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## TL;DR

-   During the month of June, CoW Protocol handled a total volume of  **$2.19B**  and generated a surplus of  **$14M**
-   In exciting news, CoW DAO  [received a new look](https://x.com/CoWSwap/status/1805606262744531260)  and CoW Protocol  [launched on Arbitrum](https://x.com/CoWSwap/status/1797996272349323412)
-   In terms of Governance, CoW DAO executed CIPS  [46](https://forum.cow.fi/t/cip-46-funding-for-marketing-business-development-services-service-agreement-no-1/2476/1)  and  [47](https://forum.cow.fi/t/cip-47-funding-for-the-purpose-of-facilitating-the-listing-cow-token-on-cexs/2458)

## Protocol Stats

This month, CoW Protocol settled a total of  **$2.19B**

![1-june-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_june_2024_highlights_bbbd21676b.webp)

The top batches worth highlighting are the following:

**Batch containing the highest volume**  **(**[**Transaction details**](https://explorer.cow.fi/tx/0x15a8acee86e3ddd8943f6cb7bf7b6c9dfc98219f0d49dede6501f30e1e6ad327?tab=orders&vis=transfers)**)**: The total batch volume was  **$27,086,967** and it was created by two traders who were swapping  **WeETH to WETH**  and  **USDT to USDC**.

![2-june-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_june_2024_highlights_997a9b5cf0.webp)

**Batch with the highest amount of surplus**  **(**[**Transaction details**](https://explorer.cow.fi/tx/0xfde66662c4df3e9c7e4ea1cf0dc6e645b53912486826f892d2c7b4dc37947518?tab=orders)**)**: The total batch volume was  **4,119 ETH** and it was created by two traders — one swapping  **WEETH to WETH**  and the other swapping  **ETH to ZAAR.** The batch achieved a surplus of  **$71,600**  **(0.49%).**

![3-june-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_june_2024_highlights_5ed5d8db9d.webp)

During the month of June, the top 10 traders traded a total of  **$17,397,532.**

![4-june-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_june_2024_highlights_9025cd7c9a.webp)

In the table below you can see the total volume for this month’s biggest trades. The most active trader executed a whopping  **$4,143,954**  in trades with CoW Protocol this month.

![5-june-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/5_june_2024_highlights_e205f5c02b.webp)

## Solvers

In  June, solvers generated a total of  **$14M**  in surplus, which is money in the pockets of traders.

![6-june-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/6_june_2024_highlights_f3e48e0cc2.webp)

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

![7-june-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/7_june_2024_highlights_87f40f594b.webp)

## Governance

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

![8-june-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/8_june_2024_highlights_8ec68b11a8.webp)

## Executed Proposals

The DAO executed one important proposal this month:

-   [CIP-45: Balancer & Cow Protocol Strategic Partnership — Launching CoWAMM Pools](https://snapshot.org/#/cow.eth/proposal/0x5a7435a287fda55133fa5973b4979465687c341def703564986f2771780352b0)

## 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-46: Funding for Marketing & Business Development Services — Service Agreement No 1](https://forum.cow.fi/t/cip-46-funding-for-marketing-business-development-services-service-agreement-no-1/2476/1)
-   [CIP-47: Funding for the purpose of facilitating the listing COW token on CEXs](https://forum.cow.fi/t/cip-47-funding-for-the-purpose-of-facilitating-the-listing-cow-token-on-cexs/2458)

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

-   CoW DAO has a  [new look](https://x.com/CoWSwap/status/1805606262744531260)  including a new logo, new landing pages for each product, and an entirely overhauled brand feel!
-   CoW Protocol  [launched on its first L2](https://x.com/CoWSwap/status/1797996272349323412)  — Arbitrum and  [participated in an X Space with members of the Arbitrum foundation](https://x.com/CoWSwap/status/1800544944396075390)
-   Curve finance  [launched a fee burner using the Programmatic Order Framework](https://x.com/CoWSwap/status/1806001775335580016)
-   Published a  [report on the findings of the second fee test](https://x.com/CoWSwap/status/1799172243995693195)
-   Put  [out a call for CoW DAO delegates](https://x.com/CoWSwap/status/1806741521594720490)
-   Reduced TWAP order minimums to just  [$1,000 per order segment](https://x.com/CoWSwap/status/1799446283662536789)
-   Helped facilitate  [Gnosis DAO’s $30 million buyback program](https://x.com/CoWSwap/status/1800974615264756174)
-   Got  [featured in the “Our Network” newsletter](https://x.com/ournetwork__/status/1807202388538978436)
-   Published a flagship “[What is MEV](https://cow.fi/learn/what-is-mev)” article

## Open Job Positions

[**Content Marketing Manager**](https://boards.eu.greenhouse.io/cowswap/jobs/4343031101)

[**Senior Data Engineer**](https://boards.eu.greenhouse.io/cowswap/jobs/4362645101)

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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 DAO.


CoW DAO June 2024 Highlights

George Hristov

Providing liquidity to automated market makers (AMMs) like Uniswap has become one of the most popular ways to earn yield in crypto.

While other yield-bearing methods like staking and lending depend on protocol economics and aggregate market demand, there is always alpha in providing liquidity. Between new token launches, incentive programs from ecosystem grants, and ever-evolving AMM models, liquidity providing is one of the most mature sectors for earning returns on crypto assets.

However, liquidity providing has one major downside: it is subject to a pernicious form of price exploitation known as loss-versus-rebalancing (LVR).

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**.

How can this be? Let’s examine how liquidity providing works to learn what loss-versus-rebalancing is and where it comes from.

## What is LVR

First coined by a  [team of researchers from Columbia University](https://arxiv.org/abs/2208.06046), LVR is a form of arbitrage that occurs whenever an AMM has an outdated (stale) price in comparison to some other trading venue.

Arbitrageurs exploit this difference by trading from the AMM to the more liquid exchange (usually a centralized exchange like Binance), correcting the arbitrage and extracting value from LPs in the process.

To better understand LVR as a process, however, we first need to understand the nature of automated market makers, as well as the pre-cursor to LVR — impermanent loss.

## The CF-AMM Design

Most AMMs (such as Uniswap) are examples of constant function automated market makers—CF-AMMs.

These AMMs take in two assets and automatically re-calculate prices after each trade to ensure ample liquidity at all times. As one asset gets depleted, the other must trade at a higher price in order to maintain a constant ratio where the value of all “A” tokens in a pool is equal to the value of all “B” tokens.

CF-AMMs use the constant product function  _x*y=k_  to calculate the ratio of assets, where  _x_  and  _y_  are the two tokens and  _k_  is the constant maintained. Thus, all trades on a CF-AMM can be mapped on the constant product function curve:

![1-what-is-lvr.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_what_is_lvr_8d10b97884.webp)

### Liquidity Positions

Let’s look at an example of providing liquidity which will help illustrate the design (and shortcomings) of CF-AMMs.

Let’s say that the price of ETH is $1,000 and we have 2 ETH worth $2,000 that we would like to earn yield on. We can start by providing liquidity to, say, an ETH-USDC pool. In order to do this, we must first split the value of our holdings into 50% ETH and 50% USDC (remember, most AMMs require LP positions to be split 50/50 between your two assets.)

> **LP Position:**   
> 1 ETH   $1,000 USDC  
> _Total value: $2,000_

Over time, we earn LP fees on this position for our service of providing liquidity to traders. So our $2,000 is slowly growing by just sitting in a liquidity pool… sounds great, right?

## Loss-Versus-Holding (Impermanent Loss)

In our example, we’re making free money off LP fees up until the moment ETH starts to move in price. This is where we risk incurring “impermanent loss” which can be thought of as the opportunity cost of our LP position compared to what we would have had if we just held the assets (without putting them in a liquidity pool). That’s right—LPing is not automatically better.

Let’s take a look at how this shakes out for our particular example:

In an extreme scenario, let’s say the price of ETH jumps from $1,000 per ETH to $4,000 per ETH. The liquidity pool will adjust so that our assets are still 50% ETH and 50% USDC.

To calculate the new position, we use the formula  [_x=√(p1ETH∗p2ETH_](https://medium.datadriveninvestor.com/impermanent-loss-in-defi-the-risks-involved-in-providing-liquidity-67c54fdf1cfc)_)_,  where _p1ETH_ represents the original price of ETH and _p2ETH_ represents the new price of ETH. Solving for  _x_  will give us the updated (dollar-denominated) value of each asset after the AMM re-calculates prices back to 50/50 in this new price environment.

The  _sqrt(1000*4000) = 2,000_, meaning that the dollar value of each asset in our liquidity pool will be $2,000 after the recalculation. This leaves us with $2,000 USDC, and 0.5 ETH in our liquidity pool, for a total of $4,000. We started out with $2,000 and we end up with $4,000 — doubling our money.

> **Original LP Position:**   
> 1 ETH   $1,000 USDC  
> _Total value: $2,000_  
>    
> **New LP Position:**  
> 0.5 ETH   $2,000 USDC  
> _Total value: $4,000_

That’s great! …until we look at what we could have made if we had just  _held_  our 1 ETH and $1,000 USDC without ever putting them in a liquidity pool in the first place.

If we had held, our 1 ETH would be worth $4,000, which in addition to our original $1,000 USDC would leave us with $5,000 net. That’s $1,000 more than what we end up with through the liquidity pool!

> **Original LP Position:**   
> 1 ETH   $1,000 USDC  
> _Total value: $2,000_     
> 
> **New LP Position:**  
> 0.5 ETH   $2,000 USDC  
> _Total value: $4,000_   
>   
> **Holding Position:**   
> 1 ETH   $1,000 USDC  
> _Total value: $5,000_

This difference is known as “divergence loss,” or, more colloquially, “impermanent loss.”

It’s “impermanent” because if the price of the assets were to return to their original value ($1,000 per ETH in our example) the loss would be reversed and the value of our LP position (excluding yield earned) would be equal to the value of a portfolio where we had just held. So impermanent loss can also be conceptualized as “loss-versus-holding.”

If we begin thinking about counterfactual scenarios where rather than LPing, we had taken some other course of action with our money, a world of possibilities opens up. The first, “loss-versus-holding,” we just covered. The second, “loss-versus-rebalancing,” is the topic at hand that we now turn to.

## Loss-Versus-Rebalancing (LVR)

In the case of impermanent loss, if an asset begins and ends a time period at the same price, there is no loss incurred by the LPs. However, it turns out that there is a portfolio scenario which would have made money even in the case of an asset beginning at and returning to the same price. This would be a “rebalancing” portfolio.

Rather than leaving your money in an AMM or simply holding, in a rebalancing portfolio you trade your way up the price curve when it’s going up and trade down when it’s going down, effectively “rebalancing” your portfolio in real time.

**“Loss-versus-rebalancing” is the difference in value between an LP portfolio and a rebalancing portfolio.**

Let’s look at another example.

### LVR in numbers

Say we start with an LP position of 1 ETH and $1,000 USDC.

Over time, the price of ETH jumps from $1,000 to $2,000. Using the  _x=√(__p1ETH∗p2ETH__)_  formula, we can calculate that our new LP holdings would consist of 0.71 ETH and $1,414 USDC, meaning we sold 0.29 ETH for $414 during the AMM recalculation. This gives us a total portfolio value of $2,828 and a loss-versus-holding value of $172.

After some more time, the price of ETH goes back down to $1,000 where it started. Here, the values of both our LP portfolio (minus fees) and our holding portfolio are equal at $2,000, with a loss-versus-holding of $0.

> **Original LP Position:**   
> 1 ETH   $1,000 USDC  
> _Total value: $2,000_  
>  
> **LP Position After Price Move**:  
> 0.71 ETH   $1,414 USDC  
> _Total value: $2,828_  
>   
> **LP Position After Price Reversion:**   
> 1 ETH   $1,000 USDC  
> _Total value: $2,000_
>      
> **Holding Position:** 
> 1 ETH    $1,000 USDC  
> _Total value: $2,000_

But what about the loss-versus-rebalancing?

![2-what-is-lvr.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_what_is_lvr_3902628499.webp)

[_Image Source: Delphi Digital_](https://members.delphidigital.io/learn/loss-versus-rebalancing-lvr)

When compared to a rebalancing portfolio executed on a liquid exchange such as Binance, our LP and holding portfolios underperform — even in the case where prices return to their original value.

The rebalancing portfolio starts at the same 1 ETH and 1,000 USDC. When the price of ETH goes to $2,000,  we copy the LP trade (selling 0.29 ETH), but we do so at the current market price of $2,000 through a liquid non-AMM exchange, earning $580 for the trade instead of the $414 we got on the AMM, for a net LVR of $166. Copying the same trade on the way down, we buy back our 0.29 ETH for $290, instead of the $414 we would have to pay through the AMM, netting another $124 in LVR.

> **Original Rebalancing Portfolio Position:**   
> 1 ETH   $1,000 USDC  
> _Total value: $2,000_  
>  
> **Rebalancing Portfolio Position After Price Move**:  
> 0.71 ETH   $1,580 USDC  
> _Total value: $3,160_  
>  
> **Rebalancing Portfolio Position After Price Reversion:**   
> 1 ETH   $1,290 USDC  
> _Total value: $2,290_

So the performance of our three portfolios (ignoring LP fees) looks like this:

![3-what-is-lvr.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_what_is_lvr_cb9ed4cb9e.webp)

### The LVR math

For any given price movement, LVR can be calculated using the formula “[_a(p-q)_](https://a16zcrypto.com/posts/article/lvr-quantifying-the-cost-of-providing-liquidity-to-automated-market-makers/)” where  _a_  is the quantity of the asset being sold,  _p_ is the “real” market price, and _q_ is the “stale” AMM price.  (_Note: “a” is a positive number when selling and a negative number when buying.)_

Unlike impermanent loss, LVR  **depends on price trajectory and volatility**. This intuitively makes sense… the more price moves there are, the more opportunities for arbitrage. The volatility of a given market can be derived using the famous “[Black-Scholes](https://www.investopedia.com/terms/b/blackscholes.asp)” options-pricing model, and is represented by  _σ_  — a lowercase sigma.

For CF-AMMs,  [instantaneous LVR can be calculated as](https://a16zcrypto.com/posts/article/lvr-quantifying-the-cost-of-providing-liquidity-to-automated-market-makers/) [_σ²/8_](https://a16zcrypto.com/posts/article/lvr-quantifying-the-cost-of-providing-liquidity-to-automated-market-makers/). There are also more complex LVR formulas which sum instantaneous LVR to find the overall LVR of any given AMM. Find these formulas, along with a technical explanation of how the numbers were derived, in  [this video](https://www.youtube.com/watch?v=XmHBiFApDXA&ab_channel=CMUCylabCryptoSeminarSponsoredbyAlgorand)  and  [this blog post](https://anthonyleezhang.substack.com/p/automated-market-making-and-loss)  by Anthony Lee Zhang, a co-author of the original LVR paper.

## LP Returns in Practice

So far, we have the concept of LVR but we’ve ignored one very important factor: LP fees. After all, LPs don’t deposit money into AMMs out of charity, they do it to earn yield.

Now that we have a reliable formula for calculating loss-versus-rebalancing, we can look at historical data to answer the question “How often do LP returns exceed LVR losses?”

Using the LVR formula, the authors of the original paper  [concluded](https://arxiv.org/abs/2208.06046)  that, in an environment of 5% asset volatility,  **a Uniswap pool would need to turnover 10% of its entire volume each day in order for LP fees of 30 basis points to offset LVR losses.**

However, we can get even more specific by retroactively looking at historical data. DeFi researcher Atis Elsts, wrote up a  [retrospective of 2023 LP returns](https://atise.medium.com/uniswap-v2-still-a-good-deal-for-liquidity-providers-a-retrospective-of-2023-11475e9d8610)  that shows real data on loss-versus-holding and loss-versus-rebalancing for ETH throughout the year.

### 2023 Loss-Versus-Holding

ETH began the year at around $1,200 and closed around $2,300. LPs outperformed a holding portfolio of 50/50 ETH/USDC by an aggregate 1–2% after fees.

![4-what-is-lvr.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_what_is_lvr_f07c7346db.webp)

![5-what-is-lvr.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/5_what_is_lvr_ca2c29b635.webp)

_Images: 2023 LP versus holding strategies &  2023 LP PnL over holding strategy_

### 2023 Loss-Versus-Rebalancing

Mapped alongside volatility, we can see that, as expected, loss-versus-rebalancing is highly correlated.

![6-what-is-lvr.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/6_what_is_lvr_b227cef436.webp)

Elsts mapped LVR (red line) versus expected fees on WETH/USDC Uniswap v2 positions and WETH/USDC v3 positions across three fee tiers. We can see that  v3 LP positions closely tracked LVR, while v2 positions largely outperformed it.

![7-what-is-lvr.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/7_what_is_lvr_f5972b65fd.webp)

According to Elsts, the reason for the large discrepancy between v3 and v2 positions is that v2 sees primarily “core” (non-arbitrage) trading volume while a majority of v3 trading volume is arbitrage.

![8-what-is-lvr.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/8_what_is_lvr_a4f9fb874d.webp)

![9-what-is-lvr.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/9_what_is_lvr_3d859d861e.webp)

_Images: Uniswap v2 volume makeup & Uniswap v3 volume makeup_

So here we finally get to the $500 million question: How can LPs protect themselves from LVR?

## Solutions to LVR

There are multiple proposed solutions to the LVR problem, each with its own set of tradeoffs.

**Oracle designs**: One of the most popular suggestions for solving the LVR problem involves using price oracles to feed AMMs the most up-to-date prices for assets. The oracle model is well-tested in DeFi, but an oracle-informed AMM would require significant design changes to current AMM models and introduce new problems around ensuring that the oracle always provides the most current price data.

**Decreasing block times**: Some proposals argue that  [increasing trade frequency](https://atise.medium.com/liquidity-provider-strategies-for-uniswap-v3-loss-versus-rebalancing-lvr-ee0ffdf1f937#:~:text=mitigating%20lvr)  by decreasing block times will result in even more granular arbitrage opportunities. This would theoretically increase the number of trades that arbitrageurs have to make, with the larger LP returns hopefully outpacing LVR.

**Batch auction designs**: While decreasing block times might mitigate the price lag AMMs experience, going in the opposite direction sounds even more promising. First proposed 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/abs/2307.02074v4#5.2),” a new category of “Function-Maximizing” AMMs forces traders to trade against AMMs in batches, creating a competition between arbitrageurs which eliminates LVR.

## CoW AMM

The  [CoW AMM](https://cow.fi/cow-amm)  is the first production-ready implementation of an FM-AMM and it’s designed to capture LVR on behalf of LPs, now live on [Balancer](https://balancer.fi/pools/cow).

[Backtesting research](https://arxiv.org/pdf/2307.02074v3.pdf)  conducted for a 6 month period during 2023 shows that CoW AMM returns would have equaled or outperformed CF-AMM returns for 10 of the 11 most liquid, non-stablecoin pairs.

![10-what-is-lvr.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/10_what_is_lvr_f4853d5593.webp)

The CoW AMM works by having  [solvers](https://docs.cow.fi/cow-protocol/concepts/introduction/solvers)  compete with each other for the right to trade against the AMM.

Whenever there is an arbitrage opportunity solvers bid to rebalance the CoW AMM pools. The winning solver is the one that moves the AMM curve higher.

![11-what-is-lvr.gif](https://celebrated-gift-f83e5c9419.media.strapiapp.com/11_what_is_lvr_2618a64372.gif)

[Learn more about the CoW AMM here](https://cow.fi/cow-amm), and  [contact us](https://cowprotocol.typeform.com/cow-amm-lpers?utm_content=widget-page-footerCTA-read-docs&utm_medium=web&utm_source=LVRarticle)  if you are interested in setting up a liquidity pool.

large_LVR.webp

medium_LVR.webp

small_LVR.webp

thumbnail_LVR.webp

LVR.webp

Liquidity providers lose more than $500 million to LVR every year, but what exactly is it?


What is Loss-Versus-Rebalancing (LVR)?

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)!

![2-twap.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_twap_2220db98f0.webp)

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.


CoW Swap Launches TWAP Orders

EIP-1271 (also known as ERC-1271) is an Ethereum improvement that enables smart contracts to validate signatures, allowing them to sign transactions just like traditional EOA wallets.

While at first EIP-1271 may seem like a niche technical bit of implementation, the standard unlocks a whole world of functionality for smart contracts that includes intent-based trading, advanced order types, and every other type of blockchain interaction that requires a wallet signature.

## What is EIP-1271

EIP-1271 serves as a “[standard signature validation method for contracts](https://eips.ethereum.org/EIPS/eip-1271),” which gives smart contracts the ability to verify whether a signature on behalf of a given contract is valid — a feature that Externally Owned Accounts (EOA) already have built-in.

Before EIP-1271, smart contracts could send transactions, but they could not sign messages like traditional wallets. EOA have private keys which they use for signatures, validating that the message came from that particular wallet. Smart contracts, on the other hand, do not have private keys, so EIP-1271 was introduced as a standard way for smart contracts to validate a signature, enabling them to also sign messages.

### EIP-1271 vs ERC-1271

“EIP-1271” and “ERC-1271” are sometimes used interchangeably as terms that refer to the same concept. Ethereum accepts ideas for changes to the Ethereum network through a proposal process, hence the name “Ethereum Improvement Proposal” (EIP). “ERC,” on the other hand, stands for “Ethereum Request for Comment” and gets assigned to additions to the Ethereum network which do not change the underlying protocol itself.

This means that “EIP-1271” is more accurately called “ERC-1271,” as the addition does not change protocol functionality. As mentioned earlier, however, the terms are often used interchangeably.

## Why is EIP-1271 so useful?

Over the last few years, Ethereum has seen a boom in specialized smart contracts leveraging ERC-1271 to sign messages. Signed messages are necessary for a variety of things including placing orders on decentralized exchanges using off-chain order books, verifying that a given wallet belongs to a user, and much more.

ERC-1271-enabled smart contracts, however, unlock a whole new set of use-cases. This is because the ERC-1271 “isValidSignature” method can take in any arbitrary order logic, turning smart contract wallets into autonomous agents that can automatically sign messages based on on-chain conditions.

Let’s take a look at the various use-cases that ERC-1271 makes possible for smart contracts.

### Off-Chain Order Books

One of the most common uses of ERC-1271 involves orders on decentralized exchanges (DEX’s). Some exchanges, like CoW Protocol and Matcha, use an off-chain order book to collect signed messages before they become orders, allowing for additional optimizations. In order for smart contracts to be able to trade using these systems, they need ERC-1271 to validate signatures.

Limit orders in particular are a common type of DEX order that relies on an off-chain order book, so smart contracts require ERC-1271 in order to place limit orders.

### Sign-to-Verify

Authentication is a necessity in web3.

Many web3 applications require users to sign a message proving that they control a connected wallet in order to use the application. NFT marketplaces such as OpenSea and Rarible, meanwhile, require users to sign a message to place bids, update profile images, and perform other gas-less transactions.

In both of these cases, smart contract wallets leverage ERC-1271 to sign verification messages.

### Intents for Smart Contracts

Recently, many DeFi solutions have begun relying on  [intents](https://docs.cow.fi/cow-protocol/concepts/introduction/intents)  as a mechanism for providing users with better prices, MEV protection, advanced order types, and a whole host of other benefits.

CoW Protocol is a meta DEX aggregator that pioneered many use-cases of intents, all of which rely on signed messages. Regular EOA orders are signed ahead of time, but thanks to ERC-1271, smart contract orders can hold off on the order signature until settlement time and check that conditions such as oracle prices, current balances, block times, and more are met before the trade goes through. This unlocks a number of unique trading strategies only available through smart contract wallets.

**Milkman for Safe Trading**

In collaboration with the  [CoW Grants program](https://grants.cow.fi/), the  [Yearn.fi](https://yearn.fi/)  team launched  [Milkman](/learn/what-is-milkman-cow-swaps-solution-for-delayed-execution-trading)  to streamline DAO trades and protect them from MEV. The DAO governance process means that significant time passes between the time a trade is proposed and when the trade is actually executed. During this time, the market can move, invalidating the trade, or worse — an MEV searcher can lie in wait for the exact trade time and manipulate prices to exploit the trade.

Milkman provides a solution by allowing the DAO to specify a price feed which the smart contract checks at the moment of execution, making a trade based on the up-to-the-second price of the asset.

This means that DAOs no longer have to commit to an execution price ahead of time, but can leverage smart contracts and EIP-1271 to make a conditional order whose price is decided at the moment of execution.

**Advanced Order Types**

Smart contract signatures on CoW Protocol allow for a number of advanced order types. One notable example is CoW Protocol’s  [TWAP orders](/learn/cow-swap-launches-twap-orders), which use ERC-1271 smart contract signatures to autonomously place orders in even time intervals.

**The Programmatic Order Framework**

The  [Programmatic Order Framework](/learn/introducing-the-programmatic-order-framework-from-cow-protocol)  from CoW Protocol takes full advantage of ERC-1271 by allowing anyone to code custom order logic for any type of order.

Programmatic orders execute indefinitely into the future based on on-chain conditions. These conditions can include any arbitrary logic including checking on-chain prices, smart contract wallet balances, block times, volumes, and more.

There are already a number of deployed use-cases for ERC-1271-enabled programmatic orders including:

-   Automated DAO operations including payroll, treasury diversification, and fee collection
-   Portfolio rebalancing based on the state of assets in a smart contract wallet
-   Special order types including stop-loss, good-after-time, and take-profit

### Any Application Requiring a Signature

We’ve covered a number of the use-cases that require signed messages, but ERC-1271 enables a potentially limitless number of uses… Any time a smart contract wants to use an application that requires a wallet signature, they need ERC-1271.

Here are a few final examples requiring signatures:

-   **Gasless Trading**: Some decentralized exchanges leveraging intents have begun offering “gasless trading,” a feature which allows users to make trades without paying for gas in ETH. On CoW Protocol, for example, all trades take gas fees in the sell token, leveraging signed messages to specify the order details.
-   **Native Token Flow**: On CoW Protocol, users can trade ETH natively, without having to use the ERC-20 “WETH” wrapped version. This is once again enabled by signed messages which specify the order details while bonded third parties ([solvers](https://docs.cow.fi/cow-protocol/concepts/introduction/solvers)) handle the execution.
-   **Web3 Login**: Services such as  [Dynamic.xyz](https://www.dynamic.xyz/)  build account abstraction functionality which allows users to use decentralized apps with just a traditional web2 email address. When using smart contract wallets, these services heavily rely on ERC-1271 to provide full signing functionality.

## How EIP-1271 works

With the introduction of ERC-1271, smart contracts can now define an “isValidSignature” method which determines the conditions necessary for the smart contract to verify a signature and execute a transaction.

This implementation gives smart contracts a leg up over EOAs when it comes to signing transactions. This is because the “isValidSignature” method can include any arbitrary logic, allowing each smart contract to define its own parameters for generating a valid signature.

Some example criteria for returning a valid “isValidSignature” include:

-   Signatures from a set of hard-coded EOA addresses (used in Safe’s multi-signature model)
-   On-chain conditions like time passing between orders or reaching a given oracle price

If the owners of the smart contract would like to delegate the order placement to someone else, they can code the necessary conditions for validating a signature in the “isValidSignature.” Whenever anyone calls the smart contract, it will check these conditions and only execute when they are met.

![1-eip-1271-explained.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_eip_1271_explained_120c3a7916.webp)

ERC-1271’s “isValidSignature” method

The method takes a “bytes32 hash” representing an order hash and an arbitrary byte array which is where the conditions for the signature go. This array can be any number of things — an EOA signature from an owner or delegate of the smart contract, the smart contract checking an oracle or an on-chain state to determine if the order should execute, or any other arbitrary logic.

Finally, the “isValidSignature” method returns a response that determines whether the order should execute.

In essence, the entire signature verification process looks like this:

![2-eip-1271-explained.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_eip_1271_explained_1ec1facfc7.webp)

An order that needs to be signed is created

![3-eip-1271-explained.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_eip_1271_explained_f916ef6bed.webp)

The order generates an order hash

![4-eip-1271-explained.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_eip_1271_explained_b692a01062.webp)

The smart contract’s “isValidSignature” method is called with the hash and signature passed in as parameters

## EIP-1271: Enabling the future of smart contract trading

As Ethereum adoption grows, the needs of traders become more complex, eclipsing the built-in functionality of traditional EOAs. ERC-1271 opens the door to a new set of primitives for trading using smart contracts which can create autonomous, conditional orders that provide much greater trading power for users.

CoW Protocol is at the forefront of innovations relying on ERC-1271, and you can already take advantage of new order types today by swapping on  [CoW Swap](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=EIP-1271-article)  or by developing custom solutions through the  [Programmatic Order Framework](https://hackmd.io/pmZX_qT2Q1yw59KiiT6TPQ)  (also known as ComposableCoW).

As always, happy trading!

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EIP-1271 is an important upgrade to the Ethereum network that’s stirred up quite a buzz, but what exactly is it?


EIP-1271 Explained

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  **July**, CoW Protocol handled a total volume of  **$865M**, and generated a surplus of  **$4.8M**
-   In exciting news, CoW Protocol  [launched CoW Hooks](https://thedefiant.io/cowswap-enables-complex-swaps-with-hooks), completed a big  [overhaul of surplus notifications](https://blog.cow.fi/announcing-cow-swap-surplus-notifications-f679c77702ea), processed a  [$27.3 million swap for Nexus Mutual](https://www.theblock.co/post/240750/nexus-mutual-diversifies-27-3-million-into-rocket-eth-using-cow-swap?utm_source=twitter&utm_medium=social), and much more

## Protocol Stats

This month, CoW Protocol settled a total of  **$865M.**
![1-july-2023-highlight.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_july_2023_highlight_47dd26561a.webp)

This month, the top 3 batches worth highlighting are the following:

-   **Batch with the highest % of CoW trades (**[**Transaction details**](https://explorer.cow.fi/tx/0xf5fcc8147ebc22122407d514770e2473c2536ff5768780e560076cfe8b020feb?tab=orders&vis=trades)**).** The total batch volume was  **$514,649.23**, and it was created by two traders who were CoWed for  **10% ($49,916)** of the batch volume. One trader was selling  **GHO** with **USDC**, and the other trader was selling  **USDC**  with  **GHO**.
![2-july-2023-highlight.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_july_2023_highlight_11e4b6d7ec.webp)

-   **Batch containing the highest volume (**[**Transaction details**](https://explorer.cow.fi/tx/0x1371ea08e02d465f3225a98f6c73b90473b49493adb6791e5443112173adc974?tab=graph)**)**: The total batch volume was  **$26,737,269.23** and it was created by a single trader who was swapping  **ETH**  **to**  **rETH**.
![3-july-2023-highlight.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_july_2023_highlight_51e10b7ef8.webp)

-   **Batch with the highest amount of surplus (**[**Transaction details**](https://explorer.cow.fi/tx/0xc54930ec6a9b45490e069bbf1a6159f056ea35b64f0c8fbfa4766ef869f5cf37?tab=graph)**):**  The total batch volume was  **2,300 ETH** and it was created by a single trader who was swapping  **ETH**  **to**  **stETH**. This trader achieved the largest surplus for the month of  **July**  by getting  **46 stETH**  extra, which at the time of trade was roughly  **$87,139.36K**  (**2.04%**  surplus).
![4-july-2023-highlight.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_july_2023_highlight_7887ec7eb7.webp)

During the month of  **July**, the top 10 traders traded a total of  **$27M.**
![5-july-2023-highlight.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/5_july_2023_highlight_40c0cc45e5.webp)

In the table below you can see the trade volume that CoW Swap traders have executed as well as the total volume for all trades. Our most active trader executed a whopping  **$7.5M** in trades with CoW Protocol this month.
![6-july-2023-highlight.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/6_july_2023_highlight_d1c9054351.webp)

## Solvers

In  **July**, solvers generated a total of  **$4.8M**, which is money in the pockets of traders.
![7-july-2023-highlight.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/7_july_2023_highlight_5efbb058a2.webp)

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

![8-july-2023-highlight.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/8_july_2023_highlight_544663fea9.webp)

## Governance

It has been a quiet month in terms of executed proposals, the CoWs were relaxing!
![9-july-2023-highlight.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/9_july_2023_highlight_a85b28a529.webp)

### Draft Proposals

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

-   [Adjust Solver Rewards to Allow for a Higher Cap](https://forum.cow.fi/t/adjust-solver-rewards-to-allow-for-higher-cap/1842/1)
-   [CIP-28: Should CoW DAO send its profits to the CoW Treasury Core unit to generate extra revenues?](https://forum.cow.fi/t/cip-28-should-cow-dao-send-its-profits-to-the-cow-treasury-core-unit-to-generate-extra-revenues/1805)

### Technical Discussions

As an “agora” for technical topics on batch auctions or CoW Protocol-related topics, the forum surfaced some very interesting posts:

1.  [Merge Settlement Contract and Uni v4](https://forum.cow.fi/t/merge-settlement-contract-and-uni-v4/1769)
2.  [Automated Treasury Management Methodology](https://forum.cow.fi/t/automated-treasury-management-methodology/1799)
3.  [Fast Liquidity in CoW](https://forum.cow.fi/t/fast-liquidity-in-cow/1841)

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

-   Launched  [CoW Hooks](https://thedefiant.io/cowswap-enables-complex-swaps-with-hooks), allowing users to execute multiple DeFi actions like swapping, bridging, staking, depositing, borrowing, & more through a single intent
-   Released a CoW Swap widget that allows any dApp to inject the CoW Swap UI directly into their website
-   Upgraded surplus notifications on  [the swap page](https://swap.cow.fi/)  to show users how much surplus they have received after every trade, as well as their overall surplus through the wallet overview page
-   Nexus Mutual used CoW Swap to  [diversify $27.3 million into Rocket Pool ETH](https://www.theblock.co/post/240750/nexus-mutual-diversifies-27-3-million-into-rocket-eth-using-cow-swap?utm_source=twitter&utm_medium=social)
-   Aave DAO swapped aBAL & aWETH into an 80/20 Balancer pool  [in a trade worth close to $2 million](https://twitter.com/CoWSwap/status/1678498134195044361?s=20)
-   Andre Canidio from the the CoW Research Team  [published a paper](https://twitter.com/CoWSwap/status/1679883540740325376?s=20)  exploring a novel method for making batch AMMs more efficient
-   The CoW Swap team  [headed to Paris](https://twitter.com/CoWSwap/status/1680848132173713408?s=20)  to take on ETH CC where CoW Swap  [hosted an MEV day](https://twitter.com/CoWSwap/status/1671216421660147712?s=20)  and  [participated in a “Desiging a DEX” panel](https://www.youtube.com/watch?v=6K-QX6HtoiM)
-   MEV Blocker  [surpassed 4 million transactions](https://twitter.com/CoWSwap/status/1684602457056563200?s=20), protecting over $11 billion of trading volume
-   A grant proposal for “Improvement and Enhancement of the CoW Swap Explorer” was  [approved through Snapshot](https://snapshot.org/#/cowgrants.eth/proposal/0xa9bedf14d3b6fc01c5944390c9ef2a153e0cecc56f4354e198a2ba873900fb18)
-   A grant application for v2 of the Milkman contract  [was posted to the forum](https://forum.cow.fi/t/grant-application-milkman-2-0/1840?u=middleway.eth)
-   Published several articles on our blog:  [CoW Hooks: You are in control](https://blog.cow.fi/cow-hooks-you-are-in-control-480ccb40044a),  [Announcing CoW Swap Surplus Notifications](https://blog.cow.fi/announcing-cow-swap-surplus-notifications-f679c77702ea)  and  [What is Frontrunning?](https://blog.cow.fi/what-is-frontrunning-b2641ad7af21)

## Product Updates

**Backend**

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

-   Deployed arak to start indexing liquidity-related events
-   Identified and proposed fixes for CIP-20 support in co-located driver
-   Recorded order events into a database for accurate measurements for our SLAs
-   Stored solver addresses with the winning quotes for CIP-27
-   Ran more price estimators
-   Made minor driver bug fixes and consistency changes

**Frontend**

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

-   Deployed a hotfix with WalletConnect v2 support
-   Worked on displaying all parts and filled % for the TWAP UI
-   Added default UTMs for links (to credit volume to people that found CoW Swap using cow.fi)
-   Made bug fixes and put final touches on TWAP
-   Made AppData changes to the frontend stack (app-data, SDK, Explorer, CoW Swap)
-   Implemented a Google analytics update for the Grants website

## Open Job Positions

The CoW Protocol team is currently looking to hire:

### Engineering

[Backend Engineer with RustRemote or Lisbon](https://boards.eu.greenhouse.io/cowswap/jobs/4208538101)

For more information on our latest job openings, visit:  [https://cow.fi/careers](https://cow.fi/careers)


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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 July 2023 Highlights

> _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!)_

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-guide).

**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).

For the below guide, we already have a Safe created. To get started, navigate to  [CoW Swap](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=TWAP-guide)  and connect your Safe wallet via Wallet Connect, or directly using the CoW Swap Safe native app.

Once your wallet is connected, there are two ways to access TWAP orders:

-   Next to “Limit” in the center module, there is a tab that says “Advanced Orders” → clicking this opens the TWAP orders interface
-   On the top-left corner of the page, next to the CoW Swap logo, it says “Trade” → clicking this opens a drop-down menu that lets you choose between “Swap,” “Limit orders,” and “Advanced orders”

Once you have selected the “Advanced” tab, you will see the following screen:
![1-twap-how-to.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_twap_how_to_6290090db4.webp)

After you click “Unlock TWAP orders (BETA)”, you will be taken to the TWAP orders interface.


![2-twap-how-to.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_twap_how_to_0171b4ab6d.webp)

On the left side of this screen, you can see the order box where you input your TWAP order parameters. On the right, there is a panel that shows your open orders and order history.

In order to place a TWAP trade, you need to input your tokens and amounts, indicate how many parts you would like to split your order into, and select the time duration of your order.


![3-twap-how-to.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_twap_how_to_c1d0d380d2.webp)

To get started, select the tokens you would like to swap from the token list.


![4-twap-how-to.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_twap_how_to_961f05a961.webp)

Once you’ve chosen your tokens, you need to select the numbers of parts your TWAP order will be split into, as well as the duration of the TWAP order as a whole.


![5-twap-how-to.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/5_twap_how_to_577542d502.webp)

As an added bonus, trading via a smart contract wallet like Safe automatically bundles your approval transaction and your trade together to save you time and gas.


![6-twap-how-to.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/6_twap_how_to_bcfd7564ec.webp)

Below the Safe bundling banner, you will see a yellow notice. This notice is not related to your TWAP order itself, but to your wallet. TWAP orders are based on the “Composable CoW” conditional order framework which uses Safe fallback handlers to enhance the functionality of your smart contract wallet.


![7-twap-how-to.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/7_twap_how_to_5563d17bc7.webp)

In order to use TWAP orders, you will need to upgrade your Safe fallback handler. This is a secure process; the code was co-developed by CoW Swap and the Safe team and it has undergone two external audits (you can find the final results of the audits  [here](https://github.com/cowprotocol/composable-cow/tree/ab3addad9bc05acdbf5fb040eb5c336209b58e31/audits)).

_Note: if you are interested in learning more about the fallback handler upgrade process, please refer to this_ [_article_](/learn/all-you-need-to-know-about-cow-swap-new-safe-fallback-handler)_. If the fallback handler is new to you, please refer to this Safe_ [_article_](https://help.safe.global/en/articles/40838-what-is-a-fallback-handler-and-how-does-it-relate-to-safe) _for a full introduction to the concept._

Once you understand how the fallback handler interacts with your Safe wallet, you can check the “Modify Safe’s fallback handler when placing order” box in order to upgrade your wallet. This upgrade will take place alongside your trade and bundle any token approvals as a single transaction.


![8-twap-how-to.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/8_twap_how_to_6aab5754fc.webp)

After you click “Approve”, you will be prompted to review your order one last time. Review all of your order details including the price protection, limit price, the minimum tokens you’re set to receive, and all your TWAP properties and ensure everything looks good.


![9-twap-how-to.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/9_twap_how_to_39ea16bee1.webp)

To actually place your TWAP order, click “Place TWAP order” and review & sign your transaction from your Safe interface.


![10-twap-how-to.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/10_twap_how_to_6a196bdf6b.webp)



![11-twap-how-to.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/11_twap_how_to_e39305a40f.webp)

After you sign your order, you will see an “Order submitted” pop-up and your order will appear in the order panel on the side.


![12-twap-how-to.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/12_twap_how_to_71bea598ed.webp)

In the order panel, you will notice that the order status is not “open,” but rather indicates that your order is still in the “signing” stage. The wallet used in this example requires 2 out of 3 signers to execute a transaction. By creating the transaction, we have performed one of the signatures, and to reach the threshold we need one more signer. To sign, the second signer would need to connect to the Safe wallet and navigate to the “Transactions” queue.


![14-twap-how-to.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/14_twap_how_to_a703daa281.webp)

In the queue, we can see our pending transaction and confirm it with the last signature required.


![15-twap-how-to.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/15_twap_how_to_f995c65744.webp)



![16-twap-how-to.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/16_twap_how_to_43c9f04edd.webp)



![17-twap-how-to.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/17_twap_how_to_21dd244dc5.webp)

After the last confirmation for the order is done, the order is placed and it will appear in the “Your Orders” UI.

The interface includes several ways to view your orders. You can get a high-level overview at a glance, expand to see the different parts of your TWAP order (in this example the first part executed immediately, which is why only 3 parts are shown), or click into the order to view a full list of details.


![18-twap-how-to.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/18_twap_how_to_58564c545d.webp)



![19-twap-how-to.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/19_twap_how_to_c6eab87d53.webp)



![20-twap-how-to.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/20_twap_how_to_41156cc84e.webp)

Now that your TWAP order is placed, you can sit back, relax, and watch it get filled with CoW Swap’s signature MEV protection and best prices.


![21-twap-how-to.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/21_twap_how_to_935598c651.webp)

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


![22-twap-how-to.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/22_twap_how_to_07e8708fcb.webp)



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How to use CoW Swap’s TWAP orders via Safe Wallet, step by step guide


How to use CoW Swap’s TWAP orders via Safe Wallet

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

CoW DAO is an open organization of developers, traders, market makers, and various community members aligned with the vision of providing traders with the best prices and comprehensive MEV protection. CoW DAO is focused on building and maintaining CoW Protocol, a fair and decentralized trading system, and MEV Blocker, an RPC endpoint. CoW Protocol’s technology powers a network of traders and solvers, enabling trustless and efficient peer-to-peer trading through a unique “batch auction” system. This positions CoW Protocol as native trading infrastructure for discrete-time settlement layers like Ethereum. MEV Blocker is designed to protect transactions from MEV attacks such as front-running and sandwiching. In addition to protecting trades from harmful MEV, MEV Blocker leverages an Order Flow Auction between various searchers and builders to offer rebates to users for certain trades.

[oSnap](https://uma.xyz/osnap)  is a DAO governance tool built and secured by  [UMA](https://uma.xyz/). It allows communities to vote off-chain and automatically execute the successful proposals on-chain. oSnap automatically integrates with the DAO’s  [Snapshot](https://snapshot.org/#/)  space and the Safe wallet holding the DAO’s treasury funds. Transactions approved by the community are validated on-chain and executed without the need for centralized multisig approval.

CoW DAO is looking forward to integrating oSnap, as it will give the DAO several advantages including:

-   A decentralized process to execute successful proposals that no longer requires the involvement of multisig signers → Instead of having the multisig owners push successful proposals on-chain themselves, the oSnap bot will automatically execute them
-   Extra on-chain guarantees through a challenge period → Through oSnap, voters will be able to challenge proposals during a “challenge period” that takes place after the successful passing of a proposal
-   One step closer to a more decentralized and resilient CoW DAO → Integrating oSnap allows CoW DAO to run 100% through on-chain governance without relying on any off-chain infrastructure or trusted parties

## How it works

On a technical level, Snapshot allows users to integrate transaction data into their proposals using its transaction builder tool. Community members can include specific transactions in their proposals for the DAO to execute. Once a proposal is published, Snapshot uses the decentralized hosting service IPFS to store and share this transaction data, assigning it a unique identifier in the process.

Once a proposal is approved, the oSnap system takes charge of submitting the transaction data to UMA’s optimistic oracle. The oracle then verifies that the transaction matches the data stored at the IPFS identifier. If the oracle confirms the match, the transaction is executed using funds from the DAO Safe. However, in the event of an invalid or malicious transaction, the system automatically removes the data before it reaches the blockchain.

This integration is a step forward for CoW DAO’s decentralization. If you are interested in participating in the CoW DAO governance process, you have several options:

-   [Forum](https://forum.cow.fi/)  → CoW DAO’s forum is the main venue for governance-related discussion. Signing up for the forum allows community members to post and participate in discussions.
-   [Snapshot](https://snapshot.org/#/cow.eth)  → CoW DAO’s Snapshot space is a simple voting interface that allows users to vote on proposals. Votes on Snapshot are weighted by the number of vCOW+COW held or delegated to the address used to vote.
-   [Discord](https://discord.gg/cowprotocol)  → The CoW DAO Discord server is currently the main discussion hub for the CoW community and an informal place for governance discussions. The “governance-discussion” channel is where governance matters and proposals are discussed.

## Learn more

[CoW DAO](https://cow.fi/)  is a decentralized organization maintaining CoW Protocol and  [MEV Blocker](https://mevblocker.io/)  for the effective protection of Ethereum traders across DeFi. CoW Protocol leverages batch auctions to find the best prices for user trades, while MEV Blocker maintains a decentralized network of searchers & builders who protect users from MEV and provide them with rebates from profitable backrunning opportunities.

[oSnap](https://uma.xyz/osnap)  is a governance tool secured by UMA and audited by Open Zeppelin. It is free to use and can be integrated in less than 60 seconds.

[UMA](https://uma.xyz/)  is an optimistic oracle that can validate any independently verifiable data on the blockchain. UMA ensures protocol security by incentivizing validators to identify and delete false information passing through the oracle. Since launching in 2020, UMA has secured more than 10,000 critical data assertions. It has never been corrupted.

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CoW DAO has integrated oSnap as a means of directly executing the results of future Snapshot votes on-chain. This integration eliminates the need for multi-signature wallets, creating a more decentralized and efficient execution process.

CoW DAO integrates oSnap for decentralized governance

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?


Maximal extractable value, or MEV, is a pernicious form of price exploitation that is responsible for over $1.3 billion in losses for everyday traders. Most MEV takes place on the Ethereum ecosystem and adversely affects transactions across decentralized exchanges, liquidity pools, NFT marketplaces, and more.

MEV is captured by MEV bots programmed  to seek out and exploit price differences. Since blockchain markets are built to be always-on, there are always arbitrage opportunities on networks like Ethereum. MEV bots exploit beginners and seasoned traders alike, so it’s important to understand how they work and how to avoid them.

## What is MEV?

Before diving into the specifics of how to avoid MEV bots, let’s first make sure we understand MEV conceptually.

Maximal Extractable Value is, as the name suggests, a measure of the maximum amount of value that can be extracted from the contents of a given Ethereum block. Ethereum transactions are not all equally valuable, and validators (the parties responsible for creating the blocks) can pick and choose how to order transactions in blocks to maximize their profits.

This means that transactions are not necessarily executed in the order they are received; instead, they are arranged in a way that maximizes the compensation for validators.

![1-how-to-avoid-mev-bots.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_how_to_avoid_mev_bots_ffb5692931.webp)

_How MEV occurs in an Ethereum block_

Upon order submission, Ethereum transactions get sent to a “mempool” where they wait to be added to a block. In this mempool, MEV bots (also known as “searchers”) can view pending transactions and bribe validators to reorder them, exploiting the little guy and profiting in the process.

## What is an MEV Bot?

An MEV bot is a program designed to monitor decentralized exchanges, NFT marketplaces, lending platforms, and other on-chain venues to spot profit opportunities. There are several distinct types of MEV bots, each targeting different kinds of transactions.

**Trading MEV bots**: The most common type of MEV bots exploit decentralized exchanges that users rely on to swap cryptocurrencies. They specifically take advantage of the mechanisms used by  [automated market makers (AMMs)](/learn/cow-protocol-glossary#:~:text=amm).

When users trade on decentralized exchanges, they set a slippage tolerance to manage the price difference between the time an order is submitted and when it actually executes. Normally, slippage tolerances range from around 0.1% for stable assets like stablecoins, to 1–2% for blue-chip cryptos like Ethereum, and sometimes upwards of 10% for highly volatile cryptocurrencies like memecoins.

![2-how-to-avoid-mev-bots.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_how_to_avoid_mev_bots_311ef2c62c.webp)

_How a sandwich attack occurs_

DEX MEV bots exploit the slippage tolerance set by users to manipulate trades through a technique called a “sandwich attack.” In a sandwich attack, MEV bots identify a target trade and execute a frontrunning trade just before it, driving up the asset’s price to the slippage tolerance limit. Once the victim’s transaction goes through and raises the price further, the bots dump the token, keeping the profits for themselves.

**LP MEV bots**: Liquidity providers (LPs) on decentralized exchanges can also fall prey to MEV bots. MEV for LPs is known as “[loss versus rebalancing” or LVR](/learn/what-is-loss-versus-rebalancing-lvr). This value extraction arises from the arbitrage between a given LP pool and a reference rebalancing pool that has more up-to-date pricing.

LVR is a problem on decentralized exchanges because price discovery for assets typically occurs off-chain. Centralized exchanges like Binance generally have more liquidity for tokens so they serve as the most accurate source of truth for up-to-the-minute prices.

MEV bots exploit this arbitrage opportunity by continuously trading against DEX pools, capturing upside for themselves at the expense of the LPs.

**NFT MEV bots**: MEV bots can also hijack NFT mints through a process called “frontrunning.” If an MEV bot detects a transaction in the mempool from a user attempting to purchase a valuable NFT, it can submit an order to buy the NFT for itself that executes before the user’s transaction. This is similar to frontrunning swaps on DEXs but applied to NFT mints instead.

## How to Avoid MEV Bots

While MEV is a pervasive problem across all of Ethereum, there are multiple ways to keep yourself safe.

### Use tight slippage when trading

The simplest way to defend against MEV is by setting a low slippage tolerance.

Since MEV exploits slippage for price manipulation, transactions with a lower slippage tolerance provide searchers with less opportunity to exploit trades.

For users not using any other MEV protection tools, setting a lower slippage tolerance can serve as an initial line of defense. However, it’s not a complete solution. Setting the slippage tolerance too low can often result in failed transactions. Even with optimal slippage, MEV bots may still manage to extract value from your trades.

### Trade on pools with large liquidity

Fundamentally, MEV relies on arbitrage opportunities. One way to reduce exposure to such arbitrage is to restrict your trading only to pools with large liquidity. On these pools, individual trades won’t have much  [price impact](/learn/cow-protocol-glossary#:~:text=Price%20impact), so it will be more difficult for MEV bots to extract value.

This strategy limits much of DeFi, of course, as there are constantly new coins launched, and even popular coins may suffer from low liquidity on certain exchanges or during certain times.

### Install an MEV protection RPC

An increasingly popular type of MEV protection that provides a comprehensive solution to the problem is the use of an MEV blocking RPC like  [MEV Blocker](https://mevblocker.io/).

An RPC (Remote procedure call) is a piece of software that sits between a user wallet and the blockchain, transmitting transactions. Normally, RPCs are a boring piece of blockchain infrastructure. Recently, however, specialized RPCs have begun incorporating extra security guarantees for transactions before they reach the blockchain.

The most popular specialized RPC endpoint is  [MEV Blocker](https://mevblocker.io/). As its name suggests, MEV Blocker provides protection against MEV across the entire Ethereum network. This RPC manages a permissionless network of searchers and conceals transactions from the public mempool. These searchers cannot frontrun or sandwich user transactions; instead, they capture value through backrunning. Whenever a searcher backruns a user’s transaction, they keep up to 10% of the value and return the remaining 90% to the user as a rebate. This means that even when a transaction leaves money on the table, MEV Blocker ensures users get most of that value back.

MEV Blocker protects all types of Ethereum transactions, not just swaps, and is compatible with all Ethereum wallets. You can install the MEV Blocker RPC endpoint by following the instructions  [here](https://mevblocker.io/).

### Use intent-based trading solutions

While RPC endpoints provide protection against MEV across many different types of trades, the most comprehensive solutions take place at the application level.

In recent years, there has been a surge in the popularity of intent-based trading solutions like CoW Swap, with leading exchanges like 1inch and Uniswap launching their own intent-based solutions in 1inch Fusion and Uniswap X. Unlike traditional decentralized exchanges, intent-based trading solutions rely on professional execution parties known as “solvers’’ to execute trades on behalf of users.

Delegating execution to professional third parties helps users get the best prices for their trades, as solvers can determine the optimal liquidity sources to tap into. It also means that the risk of MEV gets taken on by the solver themselves, and users are protected from direct price exploitation.

![3-how-to-avoid-mev-bots.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_how_to_avoid_mev_bots_523b1b6663.webp)

_The flow of a transaction on CoW Swap_

### (For LPs) Use an MEV-capturing AMM

Until recently, there wasn’t a great solution to MEV in the form of loss-versus-rebalancing (LVR). LPs basically had to accept that providing liquidity for tokens comes with a tax paid to the MEV bots that constantly rebalance the pools (at the expense of the liquidity providers themselves).

This all changed, however, with the launch of  [CoW AMM](https://cow.fi/cow-amm) — a first-of-its-kind MEV-capturing AMM that redirects profits from pool rebalancing to liquidity providers. CoW AMM works sort of like MEV Blocker in that it makes the MEV bots work FOR users rather than against them. To trade against the liquidity in CoW AMM pools, solvers must bid to provide the most surplus to the pool, thereby giving the majority of LVR profits to the LPs.

## Why MEV bots are bad for Ethereum

As a permissionless, public platform, Ethereum serves as a battleground of opinions on whether MEV is good, bad, or should even be allowed in the first place.

Those sympathetic to the practice argue that MEV is a natural market mechanism that enhances market efficiency and encourages price discovery. While litigating the specifics of the issue is beyond the scope of this article, there are important arguments to be made for why MEV bots are harmful to individual users.

![4-how-to-avoid-mev-bots.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_how_to_avoid_mev_bots_c7aafd4451.webp)

_A snapshot of total MEV value extraction_

### Reduce fairness

At its core, value extraction prioritizes sophisticated traders who have the means and know-how to exploit transactions and profit off minute arbitrage opportunities.

Users who may simply be making trades on exchanges or minting NFTs have no way to compete with these value extractors unless they themselves are capable of writing better bots to protect their transactions.

### Disproportionately target beginners

Those new to DeFi are particularly vulnerable to being exploited. The world of decentralized trading is complex for beginners, who may not even understand settings like slippage tolerance, making them easy prey for bots waiting to take advantage of inexperienced traders.

This creates a negative equilibrium for decentralized trading that may drive newcomers away, hurting the ecosystem as a whole.

### Engage in market manipulation

While there are arguments to be made for MEV encouraging market efficiency and price discovery, this is not the case with every type of MEV.

For example, trading MEV bots rely on exploiting slippage tolerances by raising prices up to a threshold and then selling immediately after in a sandwich attack. In this scenario, the AMM does not benefit from price discovery, but instead experiences an artificial pump-and-dump at the expense of a single trader. In traditional markets, such a move could be considered market manipulation as it adds nothing to the market and is designed solely to profit off a market participant.

## CoW DAO: Protecting Ethereum Users from Negative Outcomes

Ultimately, the goal of Ethereum is to serve as a public platform that enables innovation. MEV as a problem emerges from a largely unrestricted marketplace. This benefits innovation by encouraging novel market mechanisms, but it also poses risks to uninformed traders. For this reason, it’s important for users to be aware of the solutions available for protecting themselves.

Regardless of what side of the MEV debate you stand on, most of us agree that we don’t want our trades exploited. To this end, CoW DAO has your back with products that protect you from Ethereum’s dangers and work to ensure positive outcomes.

Install MEV Blocker here:  [www.mevblocker.io](http://www.mevblocker.io/)

LP on CoW AMM:  [https://cow.fi/cow-amm](https://cow.fi/cow-amm)

Swap on CoW Swap:  [www.swap.cow.fi](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=protect-from-mev-bots-article)

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The nasty culprits of MEV lurk in every corner of Ethereum… Find out how to keep yourself safe


How to Avoid MEV Bots


The vast world of DeFi offers many kinds of tokens, with more being added every day. Decentralized aggregators like CoW Swap allow users to swap between practically any two ERC-20 tokens, but sometimes you need to manually add a custom token before you can trade it.

## Add Custom Tokens

In order to display user balances, CoW Swap queries the blockchain to see what tokens a wallet holds. To ensure a smooth user experience, this analysis is limited to tokens included on official token lists such as CoinGecko.

![1-add-custom-tokens.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_add_custom_tokens_a00d95fa40.webp)

For this reason, your wallet may hold tokens that don’t show up in your balance on CoW Swap. This doesn’t mean you can’t trade them! The CoW Protocol network of  [solvers](https://docs.cow.fi/cow-protocol/concepts/introduction/solvers)  searches all available liquidity to bring you the best prices, even for tokens outside of the default lists.

To trade custom tokens, you simply need to add them to the UI. Here’s how:

## Step 1

Navigate to CoW Swap and click “Select a token.”

![2-add-custom-tokens.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_add_custom_tokens_c80ddc6351.webp)

## Step 2

A token list will come up. Here you can either search the name of your token or enter the contract address in the search box.

![3-add-custom-tokens.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_add_custom_tokens_f8dd21ae8e.webp)

## Step 3

For maximum security, you should always paste the official token contract address into the search box. This prevents any form of manipulation or phishing.

![4-add-custom-tokens.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_add_custom_tokens_1ee5946e85.webp)

For ERC-20 tokens, the contract address starts with “0x” and is followed by 40 characters. You can usually find it by looking up the token you want to trade on reputable websites like  [CoinGecko](https://www.coingecko.com/).

_Note: While rare, it is possible for token lists to show the wrong contract address. Always check the official channels of the project you are trading for the most up-to-date information on token contract addresses._

## Step 4

Once you’ve found the token you’re looking for, click the “Import” button to add it to CoW Swap.

![5-add-custom-tokens.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/5_add_custom_tokens_da75a6cce1.webp)

## Step 5

Ensure you’ve entered the correct token address and click “Import.”

![6-add-custom-tokens.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/6_add_custom_tokens_160c90e632.webp)

## Step 6

Once imported, you will be able to trade the token on CoW Swap. Tokens only need to be imported once per browser.

![7-add-custom-tokens.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/7_add_custom_tokens_149eafcaa6.webp)

If you have any questions or need help importing tokens, feel free to reach out to us on  [Discord](https://discord.com/invite/cowprotocol)  or on  [X](https://twitter.com/CoWSwap). Happy swapping!

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How to Add Custom Tokens on CoW Swap

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

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

## TL;DR

-   During the month of  **June**, CoW Protocol handled a total volume of  **$1.05 billion**, and generated a surplus of  **$5.8 million**
-   In exciting news, CoW Protocol launched the  [Tally Recipe for CoW Swap](https://twitter.com/CoWSwap/status/1671935101255688192), improved  [transaction bundling on Safes](https://twitter.com/CoWSwap/status/1666445091399933953?s=20), launched a  [brand new token page](https://cow.fi/tokens), and much more
-   In terms of Governance, CoW DAO executed CIPS 25, 26, and 27

## Protocol Stats

This month, CoW Protocol settled a total of  **$1.05B.**

![1-june-2023.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_june_2023_498a813c10.webp)

This month, the top 3 batches worth highlighting are the following:

-   **Batch with the highest % of CoW trades (**[**Transaction details**](https://explorer.cow.fi/tx/0x531af4533af13645bb4fb54a6d4d4af75821257d6def1a0712482546f55909a9?tab=graph&vis=transfers)**)**. The total batch volume was  **$76K**, and it was created by three traders who were perfectly CoWed for  **91.8%**  of their volume. One trader was buying  **USDC-USDT,**  another trader was buying  **USDT-USDC**, and the last trader was selling  **USDC-USDT**.

![2-june-2023.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_june_2023_adad65cb9c.webp)

-   **Batch containing the highest volume (**[**Transaction details**](https://explorer.cow.fi/tx/0x4469a8843ecdee0805daada813573576c2d5b31f9aedcf651d3569fb6307d4e0?tab=graph&vis=transfers)**):**  The total batch volume was  **$8.8M** and it was created by a single trader who was swapping  **USDT**  **to**  **USDC**.


![3-june-2023.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_june_2023_e17114917d.webp)

-   **Batch with the highest amount of surplus (**[**Transaction details**](https://explorer.cow.fi/tx/0xe99ff4114f37ce9cb6af40636084c125b11ab4a98f1fdab5c7c353350e7a5c25/?tab=graph&vis=transfers)**):**  The total batch volume was  **$800K** and it was created by a single trader who was swapping  **USDC**  **to**  **DAI**. This trader achieved the largest surplus for the month of  **June**, by getting  **80K DAI**  extra (**11%**  surplus).


![4-june-2023.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_june_2023_9c8fb4e4c8.webp)

During the month of  **June**, the top 10 traders traded a total of **$77M**.

![5-june-2023.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/5_june_2023_d2b3f40d9b.webp)

## Solvers

![6-june-2023.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/6_june_2023_afc3f98e04.webp)

You can find all of the solver statistics in the following table. Looking at this table, we can see that, on average for the month of  **June,**  solvers generated a total of  **$5.8M**, which is money in the pockets of traders. The highest generated surplus by a single solver was $**1.8M**.

![7-june-2023.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/7_june_2023_59f0fabb7a.webp)

## Governance

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

### Executed Proposals

This month we executed three important proposals

-   [CIP-25: Operational CoW DAO Safe](https://snapshot.org/#/cow.eth/proposal/0x79fdcc006030d50ab0ffe0ffd7c474a409eb70448d1c8eba58919af7559a876e)
-   [CIP-26: Solver bond funds switch](https://snapshot.org/#/cow.eth/proposal/0x1dd77a563722ac783c42276cee76754bf3e78a8895bf9dae7ac6fe5da61634f7)
-   [CIP-27: Incentives Mechanism for the Price Estimation Competition](https://snapshot.org/#/cow.eth/proposal/0x64e061568e86e8d2eec344d4a892e4126172b992cabe59a0b24c51c4c7e6cc33)

### 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: Incentives mechanism for the Price Estimation Competition](https://forum.cow.fi/t/cip-draft-incentives-mechanism-for-the-price-estimation-competition/1718/1)

### Technical Discussions

As an “agora” for technical topics on batch auctions or CoW Protocol related topics, the forum surfaced some very interesting posts.

1.  [Path to L2 Deployments](https://forum.cow.fi/t/path-to-l2-deployments/1774/1)

Make sure to read them and leave comments — your feedback is highly appreciated and will help move forward these important topics. 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 the  [Tally Recipe for CoW Swap](https://twitter.com/CoWSwap/status/1671935101255688192)  which allows your DAO to embed a swap action in your governance proposal
-   Took  [transaction bundling on Safes](https://twitter.com/CoWSwap/status/1666445091399933953?s=20)  a step further, enabling wrap, approve, and swap in a single click
-   Revamped the  [CoW Grants Program website](https://cow-dao-grants.super.site/)  — take a look
-   Saw early results of the Balancer discount for CoW Swap solvers with  [massive savings on a trade](https://twitter.com/CoWSwap/status/1668973199340748800)
-   Shipped a  [token page](https://cow.fi/tokens)  that helps traders find out about each token CoW Swap supports
-   Published an article on  [Effective Treasury Management for DAOs](https://blog.cow.fi/effective-treasury-management-for-daos-84bf17b8d834)  alongside CoW DAO’streasury manager,  [Karpatkey](https://www.karpatkey.com/)
-   Integrated  [Sismo badges](https://twitter.com/CoWSwap/status/1669721583873822720?s=20)  that you can use to claim swag at ETH CC
-   Alex Vinyas  [gave a talk on Order Flow Auctions in the MEV Supply chain](https://twitter.com/CoWSwap/status/1667048909498359808) at Prague DeFi Summit
-   Integrated  [Trust Wallet with CoW Swap](https://twitter.com/CoWSwap/status/1673314050380529666)
-   Participated in an  [MEV Protection Twitter Space](https://twitter.com/blocknative/status/1673420044615946241?s=20)  hosted by Blocknative
-   Received a  [Grants proposal](https://forum.cow.fi/t/grant-application-composablecow-sdk-docs/1698)  for a new “Smart Order” framework called Composable CoW
-   Receive  [another Grants proposal](https://forum.cow.fi/t/grant-application-for-audit-of-composablecow-smart-contracts/1743)  for a second audit for Composable CoW and Extensible fallback handler smart contracts
-   Published several articles:  [What are CoWs on CoW Swap?](https://twitter.com/CoWSwap/status/1674087831696994305?s=20),  [What is a sandwich attack and how can you protect yourself?](https://twitter.com/CoWSwap/status/1669344064213491716?s=20),  [Grants Wave 2 Recap](https://twitter.com/CoWSwap/status/1664633266878414850?s=20)

## Product Updates

**Backend**

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

-   Made progress on a new app data format
-   Brought the following internal hackathon projects to production: Surplus modal, and Arak (smart contract event indexer)

**Frontend**

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

-   Launched a new version of the  [CoW Explorer](https://explorer.cow.fi/)  that shows a new node (Buffers)
-   Released the bundling ETH Flow
-   Made progress on the TWAP interface including cancelations, incorporating orders table, and decoding pending safe transactions
-   Worked on internal hackathon projects including a surplus modal, widget improvements, a “Have I been MEV’d” page, and a trade graph
-   Worked on trying to implement Wallet Connect V2, but due to the lack of wallet support this has been put on hold.

## Open Job Positions

The CoW Protocol team is currently not hiring.


CoW Protocol June 2023 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!

large_Batch Auctions.png

medium_Batch Auctions.png

small_Batch Auctions.png

thumbnail_Batch Auctions.png

Batch Auctions.png

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


Understanding Batch Auctions

As we bid farewell to another eventful year, we’re taking some time to reflect on CoW DAO’s milestones in 2023.

CoW DAO develops two main products:

-   **CoW Protocol & the CoW Swap Interface**: A decentralized exchange providing users with the best prices and cutting-edge MEV protection for swaps
-   **MEV Blocker**: An RPC endpoint designed to protect user transactions from suffering MEV attacks. MEV Blocker leverages an order flow auction among searchers and builders to offer users a rebate (backrun) for their trades

2023 has been marked by a number of noteworthy developments that have expanded protocol functionality, enhanced the user experience, and solidified CoW DAO’s position at the forefront of DeFi.

## CoW Protocol 2023 Product Launches

### Milkman — February

<blockquote class="twitter-tweet"><p lang="en" dir="ltr">Timing trades has been a challenge for DAOs, but that&#39;s all changing thanks to Milkman. 🥛😎<br><br>Instead of a fixed trade amount, Milkman lets you use a price checker (i.e. <a href="https://twitter.com/chainlink?ref_src=twsrc%5Etfw">@chainlink</a>) to ensure a fair market price at execution, even far into the future!<a href="https://t.co/xH7fyqka0J">https://t.co/xH7fyqka0J</a> 👉</p>&mdash; CoW DAO | MEV Blocker &amp; CoW Swap (@CoWSwap) <a href="https://twitter.com/CoWSwap/status/1727326002202935304?ref_src=twsrc%5Etfw">November 22, 2023</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>

The challenging task of timing trades for DAOs has finally found its solution in Milkman. Developed through the  [CoW Grants Program](https://grants.cow.fi/)  in collaboration with  [Yearn.fi](https://yearn.fi/), Milkman enables smart contracts to specify an on-chain data source, like an oracle, as a reference for the otherwise static “min_out” function. This is a game-changer for deferred trade execution, as it gives DAOs a dynamic price backstop that guarantees up-to-date pricing despite governance-related delays.

Born of the spirit of collaboration, Milkman has already made its mark by facilitating large trades from major DAOs. In 2023,  [Aave used Milkman to swap $4 million directly into a Balancer LP](/learn/aave-trade-breakdown),  [Nexus Mutual used it to trade over 14.4K ETH for rETH](/learn/nexus-mutual-trade-breakdown), and  [ENS traded 10K ETH for USDC](/learn/ens-trade-breakdown). To date, Milkman has already handled over $20 million in trading volume!

Learn more about Milkman: “[What is Milkman? CoW Swap’s Solution for Delayed Execution Trading](/learn/what-is-milkman-cow-swaps-solution-for-delayed-execution-trading)”

### Partially Fillable Limit Orders — April

<blockquote class="twitter-tweet"><p lang="en" dir="ltr">Say hello to *partially fillable limit orders* from CoW Swap.<br><br>Now enabled by default, partial fills bring faster trade settlement to limit orders – even in moments of low liquidity. 🏃💨<br><br>Learn more here: <a href="https://t.co/lJ0b4qON9y">https://t.co/lJ0b4qON9y</a> <a href="https://t.co/iqxyI86l6Z">pic.twitter.com/iqxyI86l6Z</a></p>&mdash; CoW DAO | MEV Blocker &amp; CoW Swap (@CoWSwap) <a href="https://twitter.com/CoWSwap/status/1647962756400701443?ref_src=twsrc%5Etfw">April 17, 2023</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>

The introduction of partially fillable limit orders in April unlocked a faster limit order experience that also reduces price impact for large orders.

Unlike traditional “fill or kill” limit orders, partially fillable limit orders execute gradually as liquidity becomes available. For users, this means that their limit orders will complete earlier, as they can gather liquidity over time rather than having to wait for it to become available all at once.

What’s more, partially fillable limit orders are “surplus capturing,” meaning that users can receive surplus on top of their limit price. If the solvers execute a limit order for better than the limit price, the positive price difference (known as “surplus”) will be passed along to the user.

Learn more about Partially Fillable Limit Orders: “[CoW Swap Improves the Limit Order Experience with Partially Fillable Limit Orders](/learn/cow-swap-improves-the-limit-order-experience-with-partially-fillable-limit-orders)”

### CoW Hooks — July

<blockquote class="twitter-tweet"><p lang="en" dir="ltr">Today, CoW Swap is ushering in a new era in intents-based DeFi.<br><br>Introducing CoW Hooks!<br><br>With CoW Hooks you can take multiple DeFi actions: swapping, bridging, staking, depositing, borrowing, and more — &amp; group them all together into one single intent!<br><br>📖 <a href="https://t.co/RZxQQYue5k">https://t.co/RZxQQYue5k</a> <a href="https://t.co/CMNIUXFtGK">pic.twitter.com/CMNIUXFtGK</a></p>&mdash; CoW DAO | MEV Blocker &amp; CoW Swap (@CoWSwap) <a href="https://twitter.com/CoWSwap/status/1678766456719433729?ref_src=twsrc%5Etfw">July 11, 2023</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>

The launch of CoW Hooks transformed CoW Protocol from a swap-intent-matching engine into a generalized intent execution machine. Thanks to CoW Hooks, users can now specify pre and post-trade interactions for solvers to execute alongside their trades.

CoW Hooks interactions can be any DeFi actions: bridging, staking, depositing, or anything else a user would like to do before or after their trade. The best part? Solvers execute the entire sequence of pre and post interactions as a single transaction. True to the CoW Protocol model, users pay gas fees in their sell token, and they only pay if the transaction succeeds.

Learn more about CoW Hooks: “[CoW Hooks: You are in control!](/learn/cow-hooks-you-are-in-control)”

### TWAP (Time Weighted Average Price) Orders — August

<blockquote class="twitter-tweet"><p lang="en" dir="ltr">🚨🚨<br><br>TWAP orders are now available on CoW Swap! (Call us CoW Twap!)<br><br>TWAP orders let users split their trades over time while benefiting from CoW’s signature MEV protection &amp; best prices.<br><br>Available for <a href="https://twitter.com/safe?ref_src=twsrc%5Etfw">@safe</a> wallets today.<br><br>Learn more: <a href="https://t.co/A4l5P7G696">https://t.co/A4l5P7G696</a> <a href="https://t.co/ssj2xtDr8Z">pic.twitter.com/ssj2xtDr8Z</a></p>&mdash; CoW DAO | MEV Blocker &amp; CoW Swap (@CoWSwap) <a href="https://twitter.com/CoWSwap/status/1692152855694803112?ref_src=twsrc%5Etfw">August 17, 2023</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>

In August, CoW Protocol launched the first implementation of TWAP orders on a decentralized exchange to date. TWAP allows users to split large trades into smaller, discrete orders which execute over a specified time period. This lessens price impact, ensures entry at a “average” market price, and enhances MEV protection.

Learn more about TWAP orders: “[CoW Swap Launches TWAP Orders](/learn/cow-swap-launches-twap-orders)”

### Gasless Approvals — October

<blockquote class="twitter-tweet"><p lang="en" dir="ltr">Cows can sometimes get a bad rap for their gas emissions...<br><br>But CoW Swap is committed to reducing gas as much as possible.<br><br>That&#39;s why we&#39;re pleased to announce that gasless approvals are now live on <a href="https://twitter.com/CoWSwap?ref_src=twsrc%5Etfw">@CoWSwap</a>. <a href="https://t.co/NOQeeVtacr">pic.twitter.com/NOQeeVtacr</a></p>&mdash; CoW DAO | MEV Blocker &amp; CoW Swap (@CoWSwap) <a href="https://twitter.com/CoWSwap/status/1714633297408696409?ref_src=twsrc%5Etfw">October 18, 2023</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>

CoW Swap has offered gasless swaps since the start, but in October we made the entire experience — approvals + swaps — entirely gasless for over 100 tokens. With gasless approvals, the intents that users sign to place an order now give solvers the permission to execute both the swap AND the approval transaction on behalf of the user.

Thanks to this, brand new wallets can use CoW Swap without holding any ETH, as all fees get deducted in the sell token.

Learn more about gasless approvals: “[Announcing Gasless Approvals on CoW Swap](/learn/announcing-gasless-approvals-on-cow-swap)”

### Programmatic Order Framework — November

<blockquote class="twitter-tweet"><p lang="en" dir="ltr">CoW Swap is excited to announce the launch of an entirely new class of orders. We call them Programmatic Orders. ✨<br><br>Programmatic Orders execute automatically, in perpetuity, according to the conditional parameters you set.<br><br>Let&#39;s dive in. 🤿 <a href="https://t.co/sOXKCMsYLu">pic.twitter.com/sOXKCMsYLu</a></p>&mdash; CoW DAO | MEV Blocker &amp; CoW Swap (@CoWSwap) <a href="https://twitter.com/CoWSwap/status/1722735351972983030?ref_src=twsrc%5Etfw">November 9, 2023</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>

The Programmatic Order Framework pioneered a new era of “programmatic orders,” which are automated orders that execute based on on-chain conditions.

Programmatic orders are created with just one signature, and they execute when certain on-chain conditions (prices, volumes, balances, times, etc.) are met. These orders can stretch indefinitely into the future, automating everything from complex trading strategies to advanced order types, portfolio management, DAO operations, and more.

The Programmatic Order Framework itself is used to create programmatic orders by automating the boilerplate code necessary for order placement. This allows DeFi users to programmatically create any set of orders and automatically approve them for execution with just a single signature.

Learn more about the Programmatic Order Framework: “[Introducing the Programmatic Order Framework, from CoW Protocol](/learn/introducing-the-programmatic-order-framework-from-cow-protocol)”

### Widget — November

<blockquote class="twitter-tweet"><p lang="en" dir="ltr">Merhaba. Hello.<br><br>The CoW Swap widget is live. If you&#39;ve ever thought &quot;damn, I wish my users could do MEV-protected swaps/limits/TWAPs, capture surplus, and not spend gas on their trades&quot; this widget is for you.<br><br>Learn more at <a href="https://t.co/jHxQRC2ri9">https://t.co/jHxQRC2ri9</a> or reach out to chat live.<br><br>📣 <a href="https://t.co/wuhKJkJD9m">pic.twitter.com/wuhKJkJD9m</a></p>&mdash; CoW DAO | MEV Blocker &amp; CoW Swap (@CoWSwap) <a href="https://twitter.com/CoWSwap/status/1724037068610056354?ref_src=twsrc%5Etfw">November 13, 2023</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>

Launched with the goal of bringing the lush pastures to a wider audience, the widget embeds a CoW Swap trading module on any website or web3 dApp. Projects can now bring CoW Swap’s famous MEV protection and best prices to their users and even collect fees from swaps made through the widget.

Learn more about the widget  [on our website](https://cow.fi/widget).

## Improvements Throughout The Year

-   **Surplus Notifications →** Users now see exactly how much they received in surplus after every trade! Wallets connected to CoW Swap can also view their total historical surplus using the account tab 💸
-   **Fortune Cookies →**  Besides being the best place to trade, CoW Swap is also the most fun! This year, we added fortune cookies to the UI, welcoming you with a new message each day to inspire you along your trading journey 🥠
-   **Custom Recipient Addresses →**  It’s now possible to make a trade with funds from one wallet that sends proceeds to a different wallet. Save on gas fees and expedite your trades with custom recipient addresses 🔀
-   **Token Page Release →**  The  [token page](https://swap.cow.fi/#/account/tokens)  lists the tradeable tokens on CoW Swap. Users can use the page to sign the approval transactions necessary for trading new tokens in advance — useful if you’re trying to time the market ⏳
-   **The Limit Orders Stop Light →**  Limit orders received a useful UI upgrade that shows how close your orders are to completing. The limit order “stop light” lights up in different colors depending on how close the market price is to what it needs to be for your limit orders to execute 🚦
-   **A World of Notifications →**  Staying informed is key in the world of DeFi. To this end, CoW Swap enabled notifications through Discord, Telegram, and email to help users stay up to date with new announcements 🔔

## The CoW Protocol Revolution: A Year of Collaboration

The shipping hasn’t only been us, though. We’re proud to have encouraged innovation in DeFi even outside of the CoW DAO ecosystem. Below is a list of projects that are integrated with or built on top of CoW Protocol.

### 1. Dump Services

CoW DAO introduced  [dump.services](https://dump.services/), a dApp that allows users to swap (“dump”) multiple tokens from their wallet all at once by trading them for a single asset. This streamlines portfolio management, especially for small token balances.

### 2. CoW Swap Safe App Batch Transactions

The  [CoW Swap Safe App](https://app.safe.global/share/safe-app?appUrl=https%3A%2F%2Fswap.cow.fi&chain=eth)  introduced a game-changing feature — the ability to bundle multiple transactions into a single batch. Thanks to the Safe batching feature, users can merge approving, wrapping, and trading into a single, cost-effective transaction.

### 3. The Tally Recipe for CoW Swap

Tally, a prominent DAO tooling platform, launched  [a Recipe for CoW Swap](/learn/tally-recipe-for-cow-swaps). The Tally CoW Swap Recipe leverages Milkman to let DAOs attach a swap to a governance proposal, turning a multi-step process into only a few clicks.

### 4. Stackly DCA

[Stackly](https://stackly.eth.limo/)  is a new dApp that brings Dollar-Cost Averaging (DCA) swaps to DeFi users on Ethereum and Gnosis chain. Under the hood, Stackly leverages  [CoW Protocol ERC-1271 smart orders](/learn/tutorial-creating-smart-orders-with-cow-protocol)  for the trades.

### 5. Coinshift Apps

Treasury management platform  [Coinshift](https://coinshift.xyz/)  integrated CoW Swap as a part of its suite of apps, bringing the safety and reliability of CoW Swap to the DAOs using Coinshift for their treasury operations.

### 6. Stader Swap Feature

The liquid staking service  [Stader Labs](https://www.staderlabs.com/eth/)  added a “Swap” function powered by CoW Swap which directs users to trade tokens on CoW Swap dApp.

### 7. Lido Swap Feature

Staking service  [Lido](https://lido.fi/)  also added CoW Swap as one of their “withdrawal” options for users looking to convert stETH to ETH right on the platform.

## New Products: MEV Blocker

<blockquote class="twitter-tweet"><p lang="en" dir="ltr">CoW Swap, in collaboration with <a href="https://twitter.com/beaverbuild?ref_src=twsrc%5Etfw">@beaverbuild</a> and Agnostic Relayer, is proud to announce MEV Blocker. <a href="https://t.co/WIhaaGtP0e">https://t.co/WIhaaGtP0e</a> ⛱️<br><br>MEV Blocker is a free RPC endpoint that *pays users* to protect themselves from MEV across a wide variety of use cases in DeFi, NFTs, and dApps. <a href="https://t.co/Fa6cRNjrxf">pic.twitter.com/Fa6cRNjrxf</a></p>&mdash; CoW DAO | MEV Blocker &amp; CoW Swap (@CoWSwap) <a href="https://twitter.com/CoWSwap/status/1643614395002499073?ref_src=twsrc%5Etfw">April 5, 2023</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>

While the lush pastures of CoW DAO saw a lot of shipping in 2023, there was one flagship launch that stood above the rest:  [MEV Blocker](https://mevblocker.io/).

CoW DAO, in collaboration with  [Beaver Build](https://beaverbuild.org/)  and  [Agnostic Relay](https://agnostic-relay.net/), introduced MEV Blocker to protect Ethereum transactions from frontrunning and sandwich attacks. The free RPC endpoint routes transactions through a permissionless network of searchers who cannot frontrun or sandwich user transactions. Instead, searchers capture value through backrunning, sending 90% of all profits back to the users as rebates.

MEV Blocker addresses the multi-billion dollar MEV problem, enabling users to trade, buy NFTs, provide liquidity, and more without worrying about harmful price exploitation.

## Reflecting on our Udderly amazing Journey, and cheers to a CoW-tastic 2024!

2023 has been the most exciting year so far for CoW DAO. We’re already diving headfirst into 2024 with a renewed commitment to more products built for both novice and experienced users. Here’s to another thrilling year at the forefront of DeFi!

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365 Days of Udderly Fantastic CoWventures!


CoW DAO: 2023 in Review!

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.

To date, MEV has been responsible for more than $1.3 billion in lost value for Ethereum users.

![1-what-is-mev.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_what_is_mev_050181095d.png)

MEV is a complex phenomenon with multiple different causes. In this article we’ll take a deeper look at what causes MEV, how it affects traders, and how you can protect yourself.

## How Does MEV Work?

MEV is possible because validators are free to order blockchain transactions as they see fit in order to maximize their profits. Proof-of-stake (PoS) blockchains such as Ethereum use parties known as “validators” in order to ensure that the consensus rules of the blockchain are followed by all participants. Validators get randomly selected to add the next block to the blockchain. In this process, they determine what transactions are included in the block, and in what order.

![2-what-is-mev.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_what_is_mev_04f9643567.png)

When you submit a transaction on Ethereum, it does not immediately get added to the next block. Instead, it first goes into the “mempool” which is the collection of all pending transactions. Validators then pull transactions from the mempool and add them to the next block when it’s time for it to be built.

Here is where the opportunity to extract value through MEV comes in.

Validators are not required to add transactions to the block in the same order that they were submitted by users, so searchers can pay validators a fee to order transactions in a specific way. For example, they can pay to have their transactions come first if they want to frontrun someone else, or they can pay to have their transactions come right after a specific transaction if they want to perform a backrun — both are types of MEV.

## Understanding MEV Terms

In order to get a solid grasp of how the different types of MEV work, we must first familiarize ourselves with the function of on-chain trading through decentralized exchanges (DEXs) along with some terms.

**Automated Market Makers (AMM)**: Automated Market Makers are trading mechanisms that allow traders to buy and sell assets in real time. Unlike traditional “orderbook” trading, which relies on counterparties for every transaction (you need a seller in order to buy and a buyer in order to sell), AMMs work by maintaining a constant ratio between the prices of two assets. For example, ETH and COW. AMMs use the formula “x*y = k” to determine a fair price based on the ratio between two assets (x and y) in the liquidity pool.

Any time a trade alters this ratio by depleting the supply of one asset and increasing the other, the prices of the assets adjust in order to preserve the established ratio. For instance, if a trader buys COW and sells ETH, the COW price rises, and the ETH price falls. The opposite happens when traders sell COW and buy ETH.

**Slippage Tolerance**: When placing a trade, traders set a “slippage tolerance” for their transactions, which represents the maximum price difference they’re willing to accept for their trade. For example, if ETH is trading at $2,000 and you place an order to buy ETH with a 5% slippage tolerance, you’re willing to buy ETH at up to $2,100. If ETH goes above $2,100, however, your trade will fail, as it’s outside your slippage tolerance.

Some slippage tolerance is always necessary because the prices of crypto assets are constantly fluctuating, so by the time your trade executes, the price may have moved. Setting your slippage tolerance too high, however, leaves room for searchers to exploit your trades.

**Price Impact**: Crypto markets, like all markets, are based on supply and demand. AMMs maintain “liquidity pools” of assets that they use to fill trades. Each trade drains some amount of this liquidity, moving the price of the asset. This price movement is known as “price impact.” The larger the trade, the bigger the price impact.

A trade of $100 ETH will not move the price of ETH very noticeably, since it makes up a tiny fraction of the available liquidity. A trade of $1,000,000 ETH however, will noticeably move the price of ETH.

**Transaction Reordering**: Blockchain transactions do not always enter the block in the order that they were submitted. Searchers can “bribe” the validators responsible for creating the block to get them to arrange transactions in a specific sequence. This transaction reordering is what makes all of MEV possible.

## The Different Types of MEV

Now that we’re familiar with the core concepts at play in MEV attacks, let’s take a look at the different types of MEV.

### Frontrunning

Frontrunning is a particular type of MEV that affects all forms of Ethereum transactions including trades, NFT mints, and more. Users can sometimes receive messages like “your transaction may be frontrun” on decentralized exchanges and it’s important to understand what this means.

![3-what-is-mev.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_what_is_mev_fa9d5e5144.png)

Frontrunning occurs when a user makes a transaction but gets “front run” by an MEV bot who makes the same transactions ahead of them.

1.  **Monitoring Pending Transactions**: The first step involves monitoring the blockchain network’s mempool, a holding area for pending transactions. Here, frontrunners, who are often sophisticated bots, scan the mempool to identify transactions that can carry significant value that they want to snatch away or that could influence the price of a particular asset.
2.  **Selecting Profitable Transactions**: The frontrunner will analyze the potential market impact once such a transaction is identified. For instance, if a large buy order for a specific token is detected, the frontrunner knows that this transaction could increase the asset’s price once processed.
3.  **Placing a New Transaction**: The frontrunner will initiate their buy order for the same asset, intending to get their transaction processed before the initially detected transaction. They typically give the validators a higher “tip” to execute their transaction first in the block in comparison to the target transaction.

Frontrunning disrupts the fair operation of blockchain transactions, leading to distorted prices, value drain, and missed opportunities for everyday traders.

Read more about frontrunning in our article: “[What is Frontrunning](/learn/what-is-frontrunning)”

### Backrunning

Backrunning is another form of MEV that affects various Ethereum transactions, including trades, NFT mints, and more. Unlike frontrunning, backrunning takes advantage of transactions after they have been executed.

![4-what-is-mev.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_what_is_mev_ebc0972169.png)

Backrunning occurs when a user makes a transaction that gets followed by an MEV bot executing a strategic transaction right after theirs in order to capture a price movement.

1.  **Monitoring Pending Transactions**: Like frontrunning, backrunning attacks begin with searchers monitoring the mempool for profitable opportunities. In particular, they are looking for transactions that cause a large price impact, as the backrunning attack involves capturing the arbitrage opportunity left behind after a large trade.
2.  **Finding a Transaction with a Large Price Impact**: Once a valuable transaction is identified, the searcher analyzes its impact. For instance, if a large sell order for a specific token is detected, the backrunner knows that this transaction could decrease the asset’s price once processed.
3.  **Capturing the Price Impact**: By placing a transaction directly after a previous, large transaction, the MEV bot can capture the price movement that the transaction causes on the AMM. The backrunner makes a transaction correcting this price impact and collecting the arbitrage in the process.

Backrunning is considered the least harmful type of MEV. While it still captures value, it does not do it at the expense of the trader. When done in isolation, it only captures leftover arbitrage after a large transaction moves an asset’s price.

Read more about backrunning in our article: “[What is Backrunning](/learn/what-is-backrunning-mev-attacks-explained)”

### Sandwich Attacks

Sandwich attacks are considered the most dangerous type of MEV as they extract the most value from users. A sandwich attack is a combination of frontrunning and backrunning for maximum profit on the part of the searcher.

![5-what-is-mev.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/5_what_is_mev_f66a58a086.png)

Sandwich attacks occur when a user’s transaction gets trapped, or “sandwiched,” between two hostile transactions — one before and one after. As a result, the original transaction executes at a much higher price than necessary, leading to an inflated price for the original trader and a profit for the searcher placing the two extra trades.

1.  **Monitor Pending Transactions**: Like all other types of MEV, sandwich attacks begin with searchers monitoring the mempool for profitable opportunities. In this case, they’re looking for trades that will create a large price impact which they can frontrun, capturing the value of the asset before the large transaction, and then backrun after the victim transaction, capitalizing on the price impact.
2.  **Perform a Frontrunning Transaction**: When a large trade is identified, the searcher will duplicate it and place their own transaction right before the victim’s — in essence frontrunning. The searcher gauges the size of their transaction to cause just enough price impact to push the asset’s price up to the precise slippage tolerance the victim has set.
3.  **Execute the Victim Transaction**: Since a sandwich attack is a 2-part process, the searcher orders transactions so that the victim’s transaction executes right after the seracher’s frontrunning transaction, but just before their backrunning transaction.
4.  **Execute a Backrunning Transaction**: After the victim transaction executes, its price impact pushes the price of the asset even further (remember it was already raised as a result of the searcher’s frontrunning transaction). Once this takes place, the searcher executes a backrunning transaction, selling the asset and profiting from the arbitrage.

Sandwich attacks are the most common types of swap-related MEV, taking advantage of a user’s slippage tolerance to cause maximum pain for the trader and maximum profit for the searcher.

Read more about sandwich attacks in our article: “[What is a Sandwich Attack](/learn/what-is-a-sandwich-attack-and-how-can-you-protect-yourself)”

### Loss-Versus-Rebalancing (LVR)

Loss-versus-rebalancing (LVR) is a type of MEV that affects liquidity providers (LPs) and accounts for more value loss than all other types of MEV combined.

LVR is different from the swap-based versions of MEV we’ve covered so far. It occurs when liquidity providers lose out on potential profits due to stale prices. 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.

![6-what-is-mev.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/6_what_is_mev_39dc2a4798.png)

_(_[_Source: Delphi Digital_](https://members.delphidigital.io/learn/loss-versus-rebalancing-lvr)_)_

LVR is a form of arbitrage that occurs whenever an AMM has an outdated (stale) price in comparison to some other trading venue. Arbitrageurs exploit this price difference by trading from the AMM to the more liquid exchange (usually a centralized exchange like Binance), correcting the arbitrage and extracting value from LPs in the process.

Learn more about LVR in our article: “[What is Loss-Versus-Rebalancing (LVR)?](/learn/what-is-loss-versus-rebalancing-lvr)”

### Other MEV

Since the definition of MEV is broad enough to encompass all validator activities that maximize the profits of a given block, there are many other types of MEV that we haven’t covered here as well.

One such example is “Oracle Extractable Value” (OEV) which occurs whenever data from an oracle (such as pricing information) is outdated and searchers can capitalize on this arbitrage at the expense of regular users.

## An Example of an MEV Attack

Let’s take a look at a sample MEV attack through the example of the most common type of MEV — the sandwich attack. In this example, we’re going to be trading ETH and COW.

![7-what-is-mev.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/7_what_is_mev_d8784b4c5e.png)

**Step 1**: Bessie wants to buy COW using her ETH. She goes to a decentralized exchange (DEX) like Uniswap, and places an order for 4,000 COW. This should cost her around 1 ETH, but due to significant market volatility, Bessie decides to set a 10% slippage tolerance. This means she’s willing to pay up to 1.1 ETH for 4,000 COW.

**Step 2**: Bessie’s trade enters the Ethereum mempool (the pending order queue), and a lurking searcher spots an opportunity. Springing into action, the searcher places a trade just before Bessie’s trade that is large enough to push the COW price up to her slippage tolerance. In this case, the searcher buys 4,000 COW for exactly 1 ETH. As a result of this first trade’s price impact, Bessie’s 4,000 COW purchase now costs 1.1 ETH — the maximum she’s willing to pay.

**Step 3**: Once the searcher’s transaction clears, Bessie’s transaction also goes through and she receives her 4,000 COW in exchange for 1.1 ETH. The searcher takes advantage of this price impact and sells his original COW at this new rate — 4,000 COW for 1.1 ETH.

In the end, the searcher buys 4,000 COW for 1 ETH and sells it for 1.1 ETH, earning a profit of 0.1 ETH (before gas and fees) for not much effort.

It’s easy to see how lucrative sandwich attacks are!

Bessie, on the other hand, ends up with a bad deal. She could have purchased 4,000 COW for just 1 ETH, but her slippage tolerance left room for a sandwich attack that forced her to pay an extra 10% for her trade.

## Why is MEV Bad?

MEV is a complex and often controversial topic in the Ethereum community.

Some say that MEV is a natural part of the Ethereum market mechanism and it helps to find the most efficient prices. Others believe that MEV can be harmful, but only if it’s concentrated in the hands of a few validators — therefore they work to “democratize” MEV and allow anyone to extract value from on-chain transactions.

However, 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).

![8-what-is-mev.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/8_what_is_mev_26ab0ff9ec.png)

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.

## How to Protect Yourself from MEV

There are multiple ways to avoid MEV as a trader. The most comprehensive solutions take place at the dApp level, but not all dApps provide MEV protection so there are more all-encompassing protection methods including RPC endpoints.

### Reduce Slippage

The most basic defense against MEV is setting a low slippage tolerance.

Since MEV relies on slippage for price manipulation, transactions with a lower slippage tolerance give searchers less room to exploit trades.

For users who aren’t utilizing any other MEV protection tools, setting a lower slippage tolerance can be a good first line of defense, however it’s by no means a complete solution. Setting the slippage tolerance too low often results in failed transactions. Even with optimal slippage, MEV bots may still be able to extract value from your trades.

### Use a Custom RPC Endpoint

![9-what-is-mev.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/9_what_is_mev_70787de2c8.png)

A better protection method is to install an MEV protection RPC endpoint.

A Remote Procedure Call (RPC) endpoint 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.

Normally, RPCs are a boring piece of blockchain infrastructure. Recently, however, specialized RPCs have begun incorporating extra security guarantees for transactions before they reach the blockchain.

One of the most popular specialized RPC endpoints is [MEV Blocker](https://cow.fi/mev-blocker). As the name suggests, MEV Blocker provides protection against MEV across all of Ethereum. The RPC works by managing a permissionless network of searchers and hiding transactions from the public mempool. 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.

Install MEV Blocker here: [https://cow.fi/mev-blocker](https://cow.fi/mev-blocker)

### Use an MEV-Protected DEX

![10-what-is-mev.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/10_what_is_mev_16deedca85.png)

As MEV has become more prevalent, decentralized applications (especially decentralized exchanges) have begun offering creative protection solutions to users. For example, many DEXs offer an “auto-slippage” feature which determines the optimal slippage for user trades, reducing the chances of price exploitation.

[CoW Swap](https://swap.cow.fi/#/) 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.

Try CoW Swap here: [https://swap.cow.fi/#/](https://swap.cow.fi/#/)

## Maximal Extractable Value — Ethereum’s Existential Battle

MEV is a critical problem for the Ethereum ecosystem because it undermines the fundamental principles of fairness and transparency that blockchain technology aims to uphold. The ability of sophisticated actors to extract value from everyday traders pushes users away and discourages the broad adoption of decentralized technologies.

Addressing — and eventually solving — MEV is essential to keeping Ethereum a robust, innovative, and user-friendly platform for all participants. To this end, CoW DAO is working hard to secure a decentralized future by creating products that ensure a fair and protective decentralized financial system.

Learn more about CoW DAO, its mission, and its various products here: [https://cow.fi/](https://cow.fi/).

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MEV is a $1.3 billion problem for Ethereum, but what exactly is it?

What is MEV? — Maximal Extractable Value Explained

Don’t worry, trade happy! CoW Swap has been busy cooking up Conditional Orders, an architecture that allows developers (and their users) to create sophisticated orders of all kinds. At the core of this system is a flexible smart contract wallet that allows the protocol to implement its unique logic. What’s better than standing on the shoulders of giants in the ecosystem and within the Gnosis family  [Safe](https://safe.global/)?

Wait? Smart contract wallet?

That’s right: CoW Swap pioneered intents across the Ethereum space for EOAs (think MetaMask, Trezor, Trust Wallet, etc.), but what’s less well-known is that the protocol can actually work in a similar way for smart contracts by relying on a flexible intents system with the ERC-1271 integration. It sounds technical, but this standard is basically designed to allow smart contracts to “Sign” a message like any other EOAs. This is a familiar procedure for the seasoned CoWmunity, but Conditional Orders now allow anyone to define a set of conditions and have the smart contract wallet do the clicking for you.

Incubated through the  [CoW Grants Program](https://grants.cow.fi/), and supported by the Safe team throughout the testing/auditing process, the ExtensibleFallbackHandler is now live. Sounds complicated, we know! Put simply, this is a way to add extra powers to your Safe, while preserving the strong security guarantees that the Safe is well known for.

Upgrading your Safe’s fallback handler is a secure process, all you have to do is tick a box when placing an order, and your Safe upgrade will be batched with your order, making for a single-transaction order placement and upgrade. The contracts that implement this system have been audited both by an independent auditor, and an external auditor from Ackee Blockchain (You can read the final audit reports  [here](https://github.com/cowprotocol/composable-cow/tree/ab3addad9bc05acdbf5fb040eb5c336209b58e31/audits)).

The owl-eyed among you would be aware that smart contracts have always been able to use CoW Protocol, though this required both a transaction on chain to signal your intent, and that the orders be fixed (not conditional). Wave goodbye to these limitations!

With an ExtensibleFallbackHandler+ComposableCoW-enabled Safe you now benefit from all the CoW Swap features directly from your smart contract wallet: MEV protection, no failed swap transactions, at-execution path discovery, conditional orders, and batching if you need to do pesky things like approve or wrap ETH.

If you’re technically inclined, check out how you can  [start building with conditional orders using ComposableCoW](https://hackmd.io/@mfw78/HyuvoGt9h#), or drop into  [#tech-talk on our discord](https://discord.gg/cowprotocol)! While you’re busy reading up on how to write the latest and greatest conditional order, you could also be gradually buying up more of your favorite token using TWAP!

## What is a Safe fallback handler?

Long story short, Safe is designed to have strong security guarantees over basic operations (think executing transactions, spending your precious tokens, etc.), but there’s not enough time to program all functionality that a user may require. Therefore, the Safe can “forward” all function requests that it doesn’t recognize to another contract (the fallback handler).

**CRITICALLY**: Fallback handlers do  **NOT**  have the same authority as the Safe from which they were called. Due to the security architecture of Safe, it is not possible for the fallback handler to execute transactions on behalf of the Safe.

OK, the fallback handler can’t execute a transaction for you, so why should you care? Safe doesn’t by default (without a fallback handler) support ERC-1271 signatures. The standard deployment of a Safe deploys with CompatibilityFallbackHandler as the fallback handler, which has limited ERC-1271 support (meaning: it cannot read and thus, cannot be automated). CoW Swap intents super-charge this by allowing a Safe to also specify a smart contract that can sign messages for a particular application on its behalf.

This is where ComposableCoW takes over! 🐮🎶 You can think of ComposableCoW as an autonomous agent, signing orders that meet whatever conditions you have specified. After you create your first conditional order, the second transaction you see in the batch will enable ComposableCoW, which tells your Safe “I want ComposableCoW to be able to sign orders from CoW Protocol”. TWAP is just a conditional order type that works with ComposableCoW.

**CRITICALLY**: Due to the design of ERC-1271, all signature verification is  **read-only**  which means it is  **impossible**  for a ComposableCoW or any conditional order to directly access user funds (the movement of funds during a swap is initiated by the settlement contract  **ONLY**).

In summary, to make CoW Swap’s new TWAP order feature work:

-   Safe users need to upgrade their fallback handler(enables conditional signing)
-   Conditional orders are automatically placed in the CoW Protocol order book (now signed with the new handler)
-   Automated signing of orders means you may hear less of CoW’s trademark moo. Feel free to set  [this](https://github.com/cowprotocol/cowswap/blob/develop/apps/cowswap-frontend/public/audio/success.mp3)  as your phone’s notification tone if suffering withdrawal symptoms 🐄

CoW Swap takes security very seriously. The underlying Safe fallback handler code has been fully audited by both the Safe and CoW teams as well as by two independent external auditors, G0 and Ackee Blockchain. You can find all the audit final reports  [here](https://github.com/cowprotocol/composable-cow/tree/ab3addad9bc05acdbf5fb040eb5c336209b58e31/audits).

The solution presented follows Safe’s high security standards. What’s more, the fallback handler isn’t just about placing orders. It allows limitless and, as of yet, unknown functionality. Maybe you want to:

-   Define a custom method handler for any non-standard method (if you really want you can turn your Safe into an ERC-20 token)
-   Define a custom EIP-712 domain verifier, whereby a contract implementing ISafeSignatureVerifier can do your menial signing automatically (it is this interface that ComposableCoW implements to power the shiny new TWAP orders)
-   Define a set of methods (interfaceId) that your Safe supports, and report such using ERC-165

The architecture for the ExtensibleFallbackHandler can be viewed  [here](https://hackmd.io/@mfw78/HyuvoGt9h).

**NOTE**: Audits are not a guarantee that code is free from error. Use with caution.

We wish you much surplus and happy  [TWAP order trading](https://swap.cow.fi/swap?utm_source=medium&utm_campaign=fallback-handler)! Give  [TWAP orders a try](https://swap.cow.fi/swap?utm_source=medium&utm_campaign=fallback-handler)  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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Don’t worry, trade happy! Upgrading your Safe fallback handler is a secure process. This Safe fallback handler extension has been developed by the CoW Swap team in collaboration with the Safe team, and has undergone a successful audit.

All you need to know about CoW Swap’s new Safe fallback handler

The CoW Swap team is excited to release a simpler trading experience for its users. Gasless approvals allow traders to swap over 150 tokens completely gaslessly through CoW Swap.

Before the launch of gasless approvals, CoW Swap users benefitted from gasless trading thanks to CoW Swap’s  [intent-based](/learn/cow-protocol-glossary#:~:text=Intent%20to%20Trade)  execution model. However, they still needed to pay gas fees (in ETH) to execute approval transactions the first time they wanted to trade any token.

With gasless approvals, CoW Swap now allows users to sign a message (gas free!) that gives  [solvers](https://docs.cow.fi/solvers/solvers)  permission to execute the approval transaction on their behalf. Solvers then bundle the approval transaction with the first swap, and users pay fees in the sell token.

The result? Users can now do an entire swap, even for a new token, without spending a gwei in ETH, or even holding any ETH in their wallet at all. That’s a smoooooother (and cheaper) user experience. Moo-gnificent!

## Benefits of gasless approvals

This new upgrade comes with a host of benefits relevant to EOA and multisig wallets alike.

-   **Fully ETH-less swaps:** New users and fresh wallets can complete swaps end-to-end without needing ETH — that’s especially nice for airdrop farmers and privacy seekers
-   **Faster trades**: CoW Swap users don’t have to wait for an approval transaction to execute before the swap — traders can now swap right away, even with tokens they haven’t traded before
-   **Bundling efficiency**: Approval transactions execute alongside orders, in the same block — shielded from fluctuating gas prices, for a more cost-efficient experience overall
-   **Enhanced security**: Only an approved spender can execute transactions on behalf of a trader — users can trust that CoW Swap is as secure as ever

## Gasless approvals under the hood

Gasless approvals rely on  [ERC-2612: Permit Extension for EIP-20 Signed Approvals](https://eips.ethereum.org/EIPS/eip-2612).

Essentially, a function creates a signature that can call approvals directly on behalf of the owner. This allows a third party, such as a solver, to spend funds on behalf of the user. For security, gasless approvals rely on nonces which indicate the number of times a permit signature has been used. (There is also a time window in which the signature must be used.) This protects users from replay attacks because it is impossible to replicate an approval with the same nonce.

Each Ethereum transaction has a minimum fixed transaction cost associated with it. When executing transactions individually, this cost is usually higher per action than if users bundle multiple transactions together. So, in addition to creating a better user experience for traders, gasless approvals also lower the overall cost of trading on CoW Swap.

## Now live on CoW Swap

Gasless approvals are now live on  [CoW Swap](https://swap.cow.fi/#/1)  for Ethereum Mainnet. See which tokens are currently supported by checking out the  [CoW Swap Permittable Tokens List](https://hackmd.io/@mastercow/cowswap-gasless-approvals).

As always, on CoW Swap:

-   Orders are free to place and cancel
-   Traders never pay for failed transactions
-   Fees that cover settlement costs are paid in traders’ sell tokens
-   Traders are fully protected from MEV

Happy trading!

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Announcing Gasless Approvals on CoW Swap


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


CoW DAO July 2024 Highlights

## Overview

-   Backrunning is one of the three main types of MEV, but it’s the least harmful as it only involves capturing arbitrage left over after a large trade
-   When a trader places a large trade that artificially inflates the price of an asset on an AMM, an MEV bot can backrun the trade and profit from the arbitrage
-   CoW Swap eliminates backrunning opportunities through its delegated trading mechanism, while MEV Blocker pays out rebates for any backrunning opportunities user trades create when transacting anywhere on Ethereum

![what-is-backrunning-mev-attacks-explained-cover-photo.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/what_is_backrunning_mev_attacks_explained_cover_photo_7573e1bea9.webp)

Backrunning is a specific type of MEV (Maximal Extractable Value) which causes some traders to miss out on potential profit opportunities from their trades.

In practice, backrunning involves strategically executing a transaction immediately after another, high-value transaction. By doing this, the backrunning transaction capitalizes on the arbitrage opportunity left over from the  [price impact](/learn/cow-protocol-glossary#:~:text=Price%20impact) of the initial transaction.

Backrunning involves the tactical use of the information contained within the Ethereum mempool — a holding area for all pending transactions — to place transactions immediately after high-value trades in order to profit.

Out of the three types of MEV ([frontrunning](/learn/what-is-frontrunning),  [sandwich attacks](/learn/what-is-a-sandwich-attack-and-how-can-you-protect-yourself), and backrunning) backrunning is considered the least harmful. In fact, if performed by itself, this method simply captures the arbitrage opportunity left over by a large trade without affecting the initial trade itself. Backrunning is only harmful to the user when combined with a  [frontrunning attack](/learn/what-is-frontrunning), which results in the worst kind of MEV —  [the sandwich attack](/learn/what-is-a-sandwich-attack-and-how-can-you-protect-yourself).

For advanced traders who are capable of capturing the leftover arbitrage from their trades, backrunning may be considered a missed opportunity since it’s technically money left on the table.

Thankfully, not everyone has to be an experienced trader to capture the backrunning profits from their trades. Retail traders can automatically benefit from backrunning opportunities through specialized RPC endpoints such as  [MEV Blocker](https://mevblocker.io/).

## How backrunning works

The most common perpetrators of backrunning are MEV bots programmed to monitor pending Ethereum transactions. These bots place strategic trades directly after existing trades in order to capture the arbitrage left over from their price impact.

The process takes advantage of the mechanisms of  [automated market makers (AMMs)](/learn/cow-protocol-glossary#:~:text=amm). Whenever a large trade goes through, it imbalances the liquidity pools of the AMM, causing the price of the asset being sold to go down, and the price of the asset being bought to go up. This price imbalance leaves an arbitrage that MEV bots correct by placing a follow-up trade, earning a profit in the process.

## Backrunning example

To better understand the concept of backrunning, let’s consider an example scenario. In this example, a user named Alex initiates a substantial trade, selling $10,000 of ETH to buy COW on Uniswap. Due to the nature of AMMs, this swap leads to a jump in the value of COW and a drop in the value of ETH on this particular exchange (Uniswap).

At the same time, an MEV bot notices Alex’s large transaction and springs into action. The MEV bot acquires Alex’s sell token (ETH) at this lower price and immediately turns around and sells it for a higher price on a different exchange where this price arbitrage has not yet been reflected. The bot profits from the price difference between the assets on these two exchanges.

From a technical perspective, Alex’s transaction doesn’t result in any realized loss for him, since he still got the price he was quoted for his trade. However, his trade created an arbitrage opportunity that he didn’t capture, leaving money on the table.

The actions of the MEV bot have broader implications for the DeFi ecosystem. Bots monopolize arbitrage opportunities between exchanges and deny regular users the chance to benefit from the price impact their trades create.

## Related MEV tactics

[**Frontrunning**](/learn/what-is-frontrunning)**:** In a frontrunning attack, an MEV bot spots a profitable transaction, duplicates it, and offers a higher gas fee so that validators execute the duplicate transaction before the original one. In effect, the MEV bot hijacks the profits of the original transaction and keeps them for itself.

[**Sandwich Attacks**](/learn/what-is-a-sandwich-attack-and-how-can-you-protect-yourself)**:**  This tactic combines frontrunning and backrunning. An attacker first executes a frontrunning transaction before a valuable trade, pushing the price of the asset up to the slippage tolerance set by the victim trade. This increases the price of the purchased asset. The victim trade then goes through at this new higher price and its price impact raises the price of the asset even more. Finally, the attacker performs a backrunning attack which captures the newly-created arbitrage, generating a profit in the process.

## How harmful is backrunning?

Backrunning is not as harmful as the other types of MEV attacks since it doesn’t result in traders receiving a worse price for their trades. Rather, it simply means that traders leave money on the table by not capturing the arbitrage opportunities from their large trades.

This opportunity cost primarily affects advanced traders who would otherwise be able to capture this arbitrage for themselves. Everyday traders are usually not sophisticated enough to backrun their own trades, so backrunning does not really result in measurably worse outcomes for them.

However,  [MEV Blocker](https://mevblocker.io/)  can help anyone trading on Ethereum automatically capture any backrunning opportunities that their trades create.

## How CoW Swap protects against backrunning

CoW Swap has developed an innovative set of mechanisms for mitigating harm from all types of MEV, including backrunning. The system relies on  [Order Flow Auctions](/learn/understanding-order-flow-auctions)  that gather and consolidate user orders into a batch before execution. Specialized parties known as “[solvers](https://docs.cow.fi/cow-protocol/tutorials/solvers)’’ compete to find the most optimal execution path and provide the best settlement solution.

The design of CoW Swap helps protect against MEV attacks in several ways:

1.  **Delegated trade execution**: When users submit orders on CoW Swap, they are not directly initiating a blockchain transaction, like they would on Uniswap for example. Instead, users submit orders as signed “[intent to trade](/learn/cow-protocol-glossary#:~:text=Intent%20to%20Trade)” messages which include the details of the intended trade, but don’t actually get submitted to the blockchain. The solvers then find the best execution path for the specified trade and execute the trade on-chain on behalf of the user.
2.  **Uniform clearing prices:**  The batch auction system ensures that each asset in the batch only executes for a single price, even if there are multiple trades using that asset. This negates the price variations inherent to AMMs that result in different prices for trades within the same block due to sequential transaction processing. Uniform clearing prices nullify the strategy of transaction re-ordering, thereby mitigating the impact of MEV.
3.  **Liquidity:**  CoW Swap’s unique solver design executes trades optimally without leaving room for arbitrage opportunities. Thanks to Uniform Clearing Prices, all token pairs traded in the same batch will clear at the same price, leaving liquidity pools balanced with no opportunity for arbitrage.

In addition, CoW Swap leverages off-chain interactions known as “[Coincidences of Wants](/learn/what-are-cows-on-cow-swap)” (CoWs) to swap user assets peer-to-peer, leaving zero room for MEV. Furthermore, the protocol’s Order Flow Auction mechanism ensures that user trades are maximally protected from all types of MEV.

Backrunning is prevalent in the DeFi space, leaving everyday traders with suboptimal outcomes at the expense of searchers & MEV bots. However, innovative solutions like CoW Swap are combating the issue of backrunning and MEV as a whole through innovative Order Flow Auction design.

## MEV Blocker — Profit from backrunning

On  [CoW Swap](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=backrunning-article), your orders are protected from all types of MEV, including backrunning, sandwich attacks, and frontrunning.

CoW DAO has taken MEV protection a step further, however, with  [MEV Blocker](https://mevblocker.io/). MEV Blocker is a custom RPC endpoint that you add to your crypto wallet which routes all of your transactions through a trusted network of searchers that scan for backrunning opportunities, but cannot frontrun or sandwich your trades. The best part? The RPC passes the profits from backrunning opportunities back to you in the form of rebates. This means you can make money from any backrunning opportunity you create just by routing your transactions through MEV Blocker.

MEV Blocker works on all types of transactions across all of DeFi. Just  [add the RPC endpoint to your wallet](https://mevblocker.io/#rpc)  and start trading.

While MEV Blocker should be part of every Ethereum user’s arsenal, it’s still optimal to use CoW Swap when doing swaps. CoW Swap is specifically engineered to give traders the best prices and protect against all types of MEV without leaving backrunning opportunities.

Remember: if you’re swapping, use CoW Swap. For everything else, rely on MEV Blocker.

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What is Backrunning? — MEV Attacks Explained



## TL;DR

-   During the month of  **March**, CoW Protocol handled a record-breaking total volume of  **$3.42B**  and generated a surplus of  **$23.4M**
-   In exciting news, CoW Protocol saw its  [largest month ever in terms of trading volume](https://dune.com/queries/2508216/4127586), the CoW team touched grass with an off-site retreat in Portugal, and a protocol fee report  [showed 130 ETH generated with no impact on user retention](https://twitter.com/CoWSwap/status/1773163707331461620?s=20)
-   In terms of Governance, CoW DAO executed  [CIP 39](https://snapshot.org/#/cow.eth/proposal/0xd4b23381a63b19d971e625e1fcef6ffa26d6d685df8b28ca590c251506669a53)  and received several important proposals regarding  [MEV Blocker fees](https://forum.cow.fi/t/cip-40-mev-blocker-fees/2366),  [CoW DAO’s SHU token allocation](https://forum.cow.fi/t/cip-41-claim-and-delegate-cow-daos-shu-token-allocation/2360), and  [strategies for enhancing treasury asset usage](https://forum.cow.fi/t/cip-42-enhancing-treasury-asset-usage/2361)

## Protocol Stats

This month, CoW Protocol settled a total of  **$3.42B.**

![1-cow-dao-march-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_cow_dao_march_2024_highlights_2ba332d346.webp)

The top 3 batches worth highlighting are the following:

**1. Batch with the highest % of CoW trades (**[**Transaction details**](https://explorer.cow.fi/tx/0x613e4155d95f1f9ca7e15a210e54a6b446c5f69ae2638da572289cddc099e4aa?tab=orders&vis=transfers)**):**  The total batch volume was  **$89,900**, and it was created by two traders who were CoWed for  **$85,813, (95.5%)**  of the total batch volume. One trader was buying USDC, the other was selling USDC, and the CoW was facilitated through a common hop in WETH.

![2-cow-dao-march-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_cow_dao_march_2024_highlights_1e110aa48d.webp)

**2. Batch containing the highest volume (**[**Transaction details**](https://explorer.cow.fi/tx/0xe2f795665577f65b4985b6003761ab8e6364222cbec122388b7ee467644dd712?tab=orders)**):**  The total batch volume was  **$20,193,757** and it was created by a single trader swapping  **ETH for USDC**.

![3-cow-dao-march-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_cow_dao_march_2024_highlights_5e00b79ce8.webp)

**3. Batch with the highest amount of surplus (**[**Transaction details**](https://explorer.cow.fi/tx/0xe2f795665577f65b4985b6003761ab8e6364222cbec122388b7ee467644dd712?tab=orders)**):**  The batch with the highest surplus was the same as the batch with the highest volume, for a total volume of  **$20,193,757** and a surplus of  **325,762 USDC (1.58%).**

![4-cow-dao-march-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_cow_dao_march_2024_highlights_adfaa341fe.webp)

During the month of  **March**, the top 10 traders traded a total of  **$44,898,507.**

![5-cow-dao-march-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/5_cow_dao_march_2024_highlights_468f2d3834.webp)

In the table below you can see the total volume for this month’s biggest trades. The most active trader executed a whopping  **$19,601,868**  in trades with CoW Protocol this month.

![6-cow-dao-march-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/6_cow_dao_march_2024_highlights_3095ac6111.webp)

## Solvers

In  **March**, solvers generated a total of  **$23M**  in surplus, which is money in the pockets of traders.

![7-cow-dao-march-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/7_cow_dao_march_2024_highlights_e1caf63a45.webp)

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

![8-cow-dao-march-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/8_cow_dao_march_2024_highlights_2c3cb003af.webp)

## Governance

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

![9-cow-dao-march-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/9_cow_dao_march_2024_highlights_d5eee98f7e.webp)

## Executed Proposals

The DAO  **executed one important proposal**  this month:

-   [CIP-39: Continued funding for development services — Service Agreement №3](https://snapshot.org/#/cow.eth/proposal/0xd4b23381a63b19d971e625e1fcef6ffa26d6d685df8b28ca590c251506669a53)

## Draft Proposals

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

-   [CIP-40: MEV Blocker fees](https://forum.cow.fi/t/cip-40-mev-blocker-fees/2366)
-   [CIP-41: Claim and Delegate CoW DAO’s SHU Token Allocation](https://forum.cow.fi/t/cip-41-claim-and-delegate-cow-daos-shu-token-allocation/2360)
-   [CIP-42: Enhancing Treasury Asset Usage](https://forum.cow.fi/t/cip-42-enhancing-treasury-asset-usage/2361)

Make sure to read the proposals 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

-   In March, CoW Protocol had its  [largest month ever](https://dune.com/queries/2508216/4127586), with a trading volume of over  **$3.4 billion**. The CoW is quickly becoming a bull 😈

![10-cow-dao-march-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/10_cow_dao_march_2024_highlights_ae68c0eeda.webp)

-   The CoW team came together in Portgual for a yearly off-site that included a hackathon, presentations, and valuable in-person quality time
-   After taking the DeFi world by storm in February, CoW AMM  [received a Safe App announced by none other than Steve Ballmer](https://x.com/CoWSwap/status/1767587714826956807)  in a new video
-   A  [first report](https://twitter.com/CoWSwap/status/1773163707331461620?s=20)  of the newly-enabled out-of-market limit orders has identified they’ve generated 130 ETH for the protocol with no negative impact on user retention
-   The marketing team featured a new  [Widget](https://x.com/CoWSwap/status/1770489389900292344?s=20)  campaign, added new terms to the  [CoW glossary](https://x.com/CoWSwap/status/1765396565504717225?s=20), and posted a  [transaction highlight featuring surplus-capturing limit orders](https://twitter.com/CoWSwap/status/1773759519522533509?s=20)
-   CoW Protocol  [joined in the call to unblock crypto](https://x.com/CoWSwap/status/1765756459755634824)  together with some of the biggest names in DeFi
-   Anna from the CoW team was featured on the  [Deus Ex DAO](https://x.com/CoWSwap/status/1764621816633385090?s=20)  podcast
-   The blog received an update with a new article: “[MEV Bots: Switch From Searcher to Solver](/learn/mev-bots-switch-from-searcher-to-solver)”

## Product Updates

**Backend**

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

-   Replaced orders with custom appdata
-   Transitioned solvers to a new API
-   Made steady progress on protocol and partner fees
-   Rolled out verified quotes on staging

**Frontend**

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

-   Released CowSwap 1.62.0 which includes a partner fee option for the Cow Swap Widget, a “recreate limit order” option which allows users to duplicate their limit orders in a couple of clicks, and a redesign of the fee display
-   Prepared the CoW Swap “I’m Feeling Lucky” feature as an April Fool’s joke
-   Worked on a feature that allows placing limit orders for amounts beyond what a user currently has in their wallet

## Open Job Positions

### Engineering

[DevOps Engineer](https://boards.eu.greenhouse.io/cowswap/jobs/4311312101)

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CoW DAO March 2024 Highlights

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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

Surplus notifications are now live on CoW Swap! Just navigate to your account page to see the total amount of price surplus CoW Swap has generated across all your trades.

Surplus notifications will also pop up after each trade, showing you how much extra you’ve earned for that trade!

![announcing-cow-swap-surplus-notifications-cover-photo.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/announcing_cow_swap_surplus_notifications_cover_photo_dbb7d409c9.webp)

## What is Surplus?

On CoW Swap, we call any improvement over your quoted price “surplus”.

-   **Positive Slippage**: Sometimes the market moves to your advantage and the asset you’re trading becomes cheaper between the time you’re quoted and the time of execution. On CoW Swap, that price savings is passed on to you
-   **Coincidence of Wants (CoWs)**: If your order is matched peer-to-peer with someone else, you save on gas costs and LP fees. That price surplus is also passed along to you
-   **Any other price improvement**: If the solvers can find a better source of liquidity than they originally quoted, or improve the price in any other way, this price improvement is forwarded to you.

## CoW Swap Passes Along the Most Surplus

CoW Swap is the only exchange that passes along all types of price improvements. Positive slippage, gas savings, and other optimizations usually end up in the protocol treasury for most DEXs and DEX aggregators. At CoW, we put our users first, so you can rest assured that if we find a better price, it’ll be you we tell first.


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Announcing CoW Swap Surplus Notifications

_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.
