DeFi • February 14, 2024, 10:00 am EST
CoW DAO, which operates user-protecting protocols such as CoW Swap and MEV Blocker, is launching an automated market-making solution aimed at protecting liquidity providers from the maximum recoverable value.
CoW DAO’s solution, which – unlike other AMMs – protects liquidity providers from a type of MEV called loss versus rebalancing. LVR refers to the losses incurred by liquidity providers on an AMM-based decentralized exchange due to arbitrage bots constantly rebalancing liquidity pools.
The AMM would capture the MEV that would otherwise be lost to arbitrageurs – or MEV bots – and return it to LPs, the developers explained. “Liquidity providers are protected from toxic flows and know that whoever restores balance will always pass on excess to them,” said a CoW DAO spokesperson.
An automated market maker is a decentralized exchange that facilitates trading between crypto tokens. Instead of relying on traditional order books where buyers and sellers match orders directly, AMMs use liquidity pools to automate pricing and trading.
The project’s flagship offering to date is CoW Swap – an intent-based decentralized exchange aggregator. The AMM version will complement the aggregator and allow existing users to access better liquidity.
While CoW DAO's other products already protect traders from MEV, CoW AMM is the project's first product to protect liquidity providers.
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