is compiled into bytecode. This is the machine-readable language that execution environments such as the Ethereum Virtual Machine (EVM) use.

**Deployment**: Once it’s compiled, the smart contract is deployed to the blockchain through a transaction that includes the contract’s code. This transaction is then broadcast to the network and assigned a unique address on the blockchain, similar to how blockchain wallets have addresses.

**Trigger**: Smart contracts are designed to automatically execute when predefined conditions are met. They can be triggered by various events, including receiving a certain amount of cryptocurrency, the expiration of a timer, receiving a trigger from an external data source, and more.

**Execution**: Once a contract is triggered, blockchain nodes execute the contract’s code. Since every node on the network independently runs the code, the execution is verified and validated multiple times. This multi-party validation is what provides the security and transparency smart contracts are known for.

**State Change**: All actions taken by a smart contract are treated as transactions. These transactions can change the state of the contract, interact with other contracts, alter user balances, and more.

**Results**: The state change caused by the execution of the smart contract is recorded on the blockchain and assimilated by the various nodes. Changes in balances, variables, ownership records, and more are recorded on the blockchain in an immutable manner.

**Continuous Interaction**: Smart contracts can remain on the blockchain indefinitely, ready to be triggered again under the right conditions.

An important aspect of smart contracts is that they are permisionless, meaning that anyone can develop and deploy a smart contract on any public blockchain. All they have to do is pay the necessary gas fees to deploy the smart contract.

## What are Smart Contracts Used For?

Smart contracts are at the heart of decentralized apps (dApps). They power the entire world of decentralized finance (DeFi) as well as other fields like blockchain insurance, gaming, NFTs, social networks, and much more.

### Decentralized Exchanges

dApps that enable trading, like Uniswap, rely on smart contracts for processing user funds, finding liquidity, and executing swaps.

More complex decentralized exchanges such as  [CoW Swap](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=smart-contracts-article)  use smart contracts to power solver competitions where multiple independent parties find liquidity on behalf of users. In this case, smart contracts are essential for enforcing the rules of the competition and ensuring users get the best deal for their trades.

### Lending & Borrowing Platforms

Platforms like Aave allow blockchain users to take out overcollateralized crypto loans without relying on traditional counterparties. These dApps utilize smart contracts to allow users to lend out their crypto assets or borrow against them.

The platform works by having users deposit crypto tokens into liquidity pools managed by smart contracts and allowing borrowers to take out loans from these liquidity pools by providing collateral. Smart contracts automatically enforce the terms of the loan, such as collateral requirements, interest rates, and repayment terms. They also managing liquidations whenever necessary.

Additionally, on-chain lending platforms use algorithmically determined dynamic interest rates, which adjust based on the current supply and demand for each asset in the pools. Smart contracts calculate and update these rates in real-time, ensuring that lenders receive competitive returns and borrowers pay fair rates.

### Liquidity Providing

Exchanges that rely on automated market makers (AMMs) use smart contracts not only for the swap process, but also for allowing users to provide liquidity.

[AMMs](/learn/cow-protocol-glossary#:~:text=amm)  allow users to trade assets without the need for a centralized intermediary, or even a traditional orderbook. Whenever a user swaps tokens, they interact with the appropriate liquidity pool’s smart contract. The contract calculates the amount of tokens that can be received based on the current ratio of tokens in the pool, with the goal of ensuring that the pool remains balanced. The transaction is then executed automatically by the smart contract without requiring a traditional buyer-seller match.

### Staking

Many smart-contract-enabled blockchains, such as Ethereum, use proof-of-stake consensus mechanisms. These systems require users to lock up, or “stake,” tokens in order to validate the state of the blockchain. Smart contracts are essential to this process.

Tokens used for staking are locked in a smart contract that ensures that the tokens cannot be spent elsewhere while they are staked. This contract typically specifies conditions such as the minimum staking period, the minimum and maximum stake amounts, and other rules governing the staking process.

Smart contracts also calculate the rewards distribution for stakers, select which validators should create the next block, slash (penalize) validators in case of misconduct, and facilitate unstaking and withdrawals.

**In summary, smart contracts are crucial to the functions of modern-day blockchains.** They ensure these systems run according to certain rules, with no down-time, and with set rules for processing all submitted transactions. All with no centralized control or trusted intermediary!

## What are the Benefits of Smart Contracts?

So far, we’ve seen that smart contracts ensure that dApps are online 24/7 and function without the need for counterparties. Below we take a look at some additional benefits.

**Automation**: Smart contracts are automatically executed, meaning they effectively eliminate counterparty risk. Various parties in transactions also have their funds transferred automatically without having to wait for signatures, notaries, or other forms of manual verification.

**Transparency**: Smart contracts deployed on blockchains are publicly visible, meaning anyone can audit the code and determine what the smart contract does. This transparency encourages trust as malicious code can be quickly identified and there is no doubt about what steps a smart contract will take when executed.

**Immutability**: As a corollary to transparency, smart contracts are also immutable, meaning that they cannot be changed without these changes becoming public. This adds an additional layer of transparency which ensures smart contracts perform what they are supposed to with no malicious code and without censoring outputs.

## What are the Limitations of Smart Contracts?

The main downside of smart contracts is (aptly) known as “smart contract risk” — which is the risk that the smart contract has a bug that prevents it from executing properly or puts user funds at risk.

A powerful benefit of smart contracts is that they are immutable, meaning no one can sneak changes in. This can also prove to be a headache, however, if a smart contract is deployed with an error. For this reason, it’s extremely important that code deployed on blockchains is as error-free as possible. In service of this goal, the cottage industry of smart contract audit services has emerged to help make sure deployed code has no bugs and smart contract risk is well managed.

## How Smart Contracts Enable Decentralized Finance

Decentralized finance, or “DeFi” is an emerging field that aims to transform the way individuals move money, ending the reliance on centralized intermediaries like banks.

![1-what-is-a-smart-contract.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_what_is_a_smart_contract_80275c1ffb.webp)

A core DeFi function is the ability to swap cryptocurrencies from one to another permissionlessly. One of the leaders in this space, CoW Swap, is a meta DEX aggregator that enables the most efficient and price optimal swaps in DeFi.

CoW Swap relies on smart contracts for much of its functionality. Not only do smart contracts enable the nuts and bolts of processing user funds, they also govern the solver competition that sets CoW Swap apart from other decentralized exchanges.

Smart contracts ensure that CoW Swap users receive the best prices for their trades through a decentralized solver competition where independent third parties compete for the right to settle user trades. The best solution is algorithmically determined based on which solver provides the most surplus to users. Thanks to smart contracts, CoW Swap users know that they are getting the best deals for their trades.

Give CoW Swap a shot and put its smart contracts to work for you:  [swap.cow.fi](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=smart-contracts-article).

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Smart Contracts enable the majority of decentralized apps and are critical to modern blockchain ecosystems


What is a Smart Contract?

## TL;DR

-   During the month of  **April**, CoW Protocol handled a total volume of  **$2.38B**  and generated a surplus of  **$16.6M**
-   In exciting news, CoW DAO began a  [token buyback program](https://twitter.com/CoWSwap/status/1785339850394304608), MEV Blocker  [started collecting revenue](https://x.com/CoWSwap/status/1778084900610228559), and CoW Swap ran an “[I’m feeling lucky”](https://x.com/CoWSwap/status/1774725067567681674)  campaign for April Fool’s day
-   In terms of Governance, CoW DAO executed  [CIP-40: MEV Blocker Fees](https://snapshot.org/#/cow.eth/proposal/0x67aaf4f3e14f833ea496a5cf29d3c58cd12e36a72b7f36c60393083b87422070),  [CIP-41: Claim and Delegate CoW DAO’s SHU Token Allocation](https://snapshot.org/#/cow.eth/proposal/0x86686d2546586696370f87313cf1dff4705e9d7edeee03e560a84470eaa3f57e), and  [CIP-42: Enhancing Treasury Asset Usage](https://snapshot.org/#/cow.eth/proposal/0xb6edd841020478bf3c10b51a897c4bde511f11ddf53bf6352edc0fe2b949518a)

## Protocol Stats

This month, CoW Protocol settled a total of  **$2.38B.**

![1-cow-dao-april-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_cow_dao_april_2024_highlights_36cbd49453.webp)

The top 3 batches worth highlighting are the following:

-   **Batch with the highest % of CoW trades (**[**Transaction details**](https://explorer.cow.fi/tx/0xf191aa1a7280c1c5ea51c91f11d3b1d3456c57ec37712923b6d030453571b09c?tab=orders)**):**  The total batch volume was  **$2.26M**, and it was created by two traders who were CoWed for  **$2,000,000, (88.5%)**  of the total volume. One trader was buying USDC, the other was selling USDC.

![2-cow-dao-april-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_cow_dao_april_2024_highlights_cdd6a84049.webp)

-   **Batch containing the highest volume (**[**Transaction details**](https://explorer.cow.fi/tx/0xe71b7b029dd274087ef0148d9af8203b62cd0368fb42b6231c4db5dfb985d240?tab=orders&vis=transfers)**):**  The total batch volume was  **$15,474,023** and it was created by two traders — one swapping  **USDT for USDC**  and one swapping  **ETH for FRAX**.

![3-cow-dao-april-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_cow_dao_april_2024_highlights_fa24438f19.webp)

-   **Batch with the highest amount of surplus (**[**Transaction details**](https://explorer.cow.fi/tx/0xfc720a40a9cf1366b7a00c6a4f0f72a64316e07143ba523e672b12ca4b2244f6?tab=orders)**):**  The total batch volume was  **1,000 ETH**, and it was created by a trader swapping ETH for WBTC. They received  **1.05 WBTC (2.09%)**  as surplus.

![4-cow-dao-april-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_cow_dao_april_2024_highlights_97d7d45c4c.webp)

During the month of  **April**, the top 10 traders traded a total of  **$40,343,807.**

![5-cow-dao-april-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/5_cow_dao_april_2024_highlights_861a8be332.webp)

In the table below you can see the total volume for this month’s biggest trades. The most active trader executed a whopping  **$14,687,148**  in trades with CoW Protocol this month.

![6-cow-dao-april-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/6_cow_dao_april_2024_highlights_0947456c82.webp)

## Solvers

In  **April**, solvers generated a total of  **$16M**  in surplus, which is money in the pockets of traders.

![7-cow-dao-april-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/7_cow_dao_april_2024_highlights_e3f24ac5b9.webp)

Below you can find a breakdown of how each solver performed in April.

![8-cow-dao-april-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/8_cow_dao_april_2024_highlights_0b729fd1b0.webp)

## Governance

It was an active month in terms of governance! The CoWs cannot be stopped 💪

![9-cow-dao-april-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/9_cow_dao_april_2024_highlights_ccaeab6849.webp)

### Executed Proposals

The DAO  **executed three important proposals**  this month:

-   [CIP-40: MEV Blocker Fees](https://snapshot.org/#/cow.eth/proposal/0x67aaf4f3e14f833ea496a5cf29d3c58cd12e36a72b7f36c60393083b87422070)
-   [CIP-41: Claim and Delegate CoW DAO’s SHU Token Allocation](https://snapshot.org/#/cow.eth/proposal/0x86686d2546586696370f87313cf1dff4705e9d7edeee03e560a84470eaa3f57e)
-   [CIP-42: Enhancing Treasury Asset Usage](https://snapshot.org/#/cow.eth/proposal/0xb6edd841020478bf3c10b51a897c4bde511f11ddf53bf6352edc0fe2b949518a)

### Draft Proposals

There were no new draft proposals this month.

## CoWmunity News

-   With CIP-40 passing, MEV Blocker  [began earning revenue from builders](https://x.com/CoWSwap/status/1778084900610228559)
-   CoW DAO began converting all collected protocol fees from ETH to COW, effectively creating a  [buyback program for the COW token](https://twitter.com/CoWSwap/status/1785339850394304608)
-   MEV Blocker  [received an Etherscan integration](https://x.com/CoWSwap/status/1785007216485130550)  that allows users to view pending transactions submitted through the private RPC
-   CoW Swap  [supported Safe’s token launch](https://x.com/CoWSwap/status/1782433684219638205)  by offering pre-launch limit orders
-   CoW Swap welcomed April with a  [one-day-only “I’m Feeling Lucky” swap feature](https://x.com/CoWSwap/status/1774725067567681674)
-   Enabled limit orders for  [amounts larger than the current token balance a user has in their wallet](https://x.com/CoWSwap/status/1777504272487223712)
-   The Den multisig project  [integrated the CoW Swap widget](https://x.com/CoWSwap/status/1782412887778333001)  for easy swaps
-   The CoW Swap team traveled to Token 2049 to represent the project

## Product Updates

### Backend

The backend team has been working hard to improve the product infrastructure. In  **April**, we:

-   Finalized the partner fee implementation
-   Cleaned up rank-by-surplus and fee features
-   Worked on exempting CoW AMM orders from protocol fees
-   Tested support for 0x liquidity
-   Worked on colocating Gnosis solvers as quoters
-   Implemented performance improvements to make the system more stable with colocated price estimator

### Frontend

The frontend team has been working hard on improvements in the UI front, as well as the overall UI infrastructure. In  **April**, we:

-   Improved responsiveness on the CoW Swap widget
-   Launched support for creating limit orders beyond the current wallet balance as well
-   Launched the partner fee for the CoW Swap widget
-   Supported a number of integrations including Nanse, Den, Shapeshift, Memeswap, and more
-   Iterated on proposals for adding cross-chain swaps to CoW Swap
-   Worked on migrating CoW Swap blog content to an internal CMS

## Open Job Positions

### Engineering

[Support Engineer with Python](https://boards.eu.greenhouse.io/cowswap/jobs/4332254101)

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Welcome back to CoW DAO highlights, where we break down the most notable developments of the last few weeks at CoW DAO.


CoW DAO April 2024 Highlights

Batch auctions are a powerful trading mechanism for settling orders on decentralized exchanges. Recently, batch auctions have attracted attention in the DeFi space thanks to a host of benefits including better prices and built-in MEV protection.

In this article, we’ll take a look at how batch auctions work, why they’re important, and how CoW Protocol, one of the leading innovators in the DeFi space, is leveraging batch auctions as a decentralized exchange aggregator.

## What is a batch auction?

![1-understanding-batch-auctions.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_understanding_batch_auctions_bdc2352d7f.webp)

A batch auction is a trading mechanism that groups orders together into “batches” and “auctions” them off to execution parties who compete against each other to find the most optimal order settlement path.

Grouping trades together allows batch auctions to enforce certain execution rules that prevent MEV attacks. The competition between execution parties makes batch auctions a type of “[order flow auction](/learn/understanding-order-flow-auctions),” meaning they are designed to find optimal prices for user trades.

In  order to find the best prices for the orders in a given batch, the execution parties (commonly known as “[solvers](https://docs.cow.fi/cow-protocol/concepts/introduction/solvers)”) aggregate liquidity from as many sources as possible — AMMs, private off-chain liquidity, and even by routing swaps peer-to-peer between the orders in a batch.

To really understand how batch auctions work under the hood, however, we must first consider how trading takes place on decentralized exchanges (DEX’s).

### How decentralized exchanges work

Due to the volatility of crypto markets, traders have to set a “slippage tolerance” every time they make a trade on a decentralized exchange. The slippage tolerance specifies the price deviation that traders are willing to accept for the assets in their order. Slippage is necessary because it accounts for changes in price between the time traders place an order and the time the order gets executed.

Decentralized exchanges rely on automated market makers ([AMMs](/learn/cow-protocol-glossary#:~:text=amm)) to provide liquidity for trades. AMMs settle trades sequentially, meaning that every order gets executed individually as it comes in. While AMMs ensure a smooth and continuous flow of transactions, their design leaves room for MEV as malicious parties can force trades to execute at a maximum slippage tolerance, giving traders worse prices than they would normally get.

This is where batch auctions come in.

## How batch auctions mitigate the MEV problem

At its core, MEV relies on  [reordering transactions](/learn/what-is-a-sandwich-attack-and-how-can-you-protect-yourself)  from the way they were submitted to a new, more profitable order. Malicious traders, known as “searchers,” monitor the Ethereum mempool — a holding area where transactions accumulate before they are included in a block and confirmed on-chain — and bribe block builders to strategically place transactions to their advantage.

Orders in a batch are executed as a single transaction, rather than sequential transactions, giving solvers tools they can leverage to keep trades safe from MEV.

**Uniform Clearing Prices**: MEV relies on reordering transactions such that sequential orders clear for slightly different prices. Searchers pocket the differences between these prices as arbitrage. With batch auctions, multiple orders trading the same token pair (such as ETH-DAI) within a single batch clear for the same price. This makes transaction reordering useless, bypassing the risk of MEV.

**Coincidence of Wants (CoWs)**: If traders in a batch are trading opposite assets, they may be matched peer-to-peer in a “[Coincidence of Wants](/learn/what-are-cows-on-cow-swap)” trade. For example, if one user is selling ETH for DAI and another is selling DAI for ETH, the two traders can simply swap assets. This provides better prices and bypasses MEV, as orders don’t have to tap on-chain liquidity.

**Enforcing the Ethereum Best Bid Offer (EBBO):**  Thanks to the competition for execution, batch auctions guarantee that the settlement solution is at least as good as the on-chain price a user could get directly by going directly to an AMM.

## CoW Protocol’s batch auction process explained

CoW Protocol, an innovative DEX aggregator,  [leverages batch auctions](/learn/navigating-the-evolution-of-cow-swap-from-market-orders-to-programmatic-orders)  to provide optimal trading prices and  [protect traders from MEV](/learn/how-cow-swap-solves-the-mev-problem).

![2-understanding-batch-auctions.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_understanding_batch_auctions_4462e85993.webp)

Trades on CoW Protocol begin as signed “[intent to trade](/learn/cow-protocol-glossary#:~:text=Intent%20to%20Trade)” messages that get sent to an orderbook. From here, the protocol groups these intents into batches and invokes  [solvers](https://docs.cow.fi/cow-protocol/tutorials/solvers)  for the actual order execution. Solvers search all available on-chain liquidity, and even tap off-chain liquidity, to find the most efficient execution route for the batch.

Once the protocol gathers orders in a batch, it runs an “auction” to pick the winning solver that gets to settle the batch on-chain. The winner is picked based on which solver can offer the most price surplus for the orders in the batch (surplus is defined as the positive difference in price between the quoted price and the actual execution price.) Finally, the winning solver executes the orders in the batch on-chain on behalf of the users.

Thanks to frequent batch auctions, CoW Protocol guarantees a uniform clearing price for all assets, allows trades to be matched peer-to-peer in Coincidences of Wants (CoWs), and also provides several other unique benefits including:

-   Gas optimizations thanks to reduced overhead when executing multiple orders in a single transaction
-   No deposits or withdrawals into an exchange contract, meaning that all balances are credited directly to user accounts atomically in a single Ethereum transaction
-   Fair, decentralized settlement in which an open competition for order matching replaces a central operator or a constant function market maker

### An example batch auction on CoW Protocol

To demonstrate the power of batch auctions, let’s take a look at an example involving a typical batch on CoW Protocol.

![3-understanding-batch-auctions.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_understanding_batch_auctions_a5b9ca70ad.webp)

For this example, we’ll take a look at  [a batch from January 2024](https://explorer.cow.fi/tx/0x6b905fb7bc096520594fda48648dcb82fa0503b1bcbe0faf906ca7290104d950?tab=orders&vis=transfers). In this settlement, a solver executed five different trades as a single batch, forming several CoWs and leveraging on-chain liquidity to fill the orders the rest of the way.

The batch began with traders trading DAI for ETH in the first two orders and the reverse — ETH for DAI — in the third order.

![4-understanding-batch-auctions.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_understanding_batch_auctions_9c95ead419.webp)

This inverse-swap allowed for a Coincidence of Wants. The third order was for ~500 ETH, while the first two orders were only for ~216 ETH, so the solver was able to fill the first two orders entirely using the third order’s liquidity. In return, the third order received ~216 ETH’s worth of DAI and the solver went to an on-chain AMM ([0x in this case](https://etherscan.io/tx/0x6b905fb7bc096520594fda48648dcb82fa0503b1bcbe0faf906ca7290104d950)) to source liquidity for the remaining DAI it needed to fill.

![5-understanding-batch-auctions.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/5_understanding_batch_auctions_7d79cdfbf9.webp)

The last two orders in the batch traded USDC for ETH. The solver executed both of these orders on-chain, but they still received a better price than quoted because they executed in a single batched transaction, saving on gas fees and protocol fees.

![6-understanding-batch-auctions.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/5_understanding_batch_auctions_a1edd33980.webp)

In the end, not only did batch auctions protect these orders from MEV, they also allowed the solver responsible for executing the batch to provide each order with price surplus.

A few percentage points may not seem like much, but the surplus amounts to almost $20,000 across all orders in this batch. This is money that would have been left on the table in a traditional AMM.

![7-understanding-batch-auctions.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/6_understanding_batch_auctions_f44757a473.webp)

## Batch auctions: The future of fair trading

Batch auctions are gaining notoriety as a mechanism for ensuring optimal price discovery and protecting orders from MEV.

While CoW Protocol has built an innovative frequent batch auction mechanism for DeFi trades, there are still improvements that can further protect users. In particular, CoW Protocol is looking forward to experimenting with batch time lengths that are equivalent to block time lengths. This would ensure that each CoW Protocol batch executes 1:1 with each Ethereum block, providing uniform clearing prices on the block level, rather than just the batch level, further mitigating MEV.

To experience the power of batch auctions for yourself, give  [CoW Swap](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=batch-auctions-article)  a try for your next trade on Ethereum or Gnosis chain.

Happy batching!

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Batch auctions provide a host of benefits including MEV protection and better prices, but how do they really work?


Understanding Batch Auctions

After three years and thousands of hours of research with crypto whales, DeFi degens, finance bros, and specialized fortune tellers called “blockchain oracles”, CoW Swap has discovered that the secret to investing in crypto is simply  getting lucky.

That’s why CoW Swap is proud to announce its newest innovation — the “I’m Feeling Lucky” button.

That’s right — inspired by Google’s iconic search feature, CoW Swap is adding a splash of luck to web3. Just select a sell token, tap “I’m Feeling Lucky”, and let CoW Swap’s best-in-class solver network buy a random shitcoin for you.

## Putting the “luck” in “hodl”

Have you ever seen a crypto millionaire and thought “Damn, that was all luck!”

Wish you could “get lucky” the same way?

Well now you can.

Just head over to  [CoW Swap](https://swap.cow.fi/#/swap?utm_campaign=blog-feeling-lucky)  and use the “I’m Feeling Lucky” button right in the swap modal to let luck pick your new favorite token!

![1-feeling-lucky.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_feeling_lucky_609c959c95.webp)

## How to get lucky

To get lucky, simply:

1.  Navigate to  [CoW Swap](https://swap.cow.fi/#/swap?utm_campaign=blog-feeling-lucky)
2.  Pick ETH or a stablecoin as your sell token
3.  Click the “I’m feeling lucky” button where the “Swap” button normally appears
4.  CoW Swap will then pick a random “lucky” token for you as your “buy” token
5.  ????
6.  Profit!!!! (not financial advice)

Don’t worry — you’ll have a chance to confirm your trade before you place it. If you trust the luck of the CoW draw, simply click “Swap” once your random token appears and your transaction will proceed as normal.

## Luck out with CoW Swap this April 1

So if you’re tired of being the fool, let CoW Swap turn your luck around. No joke, the feature is real and  [live on CoW Swap](https://swap.cow.fi/#/swap?utm_campaign=blog-feeling-lucky)  for both Ethereum Mainnet and Gnosis Chain!

They say anything goes up in a bull market… While we can’t guarantee that your lucky token will pump, we can promise that your trades will always be backed by CoW Swap’s signature MEV protection and the best prices in DeFi.

Degen in peace this April 1 and let luck take the wheel with  [CoW Swap](https://swap.cow.fi/#/swap?utm_campaign=blog-feeling-lucky)!

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Find your lucky clover in CoW Swap’s greener pastures


CoW Swap Introduces “I’m Feeling Lucky” Mode for DeFi Trades

Welcome back to another CoW update, where we break down the most notable developments of the last few weeks at CoW DAO.

## TL;DR

-   During the month of June, CoW Protocol handled a total volume of **$2.66B** and generated a surplus of **$20M**
-   In exciting news, CoW DAO [attended ETHcc](https://x.com/CoWSwap/status/1815455776183632116), [crossed 1,000 ETH in generated revenue](https://x.com/CoWSwap/status/1818015130959183883), and had a [breakout month for MEV Blocker](https://x.com/CoWSwap/status/1819460894109368446)
-   In terms of Governance, CoW DAO executed CIPS [46](https://snapshot.org/#/cow.eth/proposal/0xbb18689e82d15b23ba2b755123777afc3579a0a86ae76f9b4eb73557b493c90a), [47](https://snapshot.org/#/cow.eth/proposal/0x7456f84721dbbe164b30324112accf976ff3be397b1957e68abe6953801a1f97), [48](https://snapshot.org/#/cow.eth/proposal/0x563ab9a66265ad72c47a8e55f620f927685dd07d4d49f6d1812905c683f05805), and [49](https://snapshot.org/#/cow.eth/proposal/0x153a2e42936b6b99e825d5ebf4aa7a64c176243138c491274fd199b74ed23f6a)

## Protocol Stats

This month, CoW Protocol settled a total of **$2.65B in trading volume.**

![1-july-2024-highlights.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_july_2024_highlights_2786b81422.png)

The top batches worth highlighting are the following:

**Batch containing the highest volume** **(**[**Transaction details**](https://explorer.cow.fi/tx/0xfbb0878ea2b18b20baeac86bc5352fbeefab43dabc74989c5b137633c5526601?tab=orders&vis=transfers)**)**: The total batch volume was **$61,110,239** and it was created by a single trader swapping **wETH to wstETH.**

![2-july-2024-highlights.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_july_2024_highlights_46d1d601b2.png)

**Batch with the highest amount of surplus** **(**[**Transaction details**](https://explorer.cow.fi/tx/0xaa7dc317ae0e14c63c0d44bae9c8c01cc30c01dcd9bf2ccdca5e7d4ffc2cc0ab?tab=orders)**)**: The total batch volume was exactly **$10M** and it was created by a single trader swapping USDT for ETH**.** The batch achieved a surplus of **69.94 ETH** **(2.14%).**

![3-july-2024-highlights.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_july_2024_highlights_354e76463c.png)

During the month of July, the top 10 traders traded a total of **$31,713,561.**

![4-july-2024-highlights.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_july_2024_highlights_39c86a9d5c.png)

In the table below you can see the total volume for this month’s biggest trades. The most active trader executed a whopping **$10,220,367** in trades with CoW Protocol this month.

![5-july-2024-highlights.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/5_july_2024_highlights_fa113c7901.png)

## Solvers

In  July, solvers generated a total of **$20.2M** in surplus, which is money in the pockets of traders.

![6-july-2024-highlights.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/6_july_2024_highlights_3fd2853012.png)

Below you can find a breakdown of how each solver performed in July.

![7-july-2024-highlights.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/7_july_2024_highlights_5294aebf33.png)

## Governance

It has been a hectic month in terms of governance! The CoW cannot be stopped 💪

![8-july-2024-highlights.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/8_july_2024_highlights_c9cef5d2ac.png)

## Executed Proposals

The DAO executed four important proposals this month:

-   [CIP-46: Funding for Marketing & Business Development Services — Service Agreement No 1](https://snapshot.org/#/cow.eth/proposal/0xbb18689e82d15b23ba2b755123777afc3579a0a86ae76f9b4eb73557b493c90a)
-   [CIP-47: Funding for the purpose of facilitating the listing COW token on CEXs](https://snapshot.org/#/cow.eth/proposal/0x7456f84721dbbe164b30324112accf976ff3be397b1957e68abe6953801a1f97)
-   [CIP-48: Solver rewards budget renewal and update of CoW DAO bonding pool operations](https://snapshot.org/#/cow.eth/proposal/0x563ab9a66265ad72c47a8e55f620f927685dd07d4d49f6d1812905c683f05805)
-   [CIP-49: Extending the Revenue Model Testing Period for CoW Protocol](https://snapshot.org/#/cow.eth/proposal/0x153a2e42936b6b99e825d5ebf4aa7a64c176243138c491274fd199b74ed23f6a)

## Draft Proposals

This month, there were two new proposals asking for feedback before moving into the next phase, final CIPs, in their current form:

-   [CIP-Draft: Wintermute <> COW Liquidity Provision Partnership](https://forum.cow.fi/t/cip-draft-wintermute-cow-liquidity-provision-partnership/2530/1)
-   [CIP-Draft: Amendment Balancer & Cow Protocol Strategic Partnership — Launching CoWAMM Pools](https://forum.cow.fi/t/cip-draft-amendment-balancer-cow-protocol-strategic-partnership-launching-cowamm-pools/2525)

Make sure to read them and leave comments — your feedback is highly appreciated and will help move these important topics forward. If you are interested in submitting a proposal to the CoW DAO, make sure to use the following [template](https://forum.cow.fi/t/cip-0-template/28).

## CoWmunity News

-   The CoW team attended ETHcc, giving several talks [including a feature on the first MEV-capturing AMM mechanism — CoW AMM](https://x.com/CoWSwap/status/1815455776183632116)
-   CoW DAO has paved the way toward sustainability by [generating just over 1,000 ETH](https://x.com/CoWSwap/status/1818015130959183883) in protocol revenue during the last 7 months
-   In July, MEV Blocker [protected 13.8B in trading volume and returned a whopping 213 ETH in rebates to 416,000 users across 2.8M transactions](https://x.com/CoWSwap/status/1819460894109368446)
-   Safe{Wallet} got CoW Swap TWAP orders [natively integrated](https://x.com/CoWSwap/status/1811105186578055329) into the wallet swap
-   Attention web3 governance fans! CoW DAO is [searching for applicants](https://x.com/CoWSwap/status/1809237051327562214) to join the Delegate Council and play a crucial role in the new COW Token Vote Delegation Program
-   Convex [enabled mints for $cvxCRV](https://x.com/ConvexFinance/status/1808497404439585273) directly from the CoW Swap interface
-   Stackly, the DCA tool built on top of CoW Swap, [launched on Arbitrum](https://x.com/Stacklydapp/status/1808883040606667099)
-   Hot off the heels of our launch on Arbitrum, CoW Swap [crossed $40M in trading volume](https://x.com/CoWSwap/status/1808166051437596899) on the L2

## Open Job Positions

[**Growth Marketing Manager**](https://job-boards.eu.greenhouse.io/cowswap/jobs/4375232101?utm_source=cow.fi&utm_medium=web&utm_content=job-Growth%20Marketing%20Manager)

[**Product Marketing Manager**](https://job-boards.eu.greenhouse.io/cowswap/jobs/4377355101?utm_source=cow.fi&utm_medium=web&utm_content=job-Product%20Marketing%20Manager)

[**Senior Data Engineer**](https://job-boards.eu.greenhouse.io/cowswap/jobs/4362645101?utm_source=cow.fi&utm_medium=web&utm_content=job-Senior%20Data%20Engineer)

[**Senior Backend Engineer With Rust**](https://job-boards.eu.greenhouse.io/cowswap/jobs/4368543101?utm_source=cow.fi&utm_medium=web&utm_content=job-Sn.%20Backend%20Engineer%20with%20Rust)

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CoW DAO July 2024 Highlights

_Blockchains enable reliable, trustless transactions on a large scale, however the automated nature of the technology leaves room for price manipulation by bots and malicious actors. In this talk, Olga Fetisova of CoW Protocol takes a look at Maximal Extractable Value (MEV) and its impact on the Ethereum ecosystem._

_The first part of the talk focuses on defining MEV and considering metrics, while the second part covers transparency initiatives, challenges, and solutions._

<iframe width="560" height="315" src="https://www.youtube.com/embed/hbgJYZlSU1k?si=IXHbjvmu9cdhWKC4" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen></iframe>

_What follows is a transcript of Olga’s talk:_

## What is MEV?

![1-mev-transparency-a-dappcon-talk.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_mev_transparency_a_dappcon_talk_f6131f7a7a.webp)

Blockchain technology is great at ensuring the validity of all transactions and creating new blocks with no downtime, however not all transactions are ordered in the same manner that they are submitted.

While block producers have full autonomy over selecting which transactions to include in each block, they usually opt to maximize profits by ordering transactions based on the highest gas price. This means that validators may censor or re-order transactions before creating the block. Re-ordering transactions with a profit motive is known as “maximal extractable value” (MEV).

In other words, MEV is the profit extracted by miners or other actors in the blockchain network who insert, remove, and re-order transactions.

According to  [Flashbots](https://www.flashbots.net/), a research and development organization focusing on MEV, over $500 million in MEV has been extracted just since The Merge. This value is only the recorded amount paid out to Ethereum validators; the attackers themselves have earned much more.

As we can see, MEV creates a set of skewed incentives. On certain days, Ethereum validators earn more ETH from extracting MEV than from network fees themselves.

Some MEV activities are indeed legitimate, as the practice makes sure that transactions are ordered in an optimal way. Overall, however, the practice creates unfair advantages for a small minority.

Today we will talk about the most common types of MEV.

**Frontrunning attacks**

Frontrunning is when a bot sees a profitable transaction in a public mempool, duplicates it, and places their own order in front of the victim transaction, extracting its value for themselves.

**Backrunning attacks**

Very similar to frontrunning, but in reverse. In backrunning, the attacker places a transaction after the victim transaction to capitalize on any arbitrage left by the victim’s order.

Frontrunning and backrunning transactions are not very common by themselves, but a combination of the two, known as a “sandwich attack,” accounts for most MEV.

**Sandwich attacks**

Sandwich attacks combine frontrunning and backrunning, placing a buy order before the victim transaction and a sell order directly after. This creates a “sandwich” of the victim transaction.

Let’s take a deeper look into sandwich attacks.

## Sandwich attacks on the blockchain

![2-mev-transparency-a-dappcon-talk.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_mev_transparency_a_dappcon_talk_8e1295469d.webp)

A sandwich attack begins after a user places a transaction in the mempool.

During order placement, the user indicates a slippage tolerance. Slippage is the necessary deviation in price that a trader is willing to accept for their transaction. Since the user indicates that they are willing to accept a particular sub-optimal price, MEV bots take this opportunity to exploit the price of the asset and capture the value for themselves.

The bot frontruns the user by placing a transaction directly in front of the victim’s trade. This strategically raises the price of the token by the exact amount necessary to make the victim transaction clear at its maximum slippage tolerance.

After the user’s transaction goes through (at the max slippage), it pushes the price of the asset up even further. The bot places a sell transaction (backrunning) directly after, benefiting from this artificial price arbitrage.

In essence, the bot places a transaction at a low price, rides the user’s slippage and price impact up, and sells at a higher price.

The user loses out, as they have to pay more than they would have otherwise and they receive fewer tokens for their trade. This is not fair.

## MEV Attacks in Practice

We can look at the chain to examine sandwich attacks directly. If we see the same token trading multiple times in one block, this may be an indicator that MEV attacks are occurring.

![3-mev-transparency-a-dappcon-talk.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_mev_transparency_a_dappcon_talk_0bf4aae45b.webp)

In a block analyzed by the research organization  [ZeroMEV](https://zeromev.org/block?num=15956603), we can see that the DAI token was traded multiple times, suggesting actions by MEV bots.

The ZeroMEV analysis indicates that this block contains nearly $40 of lost value. The last transaction in the block was a payment to the miner in the form of 0.41 ETH, meaning that the attacker themselves earned an even higher amount.

![4-mev-transparency-a-dappcon-talk.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_mev_transparency_a_dappcon_talk_6d599f75e5.webp)

To put this into perspective, the average MEV payout per block is about $100. On certain days of volatile market activity, however, this value can be much higher.

![5-mev-transparency-a-dappcon-talk.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/5_mev_transparency_a_dappcon_talk_f76cf0cd60.webp)

![6-mev-transparency-a-dappcon-talk.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/6_mev_transparency_a_dappcon_talk_aa4faee6ce.webp)

Looking at  [a block from November 2022](https://zeromev.org/block?num=15957277)  around the time of the FTX crash, we can see a completely different set of numbers.

In just one block, a bot caused over $5,000 in user losses and the validator received a kickback of over 3.5 ETH, suggesting, once again, that the gains for the MEV bot were significantly higher.

One notorious MEV searcher is known as “jaredfromsubway.” In a report by  [The Block](https://www.theblock.co/post/230218/jaredfromsubway-mev-bot), this searcher earned $34 million through MEV extraction in just the span of 3 months.

Using  [on-chain data](https://transparency.flashbots.net/), we can break down MEV price exploits by DEX. In the below image, we can see that Uniswap V2 and V3 account for over 90% of all MEV attacks on Ethereum.

![7-mev-transparency-a-dappcon-talk.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/7_mev_transparency_a_dappcon_talk_d48aacf263.webp)

This, of course, is primarily as a result of Uniswap capturing the majority of trading liquidity — the more trades, the more potential MEV.

Thankfully, it’s quite simple to check if you have been MEV attacked. One of the easiest methods is by entering your Ethereum address on  [ZeroMEV’s website](https://zeromev.org/). You can also use a transaction hash or a particular block number.

![8-mev-transparency-a-dappcon-talk.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/8_mev_transparency_a_dappcon_talk_60f3ba93f7.webp)

## Transparency Initiatives

Several organizations specialize in tracking MEV. These include Flashbots, Eigenphi, and ZeroMEV, among others. There are, however, practical ways that you can protect yourself from MEV exploits.

One of the most effective methods involves using a specialized RPC (remote procedure call) endpoint. RPC endpoints send calls to the blockchain for data and stand as an intermediary between your wallet and the blockchain itself.

RPC endpoints can be swapped out by the user depending on their needs. Most wallet applications such as MetaMask make it relatively straightforward to add custom RPC endpoints. Some well-known examples of specialized RPC endpoints include  [MEV Blocker](https://mevblocker.io/),  [MEV-Share](https://docs.flashbots.net/flashbots-protect/mev-share), and  [BackRunMe](https://backrunme.com/).

## MEV Blocker

![9-mev-transparency-a-dappcon-talk.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/9_mev_transparency_a_dappcon_talk_08bc87a2fd.webp)

[MEV Blocker](https://mevblocker.io/)  was developed by CoW DAO and, as the name suggests, it provides MEV protection for users.

When a user submits a transaction using MEV Blocker, rather than sending it to the public Ethereum mempool, the RPC sends the transaction to a specialized private pool. This conceals the transaction from public exposure, protecting it from exploitation by MEV searchers.

As an extra layer of security, MEV Blocker generates fake transactions that prevent probabilistic exploitation by advanced searchers. In addition, MEV Blocker offers rebates on trades by capturing value from potential backrunning opportunities. If a user transaction creates a backrunning opportunity, MEV Blocker guarantees that at least 90% of the backrunning value will be forwarded back to the user in the form of a rebate.

While it’s relatively new, MEV Blocker has already enjoyed a meteoric rise. So far, the RPC endpoint accounts for $16 billion in protected volume and 370 ETH in user savings.

To add MEV Blocker to your wallet, check out the MEV Blocker website:  [https://mevblocker.io/](https://mevblocker.io/)

## Dedicated dApps

While RPC endpoints protect against price exploitation, the most extensive MEV protection comes at the application layer.

One dApp that provides comprehensive MEV protection is  [CoW Swap](https://swap.cow.fi/). CoW Swap is a meta-DEX aggregator that matches orders with the best liquidity available on-chain and protects trades from MEV exploitation.

CoW Swap actually sends all transactions through MEV Blocker by default, but the dApp also uses some extra techniques to combat MEV.

1.  **Delegated Trade Execution**: On CoW Swap, dedicated parties known as “[solvers](https://docs.cow.fi/solvers/solvers)” execute transactions on behalf of the users. This means that users are never directly exposed to the chain, as they only sign an “intent to trade” message which the solvers execute as a blockchain order.
2.  **Coincidence of Wants (CoW)**: CoW Swap enables users to trade off-chain with each other through a peer-to-peer trading mechanism. These trades don’t have to go through the public mempool, so they avoid the dangers lurking there.
3.  **Uniform Clearing Prices**: Transactions on CoW Swap get grouped together into “batches.” Each time a particular asset (such as WETH) trades in a batch, it trades for a constant price. This mechanism obviates the price advantages of reordering transactions, preventing MEV exploits.

These two categories of protection — RPC endpoints and dedicated dApps — are the current ways that we can protect ourselves from MEV attacks. It’s important to remember, however, that MEV is a broader problem that evolves quickly, with bots constantly finding new ways to attack us and steal our precious ETH.

## Conclusion

There are many challenges in combating MEV.

For one, there is a lack of data availability. Centralized exchanges, for example, don’t share their data so it’s difficult to understand the full scale of the MEV problem and come up with a complete solution.

While lots of organizations focus on combating MEV, the issue continues to pose a significant challenge. This also creates opportunities, however, for the community to come together, innovate, and ensure that Ethereum remains the gold standard in the blockchain world.


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A DappCon Talk by Olga Fetisova of CoW DAO


MEV Transparency: Ensuring Fairness In DeFi Markets

Maximal extractable value (MEV) has become a controversial topic in the DeFi community over the last few years as the practice has gained wider adoption. Some blockchain projects take steps to protect their users from suffering MEV, but there are also advocates of the practice who argue that it contributes to market efficiency and validator compensation.

[CoW DAO](https://cow.fi/)  creates products that protect Ethereum users from negative outcomes, so it’s clear that participants in the DAO are no fans of MEV. The technical innovations that MEV searchers have pioneered in the pursuit of maximizing profits, however, are indeed impressive.

Thankfully, this tech can be put to good use in a way that benefits users and still makes money: Rather than being MEV searchers, these users should consider becoming CoW Protocol solvers.

## What is a Searcher?

Searchers are DeFi market participants, most often bots, that monitor pending Ethereum transactions for arbitrage opportunities.

Captured arbitrage is known as  [maximal extractable value (MEV)](/learn/understanding-mev-protection), and it’s a pernicious form of price exploitation that occurs across all types of transactions. To date, MEV has cost traders over $1.5 billion in losses. Most of these losses have been facilitated by searchers who pocket a large portion of the arbitrage for themselves.

## What is a Solver?

![1-switch-from-searcher-to-solver.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_switch_from_searcher_to_solver_7763c26103.webp)

CoW Protocol is a meta DEX aggregator that relies on bonded third parties known as “[solvers](https://docs.cow.fi/cow-protocol/concepts/introduction/solvers)” to execute user trades. The protocol uses an  [intents-based trading system](https://docs.cow.fi/cow-protocol/concepts/introduction/intents)  where user intents get grouped into  [batches](https://docs.cow.fi/cow-protocol/concepts/introduction/batch-auctions). The solver that can execute the orders at the best price wins the right to settle the batch (find out more about how CoW Protocol works  [here](https://docs.cow.fi/category/concepts).)

Solvers are compensated in COW tokens for settling batches, incentivizing them to compete to find better prices and win the right to execute user intents. In return for this compensation, solvers provide users with a number of benefits including:

-   Finding optimal prices for the trades in a batch
-   Protecting users from MEV by executing transactions on their behalf
-   Providing abstraction that allows for benefits like gasless trades, transaction bundles, directly tapping into LPs, and more

## Searchers vs. Solvers

Fundamentally, searchers and solvers optimize for the same thing: maximizing profits. However, they serve different purposes, so their incentives diverge.

Searchers make money by performing MEV attacks on vulnerable transactions — giving users worse prices and keeping the difference for themselves. Searchers are incentivized to maximize their profits while ensuring that they are bidding enough for their transactions to be included in the next block.

In Ethereum, searchers work to out-bid each other to have their transactions included and make money. This is similar to what solvers do on CoW Protocol. The difference, of course, is that  **searchers benefit validators while solvers benefit users.**

## Why Become a Solver?

The fundamental difference between searchers and solvers is that searchers extract value from user transactions while solvers add value to them.

MEV may be a profitable enterprise in the short-term, but it hurts users and makes for a more toxic ecosystem. This turns potential new entrants away, feeding a vicious cycle — after all if there are no users left, who will searchers make money off of?

Solvers are the opposite: they take the same tech but they leverage it for the benefit of users. This cycle is virtuous, rather than toxic. Users achieve better prices, so they’re incentivized to use the product more, which means more order flow and better compensation for solvers.

From a technical standpoint, the methods searchers use to find arbitrage opportunities can be used to instead find solutions to batches. Searchers can leverage their existing nodes, algorithms, servers, AMM-indexed liquidity, simulation services, and more to become a good solver. This means that the lift to turn a searcher into a solver is relatively minor, while the upside is significant.

## Who can be a Solver?

CoW Protocol was the first DEX to implement intent-based trading, a model that the entire DeFi industry is now moving towards. This means that  [opportunities for solvers](https://dune.com/cowprotocol/solver-info)  will only grow in the coming years.

Thanks to a permissionless structure, anyone can become a solver. The main requirement is to put up a bond which serves as a guarantee that the solver will follow the  [rules](https://docs.cow.fi/cow-protocol/reference/core/auctions/competition-rules)  or risk getting slashed.

Solvers that do well find good solutions to the  [batch auction problem](https://docs.cow.fi/cow-protocol/reference/core/auctions/the-problem). They also generally:

-   Develop an efficient optimization algorithm
-   Identify and solve special problem instances that are easy to solve
-   Consider diverse liquidity sources
-   Integrate external market makers

## How to Become a Solver

Transforming a searcher setup into a solver setup or writing a new solver takes some technical expertise. We won’t go into it in this article, but you can find the requirements and specifications for becoming a solver in the  [CoW Protocol solver documentation](https://docs.cow.fi/cow-protocol/tutorials/solvers).

We also answer questions and provide technical support through the CoW Protocol  [Discord](https://discord.gg/cowprotocol).

Happy solving!

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Searchers make Ethereum worse for everyone, but with just a few tweaks they could contribute to the ecosystem instead


MEV Bots: Switch From Searcher to Solver


MEV or “maximal extractable value” is a hidden tax on all types of Ethereum transactions. Any time you make a DeFi trade, buy or sell an NFT, or lend tokens to a liquidity pool, opportunistic users known as “searchers” may manipulate your trades, resulting in unfavorable prices, failed transactions, and missed opportunities. But not everyone agrees that MEV is bad.

  

In this article we’ll be exploring the pros and cons of MEV and most importantly, how you can protect your transactions from MEV, if you decide it’s not for you.

## Is MEV inevitable?

  

On Proof-of-Stake blockchains such as Ethereum, validators - contributors who validate transactions to help keep the network secure - are free to select which transactions they process first. This is different from markets you would find in TradFi, where the order of transactions are strictly enforced by regulators.

  

Because of this unique feature, users can offer incentives to process their transactions faster than they might process others. This incentive typically comes in the form of a payment, or gas fee on Ethereum. This unique feature on Ethereum and other, similar chains allows MEV to take place.

  

While there are many types of MEV, the most common is frontrunning. Sophisticated traders and bots scan the mem pool, a digital holding area where all transactions wait to be processed. When it identifies a transaction it believes it can make money out of, it places a transaction for the same asset, and pays extra to have it processed before the transaction it wants to front run.

  

By the time the target transaction has been completed, the frontrunner has made a profit. But not everyone believes this is a bad thing. Let’s explore the pros in the next section.

## The good

  

The presence of MEV can lead to improvements in how markets are run. At a high level, the presence of MEV bots can help them run more smoothly by eliminating efficiencies in how markets are run.

  

Arbitrage and liquidations are common trades that flow through MEV infrastructure. Arbitrage is a useful activity that keeps prices aligned between, say, a DEX’s AMM price and the price of the broader market.

### Improved economic inefficiencies

  

Liquidations, meanwhile, are important for the smooth operation of over-collateralized lending platforms like Maker DAO, for instance.

  

MEV activity is necessary to do things like maintain stablecoin pegs and rebalancing liquidity across different pools. MEV bots compete to buy assets at a low price from one source and sell it to another as quickly as possible.

  

The profit taken from the price difference ensures AMM liquidity pools remain balanced. There are also other less obvious yet potentially beneficial effects of MEV. One of which is the incentive for validators to remain engaged in the maintenance of networks when prices are low.

  

By having a larger pool of validators, who can remain engaged during market downturns - thanks to the additional incentives earned through MEV - can help keep a network decentralized.

### Fast price corrections across decentralized exchanges

  

MEV can also bring benefit to blockchains because it incentivizes price normalization and ensures events like liquidations are efficiently executed. Because there is inherent value to capture, MEV bots can exchange assets across pools to maintain the ecosystem without liquidity providers’ or lenders’ involvement. This phenomenon also appears in other DeFi mechanisms where some form of asset rebalancing takes place.

## The bad

  

While MEV can have its benefits, it also has a number of drawbacks: namely that it creates unfairness. Sophisticated actors familiar with the mechanics of blockchains like Ethereum have developed numerous ways to exploit users with less knowledge.

  

MEV makes money for searchers, block builders, and Ethereum validators at the expense of regular users, especially beginners who don’t know how to protect themselves. As of the time of writing, sandwich attacks on AMMs and aggregators alike generate [almost $1 million in profit for searchers each week](https://eigenphi.io/mev/ethereum/sandwich).

  

Over time, persistent MEV erodes market confidence as traders realize they are at a constant disadvantage to more sophisticated actors. Ultimately, MEV may pose an existential threat to blockchain ecosystems like Ethereum so it’s imperative for solutions to emerge that protect everyday traders from price exploitation.

## The compromise

  

The reality is, there is little appetite to change the design of chains like Ethereum, meaning MEV is here to stay. While it does help prices remain consistent across different liquidity pools, it creates a hierarchy between sophisticated actors looking for arbitrage and regular users unaware that their transactions could be exploited.

  

But there are ways to guard against MEV. In the below sections we’ll be exploring each one, and also solutions that do the hard work for you.

### Methods of defense

  

There are a wide range of methods you could use to help mitigate against the effect of MEV. The good news is there are many projects - including [CoW DAO](https://cow.fi) - that are already aware of this problem, and have built a number of solutions to ensure your trades and transactions are MEV free.

  

But as you will see, while there are many different ways you can protect yourself, there are few that combine all these defenses into a single solution that’s easy to use. Like [CoW Swap](https://cow.fi/cow-swap), or [MEV Blocker](https://cow.fi/mev-blocker).

#### Off-chain single batch settlement

  

Off-chain single batch settlement is an idea that’s designed to keep prying eyes from seeing what transactions you are submitting before they are put into a block to be verified.

  

Off-chain settlements are, like they sound, transactions that take place away from the main blockchain. One such technique for using off-chain settlement is to use a layer 2, a second blockchain built on top of the main blockchain.

  

By settling off-chain, the order of those transactions, the primary attack vector for MEV bots, is irrelevant. That’s because by the time the transactions are added to the mem-pool, they have already been completed, meaning arbitrage can’t take place because the prices of the transactions have already been fixed.

#### Fair Sequencing Services (FSS)

  

Fair Sequencing Services (FSS) is a decentralized framework that helps ensure that transactions are ordered fairly and impartially, and that smart contracts process transactions in a fair manner. FSS is designed to help DeFi developers create more equitable systems for users.

  

FSS combats MEV by using an oracle network to order transactions sent to a contract. An oracle is a data source used to verify whether data is accurate. In the case of FSS, it ensure transactions are in an order that makes exploitation more difficult.

#### Explicit specification of maximum slippage

  

Slippage is the difference between the expected price of a trade and the price at which it is executed. It can occur at any time, but is more likely to happen during periods of high volatility or when orders exceed the available liquidity.

  

When it comes to transacting on a blockchain, users are able to adjust the level of slippage, which is commonly expressed as a percentage of the total value. For example, if you set slippage at 5%, this creates an acceptable range whereby the price can move before it is finalised.

  

When trading in DeFi, it’s important to set as low a number as possible to ensure you’re not being exploited by MEV bots. The lower the number, the less price variation. But there are limits. If there’s limited liquidity for the coin you’re trading, the transaction might fail if the slippage range is too small.

#### Using RPC endpoints for MEV protection

  

RPC endpoints or Remote Procedure Calls, are an intermediate layer that routes transactions from a user’s wallet to the blockchain itself. Transactions pass through RPC endpoints before getting to the mem pool, so RPCs can provide additional functionality across any blockchain application or protocol. Think of RPCs as a middle-man which can be used to improve security.

  

[CoW DAO](https://cow.fi) uses this unique feature of public blockchains to create a safety layer that helps protect transactions from MEV bots.

  

[MEV Blocker](https://cow.fi/mev-blocker) provides access to a permissionless network of searchers while hiding transactions from the public mem pool. These searchers cannot frontrun or sandwich user transactions. Instead, they capture value through backrunning. Anytime a searcher backruns a user’s transaction, the searcher keeps up to 10% of the value and sends the other 90% back to the user as a rebate.

  

Want to try MEV Blocker for yourself? [Start here.](https://cow.fi/mev-blocker)

  

CoW Swap's Uniform Clearing Prices

  

Another unique feature of CoW Swap is its uniform clearing price.

  

CoW Protocol collects and aggregates [intents](https://docs.cow.fi/cow-protocol/concepts/introduction/intents) off-chain and settles them together in groups, known as batches. These batches are then "auctioned off" through a competition to the [solver](https://docs.cow.fi/cow-protocol/concepts/introduction/solvers) offering the most surplus for the orders in the batch.

  

Batch auctions allow for Uniform Clearing Prices (UCPs), where an asset that appears multiple times across orders in the same batch settles for a consistent price. This makes transaction order irrelevant within the block, undermining the ability for MEV bots to extract value.

#### CoW Swap's Coincidence of Wants

  

A unique feature of CoW Swap is its use of what’s called a Coincidence of Wants - which also happens to be the meaning of CoW in CoW DAO!.

  

A coincidence of wants is an economic phenomenon where two parties swap assets with one another peer-to-peer. Typically users would have to use an exchange such as Uniswap to complete this trade, but on CoW Swap, you can do it off chain.

  

CoW Swap orders start out as signed “intent to trade” messages that get batched together before getting sent to on-chain liquidity sources like Uniswap. As a result, CoW Swap can match orders peer-to-peer when the opportunity arises.

  

This has two benefits: gas fees are lower, and second, it avoids transactions going through the public mem pool, adding an extra layer of security.

#### CoW Swap's Delegated Trade Execution

  

CoW Swap’s unique “solver” feature protects users from MEV by completing transactions on their behalf. Solvers are dedicated third parties whose role it is to search for the best price for trades submitted by users.

  

A group of solvers compete against each to find the best price for trades. They do this by searching across multiple DEX’s looking for the best prices - hence why CoW Swap is referred to as a meta DEX - because it searches all the other DEXes to find you th ebest price.

  

The most competitive solver is then awarded the trade, and any savings they generate for the user, they pass on to the user.

## The CoW approach to MEV protection

  

CoW DAO’s [MEV Blocker](https://cow.fi/mev-blocker) and [CoW Swap](https://cow.fi/cow-swap) have safety baked in. They are designed specifically to protect you from MEV attacks.

  

In the case of MEV Blocker - this is a stand alone product that you can add to your wallet to enjoy the full benefits of MEV protection. This works by using what is called an RPC or a Remote Procedure Call. This is an intermediate layer that routes transactions from a user’s wallet to the blockchain itself. Transactions pass through RPC endpoints before getting to the mempool, so RPCs can provide additional functionality across any blockchain application or protocol.

  

With CoW Swap meanwhile, it provides MEV protection whenever you trade on the DEX. CoW Swap is a meta DEX aggregator that finds the best prices for trades and provides comprehensive MEV protection.

  

The protocol uses a unique trading mechanism that relies on batch auctions and intents to achieve the best outcomes for users. Thanks to a powerful combination of delegated trade execution, batch auctions, and protected transaction flow through MEV Blocker, CoW Swap users benefit from thorough MEV protection on all trades.

### Interested to learn more?

  

If you want to dive deeper into MEV Protection and how CoW DAO does it, [head this way.](https://cow.fi/learn/articles/what-is-mev)

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MEV or “maximal extractable value” is a hidden tax on all types of Ethereum transactions. But some argue it can be useful. We weigh up the pros and cons. 

Is MEV good or bad?

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This article summarizes the “Order Flow Auctions on the MEV Supply Chain” talk presented by CoW Swap at the Prague DeFi Summit

Understanding Order Flow Auctions

CoW Swap has recently become one of the first DeFi projects to launch native support for Time-Weighted Average Price (TWAP) orders. TWAP orders spread out large trades into multiple smaller orders. This reduces slippage & price impact and helps traders enter or exit a market position at an average price.

TWAP has been around for a while on centralized exchanges, but CoW TWAP — CoW Swap’s version of TWAP — comes with several important benefits that traders won’t find on CEX alternatives.

## Benefits of TWAP orders

### Dollar-Cost Averaging (DCA)

TWAP orders help automate the dollar-cost averaging (DCA) investment strategy. DCA involves investing a fixed amount of money in an asset at regular intervals, regardless of the asset’s price, in order to reduce the impact of market volatility.

In highly volatile markets like crypto, the risk of making a large investment just before a sudden price shift is significant. TWAP minimizes this risk by breaking down your investment into smaller, evenly distributed purchases over time. This finds an average market price and helps smooth out market volatility. Want to buy an asset but you’re not sure exactly when to click the “Swap” button? TWAP-enabled DCA means you can forget about timing the market and get the average price instead.

Investors can also use TWAP to sell their positions through dollar-cost averaging. Simply switch the assets you’re swapping and TWAP will help you exit the market for an average price.

Riding the crypto waves has never been so s-moooo-th! 🐮

### Reduce your price impact

Large orders move markets and traders often get worse prices as a result. By splitting up large trades into multiple smaller orders, TWAP helps mitigate the negative effects of price impact. A bunch of smaller orders affect prices much less than one big order, meaning you end up getting a better deal for your trades.

### Reduce your slippage

Finding the right slippage can be tricky. Set it too low and your order might not go through, too high and you could fall prey to MEV. Using TWAP to split up a large order into smaller parts allows you to use a smaller slippage tolerance for each part. The MEV bots can stay hungry…

## Why TWAP with CoW Swap?

Those familiar with CoW Swap know there’s always something extra in our barn 😉. Below are some exclusive benefits you’ll only find on CoW TWAP.

### Always receive 100% of your order surplus

CoW Swap searches for surplus opportunities on every order and TWAP orders are no exception. In fact, since TWAP orders are split up into different parts, each part is another opportunity to find surplus for your trade.

In our tests, selling 1,000 ETH in four parts of 250 ETH each allowed us to get a price for the order that was 3.5% better than selling the 1,000 ETH all at once! This was in large part thanks to CoW Swap’s batch auctions that include finding  [Coincidence of Wants](/learn/what-are-cows-on-cow-swap) and other price improvements.

### Get price protection
![1-why-twap.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_why_twap_bd8b2c362b.webp)

After you select the assets you want to trade through CoW Swap’s TWAP interface, you’ll need to indicate the number of order parts you want to use, as well as the total duration over which you’d like your TWAP order to execute. From these selections, the interface automatically calculates each part duration and the amounts you will be buying and selling per part.

Unique to TWAPs on CoW Swap is the “price protection” feature. Price protection ensures that your order will stop executing if the market price of the assets moves by more than your specified percentage.

## Get started with CoW TWAP

To get started with TWAP orders on CoW Swap, you’ll first need to ensure that you have a Safe wallet. Currently, TWAP is only available through Safe but support for more wallets will be coming soon.

Don’t have a Safe? No problem! Create one  [here](https://app.safe.global/share/safe-app?appUrl=https%3A%2F%2Fswap.cow.fi&chain=eth). After you make a Safe, you’ll also need to upgrade your fallback handler. Learn what this means and how to do it  [here](/learn/all-you-need-to-know-about-cow-swap-new-safe-fallback-handler).

Once your Safe is fully set up, you can access TWAP directly through the  [CoW Swap order interface](https://swap.cow.fi/#/1/advanced?utm_source=medium&utm_campaign=why-twap).

TWAP orders on Ethereum Mainnet have a $5,000 minimum per order part. This ensures that gas costs are relatively low compared to the entire order size, even with multiple parts involved. Smaller traders can also enjoy CoW TWAP on Gnosis Chain where part minimums are only $5 (and the gas is much cheaper!)

You can find the full how-to guide on CoW TWAP orders  [here](/learn/how-to-use-cow-swap-twap-orders-via-safe-wallet).

As always, on CoW Swap:

-   All prices are aggregated from the best available on-chain and off-chain liquidity
-   Traders are fully protected from MEV
-   Orders are free to place and free to cancel
-   Traders never pay for failed transactions
-   Transactions are gasless as fees are paid in the sell token

Happy TWAPping!
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How CoW Swap’s new feature, Time-Weighted Average Price (TWAP) orders helps you get better prices for your trades


Why TWAP?

TWAP orders allow traders to spread their trade over a specified period of time in order to smooth out fluctuations in market price and open a position for an average market price. A TWAP order consists of multiple smaller orders placed at regular intervals over a predefined time period.

> **In our tests, selling 1,000 ETH in four parts of 250 ETH each, allowed us to yield a price for the order that was 3.5% better than selling the 1,000 ETH all at once!**

## TWAP Order Interface

To get started with TWAP orders through the  [Safe](https://app.safe.global/)  app, you will first need to authorise a transaction signing request that contains a batch of transactions (we’re big fans of gas savings through batching ⛽🚫). This batch includes a “setFallbackHandler’’ function. TWAP orders are the first order type that runs on a new conditional order framework, super-charging your Safe.

In order for this framework to make complex trades on your behalf, an upgrade to Safe’s “fallback  handler” is required. Don’t worry though, you will be automatically prompted to upgrade in order to use TWAP.

![1-twap.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_twap_9fef6b1d70.webp)


The TWAP interface has several sections:

-   **Trading Assets**: Select the assets you want to swap and the amounts of each.
-   **Price Protection**: Provides protection against major price movements. Your TWAP order won’t execute if the market price dips more than this percentage (calculated from the asset price at the time of order submission).
-   **Number of parts**: Enter the number of parts you would like your order split into.
-   **Total Duration**: The total amount of time your order will take to execute.
-   **Part Duration**: Automatically calculated from your total duration and number of parts, part duration shows how long CoW Swap will wait between each part of your order.
-   **Sell & Buy per part**: Shows an estimate of how much CoW Swap will sell and buy with each part of your trade.

## Benefits of TWAP Orders

TWAP orders have been widely explored through research literature in traditional finance but haven’t yet seen the light of day in DeFi. They’re finally entering use on exchanges such as CoW Swap and they provide a range of benefits for traders.

**Reduce your slippage**: Breaking up a large order into smaller pieces allows you to set a smaller slippage tolerance for each piece than if you had executed the large order as one.

**Reduce your price impact**: As with slippage, breaking up a large order into small pieces allows you to spread your liquidity needs over time, reducing your price impact.

**Always receive 100% of your order surplus**: On CoW Swap, all order surplus is forwarded to you. If your order executes for a better price than your quoted price — thanks to  [Coincidence of Wants](/learn/what-are-cows-on-cow-swap)  or any other price improvement that solvers are able to find — the extra price improvement will be forwarded to you.

**Eliminate market fluctuations**: By giving traders the time-weighted average price, TWAP orders smooth out market volatility, which makes trying to predict prices a thing of the past.

**Customise your order parameters**: TWAP orders allow you to fine-tune your order by specifying the number of parts you’d like it split up into, as well as the time period you want it to execute over. On CoW Swap, TWAP orders also have a “price protection” option which protects your order from executing at an unfavorable price due to market volatility.

## Get Started with TWAP Orders on CoW Swap

TWAP orders are now available in the  [CoW Swap order interface](https://swap.cow.fi/#/1/advanced)  under the “Advanced” tab.

**Have a Safe?**  Awesome! You can try out TWAP  [here](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=TWAP-announcement).

**Don’t have a Safe?**  Not a problem! Create one  [here](https://app.safe.global/share/safe-app?appUrl=https%3A%2F%2Fswap.cow.fi&chain=eth).

The CoW Swap team is working on adding support for more wallets in the future.

One more thing to note: TWAP orders are most useful for big trades! So, when trading on Mainnet, the  _minimum_  TWAP order size is $5k. This minimum ensures that your savings from reduced price impact are not lost on execution fees (AKA gas fees). If you want to trade smaller amounts, head over to Gnosis Chain, where the TWAP order minimum is only $5 (and the gas fees are much cheaper!)

As always, on CoW Swap:

-   All prices are aggregated from the best available on-chain and off-chain liquidity.
-   Traders are fully protected from MEV.
-   Orders are free to place and free to cancel.
-   Traders never pay for failed transactions.
-   Transactions are gasless as fees are paid in the sell token.

Celebrating ComposableCoW’s conditional order superpowers, we are releasing it with TWAP (time-weighted average price) order support for enabled-Safe users.

Give  [TWAP orders a try](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=TWAP-announcement)  today and let us know what you think by reaching out on  [Twitter](https://twitter.com/CoWSwap)  or  [Discord](https://discord.com/invite/cowprotocol)!

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We wish you much surplus and happy TWAP order trading! Give  [TWAP orders a try](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=TWAP-announcement)  today and let us know what you think by reaching out on  [Twitter](https://twitter.com/CoWSwap)  or  [Discord](https://discord.com/invite/cowprotocol)!

_Please note that TWAP orders currently require a_ [_Safe_](https://safe.global/) _wallet with a fallback handler. More wallets will be supported in the future._



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CoW Swap is excited to announce the launch of Time-Weighted Average Price (TWAP) orders! Available now as an advanced order type in the CoW Swap order interface.


Aave Trade Breakdown

1st Trade Details

2nd Trade Details

Why CoW Swap?

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