CoW Swap is intentionally spelled with weird capitalization. The pursuit of a “Coincidence of Wants” (CoW) underpins its unique approach compared to other decentralized exchanges (DEX). Unlike typical decentralized exchanges, CoW Swap allows for direct order matching between traders before considering traditional liquidity pools.
By avoiding on-chain liquidity pools, traders save on LP fees and gas costs, resulting in better trading prices. This method also protects against MEV attacks by enabling peer-to-peer exchanges, thereby eliminating opportunities for transaction hijacking. CoWs are particularly effective for large deals or for assets with lower liquidity.
They can also lead to lower slippage and are part of the protocol’s main goals: ensuring fair trading conditions by developing features that directly benefit users.
On the Bell Curve podcast (Spotify/Apple), Anna George, CEO and co-founder of CoW Protocol, discussed how the project’s newest feature – programmatic orders – expands the ways traders can automate their strategies.
By using ERC-1271, CoW allows users to “add any type of on-chain interaction before and after a normal exchange,” George told Blockworks’ Michael Ippolito and co-host Dan Robinson.
For example, how about setting up 100 different TWAP jobs to run and then updating the frequency for all of them with a single signature?
Or introduce stop-loss orders and automatic DCA (dollar cost averaging) systems entirely on-chain?
The feature allows users to automate complex trading strategies, portfolio management, and even DAO treasury operations.
Ludwig Thouvenin, founder of Sorella Labs, shared the guest microphone on Bell Curve and explained the mechanisms behind the “plague” of Maximum Extractable Value (MEV) – also known as Loss versus Rebalancing (LVR) – which makes providing passive liquidity unprofitable.
He pointed out that 80% of the volume on Uniswap is arbitrage. Due to Ethereum’s 12-second block times, DEX LPs are constantly moving in price in the past, while centralized exchanges operate with a “continuous time” order book.
“MEV comes about because there is this sequential execution of transactions,” Thouvenin explained. “You have different prices for an asset and a block, and then they are arranged arbitrarily or someone else intentionally arranges them in a certain way to maximally avoid slippage.”
This notion of “stale” price offerings is exploited by vertically integrated block builders who take advantage of asymmetric information – the knowledge of prices from centralized exchanges – and bet on winning Ethereum’s block auction to be the first to extract value from the passive LPs .
“Sorella” means “siblings” and the company’s Angstrom project, built on Uniswap V4 hooks, aims to group all transactions of a given asset into one big, happy family with the same price.
The technique, called batch auctions, eliminates the arbitrageur’s advantage – his chance for near-risk-free profits, which, according to Thouvenin, “should not exist in a well-functioning market.”
“This is a philosophical question [and] I think it’s more of an existential question for blockchain in the sense that this value, starting from MEV, is mostly extractive – someone loses – and we see that today with LPs.”
George agreed and said: “[Automated Market Makers] which we now know may be in danger of disappearing because it is neither profitable nor efficient.”
Ludwig expects that over time, passive LPs will rely exclusively on third-party services to provide and manage their liquidity – an efficient solution “as long as you eliminate the inherent loss that occurs every time there is something poisonous.” [order] flow.”
So Angstrom’s goal is to redirect value to the LP.
“You have to design the application so that you are aware of the fact that a MEV opportunity is being created. However, if this is the case, the application itself must actually give someone the right,” he said.
“You have to have control over who can actually extract that value.”
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