Why Traders Trust CoW Swap for High Volume Trades

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

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

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

CoW Swap Reduces Slippage

Slippage is the amount the price of an asset may vary between the time the trade is placed and the time it actually executes.

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

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

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

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

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

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

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

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

Protecting Slippage Tolerance

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

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

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

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

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

Gives traders more than they ask for

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

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

Coincidence of Wants (CoWs)

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

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

Privileged Pricing for Traders

Using CoW Swap directly often means traders can gain access to prices only reserved for pros! CoW Swap’s unique relationship with projects like Balancer allows traders to access reduced fees, by as much as 75% when Solvers use liquidity on the network.

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

Batch Pricing

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

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

Better UX for advanced traders

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

Improved multisig experience

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

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

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

Milkman, CoW Swap’s secret UX sauce

For traders looking to trade at some point in the future, on traditional DEXes that’s a challenge. That’s why CoW DAO built Milkman. Milkman is a specialized smart contract for advanced traders that lets them set their slippage tolerance for trades in the future.

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

• DAOs that need trades to execute after passing a governance process

• Groups that need hours to collect signatures to execute trades from a multisig wallet

• Applications that process automated swaps years in the future (e.g. for payroll or treasury management).

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

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

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

It’s why DAOs like Aave and ENS, have already used Milkman to trade over $20M worth of tokens. Beyond allowing these DAOs to count on reliable prices, Milkman lets them reduce their overall number of governance votes and gives them standard CoW Swap benefits like best price execution and best-in-class MEV protection — critical for large trades.

Programmatic Orders

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

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

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

Users can even bundle multiple actions together into one single order. For example, if a trader wanted to withdraw and swap a token for another in the future, it can do so using programmatic orders. No need to create multiple transactions, thanks to Hooks. This is a unique feature of CoW Swap. How does it work?

They allow any user to to pair multiple steps together into a single transaction. Let’s say you want to unstake tokens to take advantage of a price movement, sell a token and swap it for another. With Hooks that can be created and executed in one single transaction. No more multiple transactions, no more multiple fees. Find out more about how to use Hooks here.

In summary: Why Traders Trust CoW Swap

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

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

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

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