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George Hristov

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

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

## 1st Trade Details

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

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

## 2nd Trade Details

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

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

## Why CoW Swap?

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

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

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

## Milkman

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

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

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

## CoW Swap: The leader in DAO trading

The largest DAO trades take place on CoW Swap, and the exchange is single-handedly responsible for more than 30% of all DAO trades. Check out  [CoW Swap for DAOs](https://blog.cow.fi/cow-swap-for-daos-8d67831c2a13)  to learn why DAOs such as  [ENS](https://medium.com/@cow-protocol/ens-trade-breakdown-a8eb00ddd8c0),  [Nexus Mutual](https://medium.com/@cow-protocol/nexus-mutual-trade-breakdown-4aacc6a94be8), and more trust CoW Swap with their large trades.

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

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


Aave Trade Breakdown

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

Slippage is the difference between the price at which an 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?

A cow is a large, domesticated animal that’s been used as livestock for centuries…

But a CoW — now that’s a totally different thing!

The acronym “CoW” stands for “Coincidence of Wants” and it’s the founding mechanism behind the creation of CoW Swap, as well as the inspiration for our cow theme! A Coincidence of Wants is an economic phenomenon where two parties swap assets with one another peer-to-peer. On CoW Swap, a Coincidence of Wants occurs when two (or more) traders swap cryptocurrencies with each other without having to use on-chain liquidity.

To illustrate the concept better, let’s look at an example.

## How to Have a CoW

Let’s say Meredith wants to buy 0.5 ETH in exchange for $1,000 DAI. At the same time, another trader, Eli, wants to swap 0.75 ETh for $1,500 DAI.

On a traditional exchange such as Uniswap, Meredith and Eli would both tap an ETH / DAI liquidity pool in order to make their trades.

![1-how-to-have-a-cow.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_how_to_have_a_cow_40e7bc1ad9.webp)

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

If you notice, Meredith and Eli each have what the other wants. This means that Meredith can give her ETH to Eli directly, and he can give his DAI to her in return as a peer-to-peer trade that does not need to go through a liquidity pool. In this way, Meredith can have her trade fully filled without having to ever use on-chain liquidity! This saves on liquidity provider fees and gas costs, avoids slippage, and prevents MEV attacks.

![2-how-to-have-a-cow.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_how_to_have_a_cow_80b25b7aea.webp)

So Meredith walks away with $1,000 of Eli’s DAI, and she gives him her 0.5 ETH.

You’ll notice here that Eli is seeking $1,500 DAI — which is $500 more than what Meredith gave him. In this case, assuming there is no one else in Eli’s batch who can do a second CoW trade with him, Eli’s trade will have to be routed to an on-chain liquidity pool through a service like Uniswap or Balancer in order to fill the remainder of his trade.

CoW Swap automatically matches Coincidences of Wants and routes unfilled orders through the most optimal on-chain liquidity. CoWs are possible due to CoW Swap’s delegated trading model that uses  [solvers](https://docs.cow.fi/cow-protocol/tutorials/solvers)  to execute your trades through the most optimal trading path.

## The Benefits of CoWs

CoWs do a lot: they protect you from MEV, and you save on all kinds of fees including liquidity provider fees, gas fees, and slippage …all with no methane released into the atmosphere ;)

### Lower Fees

The main advantage of CoWs is that they bypass liquidity provider fees and save on gas fees, meaning you get a better price for your trades. When you’re swapping an asset directly with another trader, you are not tapping into on-chain liquidity from a protocol like Uniswap, so you do not have to pay their LP fees and your peer-to-peer trade costs less in gas than interacting with smart contracts. Additionally, certain types of CoWs bundle orders together in order to send them to an on-chain liquidity source, meaning that your gas is also cheaper.

On CoW Swap, these savings get passed on to you in the form of lower prices for your trades!

### MEV Protection

MEV, or “maximally extractable value” is a hidden tax on Ethereum trades that can result in failed transactions and unfavorable prices. Any time you submit a transaction to the blockchain, it may get re-ordered and hijacked by opportunistic traders looking to make a buck off your alpha (learn more about how CoW Swap solves MEV  [here](https://medium.com/@cow-protocol/how-cow-swap-solves-the-mev-problem-fd35b0127390)).

CoWs protect you from MEV because they are peer-to-peer swaps that don’t rely on on-chain liquidity. This means that there are no opportunities for your trade to get hijacked, since you’re interacting with another trader, rather than going through a liquidity pool. In other words, CoWs make transaction ordering irrelevant when interacting with AMMs as they are simple, peer-to-peer trades among traders themselves.

### Less Price Impact

Price impact is a major concern for large trades or for assets with relatively low liquidity. Whenever a trade impacts a liquidity pool enough to change the prices of the assets in the pool, it causes a “price impact”.

If you attempt to purchase $5,000 worth of BNB tokens, for example, but there isn’t enough liquidity to fill your entire order at a fixed market price, you may experience a price impact that causes you to get $4,950 worth of BNB tokens for the $5,000 that you pay.

CoWs alleviate price impact for large trades. If part of your trade is matched peer-to-peer with another trade, you will need to use less on-chain liquidity, thus reducing the impact that your trade will have on asset prices.

## Types of CoWs

CoWs are possible thanks to CoW Swap’s delegated trading model. On CoW Swap, users sign an “intent to trade” message, rather than submitting a transaction, when initiating a trade. This signed message allows for all sorts of order optimizations including CoWs, price improvements, gas optimizations, and much more that’s not possible when directly submitting transactions.

There are several different types of CoWs, each with varying complexity and levels of price savings.

### Simple CoW

![3-benefits-of-cow.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_benefits_of_cow_150c8f788e.webp)

The example of Meredith and Eli at the beginning of this article is an instance of a simple CoW. In a simple CoW, two traders that each have an asset the other wants come together to execute a peer-to-peer swap.

In contrast, on Uniswap this trade would require using a liquidity pool:

![4-benefits-of-cow.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_benefits_of_cow_281b830815.webp)

### Batching CoW

![5-benefits-of-cow.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/5_benefits_of_cow_68a360bd82.webp)

Another type of CoW is the “batching” CoW trade that occurs whenever two traders are trading the same asset. For example, if two traders are looking to buy ETH in exchange for USDC, CoW Swap batches their trade together and executes a single on-chain transaction from a liquidity pool like Uniswap for the combined amount of ETH for both trades.

This saves on fees since, instead of having to execute the transactions individually and spend gas twice, the protocol batches the trades together into a single transaction, reducing the overall gas cost.

Here is what this trade would look like on a traditional liquidity pool through Uniswap. As you can see, there is a redundancy that’s saved when trading on CoW Swap.

![6-benefits-of-cow.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/6_benefits_of_cow_3391fc0925.webp)

### Intermediate CoW

![7-benefits-of-cow.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/7_benefits_of_cow_79e8dd4812.webp)

CoW Swap’s delegated trading model allows for gas optimizations through “intermediate CoWs.”

An intermediate CoW is similar to a simple CoW, but with the caveat that it is not a perfect A-B and B-A settlement. This type of CoW uses intermediate “hops” that both trades have to do in order to complete.

For example, in order to exchange COW for USDT, your trade might first have to go COW to ETH and then ETH to USDT. If, at the same time, another trader is trading USDT for CRV, they will go through the opposite trading route: USDT to ETH and then ETH to CRV. In both cases, there is an opportunity for a Coincidence of Wants in the intermediate leg (ETH to USDT and USDT to ETH).

Here is what this trade would look like on a traditional liquidity pool through Uniswap.

![8-benefits-of-cow.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/8_benefits_of_cow_2e078ec2ef.webp)

### Multidimensional CoW, AKA a “Ring Trade”

In some batches, there are multiple orders which can all combine together in multiple Coincidences of Wants. In fact, one of the most interesting use cases of CoWs is what’s known as a “ring trade”. Ring trades enable a true barter-economy style of swapping. Traders can swap unrelated assets without relying on external liquidity.

Let’s take a look at an example of a Ring Trade:

![9-benefits-of-cow.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/9_benefits_of_cow_96c53012be.webp)

In the above scenario, we have four parties:

-   Eli
-   Edith
-   Lily
-   Chow

Trading four assets

-   ETH
-   USDT
-   COW
-   DAI

As you can see, each party wants to swap one of their assets for one of the others in the batch. In this case, however, there is no “perfect” Coincidence of Wants — where one party has exactly what the other party needs — instead, we can get everyone what they want by trading around the “ring”.

Eli wants to trade his ETH for DAI. He sends his ETH to Edith, who gives her USDT to Lily who gives her COW to Chow, and finally, Chow gives his DAI to Eli. In this way, Eli’s trade is filled by going through a three-party Coincidence of Wants ring trade. This logic holds for the other three participants as well:

1.  Edith gets her ETH from Eli, even though she has no DAI (the asset he really wants) to give him in return
2.  Lily trades COW for USDT using Chow, Eli, and Edit as proxies
3.  Chow does the same thing for his DAI to COW trade

Ring trades are a powerful use-case of CoWs that can occur whenever a batch of orders gets large enough.

On Uniswap, this trade would be much more complicated (and expensive!)

![10-benefits-of-cow.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/10_benefits_of_cow_924199f399.webp)

## CoWs: Your Ticket to Better Prices

CoW Swap turns economic theory into reality by utilizing CoWs (Coincidences of Wants) to optimize prices and enable safer trades.

The protocol relies on Order Flow Auctions which allow users to sign composable intents to trade rather than committing to a specific transaction. Through intents,  [solvers](https://docs.cow.fi/cow-protocol/tutorials/solvers)  can use multiple sources of liquidity, compose trades together, and perform all sorts of optimizations. This is what makes CoWs possible!

Give CoWs a shot by  [using CoW Swap for your next trade](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=cow-article). Happy trading!

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An overview of Coincidences of Wants (CoWs) & the benefits they bring to CoW Swap traders — it’s not just a meme!


What are CoWs on CoW Swap?


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


CoW DAO March 2024 Highlights

![1-tally-gif.gif](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_tally_gif_0192363076.gif)

DAO trading presents a unique set of challenges when compared to retail trading. While small trades can easily access the liquidity necessary to execute quickly and efficiently, DAOs have to go through a complex proposal and voting process to simply initiate a trade. When actually placing the trade, DAOs also have to worry about optimizing liquidity sources, reducing price impact, avoiding MEV, fine-tuning slippage, and much more.

The DAO governance process ensures that all stakeholders get a say, but when it comes to executing trades, it forces DAOs into a difficult choice:

1.  **Announce and commit to the trade in advance to collect votes**: This exposes the trade to significant MEV risk since the DAO makes the exact trade details known in advance… or,
2.  **Elect a treasury management team to execute the trade**: This keeps trade details private, but bypasses the regular governance process and requires trusted third parties

This choice between losing money to MEV or having to delegate treasury decisions leads many DAOs to avoid making trades unless absolutely necessary. This causes more problems since regular trades are necessary for effective treasury diversification.

Today, [CoW Swap](https://cow.fi/)  and [Tally](https://www.tally.xyz/), two of the most trusted names in the DAO space, are putting an end to this tradeoff once and for all.

We’re excited to announce the launch of the Tally Recipe for CoW Swaps: a combined governance & swap mechanism that eliminates the need for precise trade timing and gives DAOs the best of both worlds.

## CoW Swap & Tally Present: The Tally Recipe for CoW Swaps
![2-cow-swap-and-tally-present.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_cow_swap_and_tally_present_a1c0a92d1d.webp)

**The Tally Recipe for CoW Swaps relies on** [**Milkman**](https://github.com/charlesndalton/milkman)**, a CoW Grants-funded project developed by contributors from** [**Yearn.fi**](https://yearn.fi/)**, to enable easier DAO trading.**

Milkman is a trading mechanism that uses a real-time price checker instead of a fixed slippage tolerance for executing trades. It has quickly become a critical tool for DAOs, as it encodes a guaranteed price on-chain at the time of the trade execution, rather than during the proposal process. The Milkman smart contract uses a bot that places trades on behalf of the DAO based on the parameters encoded in the DAO’s signed message.

Rather than including a fixed price and slippage tolerance in the governance proposal for an upcoming trade, DAOs can instead use a price checker (such as a Uniswap v3 price oracle) to complete the trade based on whatever the price is at the time of execution (within some slippage deviation).

Previously, DAOs had to run Milkman via scripts and code, but  [CoW Swap](https://cow.fi/)  and [Tally](https://www.tally.xyz/)  have created an easy-to-use operational UI interface for Milkman through the Tally Recipe for CoW Swaps.

## How the Tally Recipe for CoW Swaps Works

The Tally Recipe for CoW Swaps makes DAO trading super simple.

![3-how-the-tally-recipe-works.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_how_the_tally_recipe_works_335fcb4e85.webp)

When creating a governance proposal through Tally, DAO managers can add a “swap” action, in which they can specify:

-   The assets that the proposal will trade
-   The price checker that will be used to guarantee that the price at the moment of execution won’t deviate from the market price by more than the specified slippage tolerance
-   The slippage amount that the DAO is willing to accept

Once the governance proposal for the DAO trade passes, the Milkman bot automatically picks up the transaction, checks the signature, and forwards the order to CoW Swap. Thanks to an  [EIP-1271](https://cow-protocol.medium.com/tutorial-creating-smart-orders-on-cow-protocol-683a5f9f4763)  integration, CoW Swap can verify that the attached signature is valid and contains all the necessary trade parameters, even if it comes from a smart contract. The transaction then moves to the CoW orderbook and the solvers compete to find the best price and execution path for the order.

## Tally & CoW Swap for Your DAO

DAOs have lots of options when it comes to governance and treasury management. Tally and CoW Swap are both committed to creating tools for enhancing the DAO trading experience.

### Tally makes DAO governance management a breeze. DAOs can use Tally to:

-   Create a home page for existing members and new visitors
-   Create and manage DAO proposals
-   Allow participants to vote on DAO proposals or delegate their voting power through a personal profile
-   Allow delegates to advocate for receiving more votes by making a profile and showcasing their past voting activity

### CoW Swap offers DAOs:

-   The best prices from all available on-chain liquidity and through peer-to-peer swaps
-   MEV protection through a network of solvers
-   Forwarding of positive price surplus (your quoted price is the worst price you’ll pay)
-   EIP-1271 smart orders that find the best price at the time of execution
-   And  [much more](https://blog.cow.fi/cow-swap-for-daos-8d67831c2a13)

For DAOs large and small, the Tally Recipe for CoW Swaps takes treasury swaps to a whole new level. Enjoy trading with the peace of mind of a retail trader — regardless of how big your trade is.

To use the Tally Recipe for CoW Swaps for your DAO, sign up with Tally through [their website](https://www.tally.xyz/).

Happy trading!

## About CoW DAO

CoW DAO is an open organization of developers, traders, market makers and many more community members aligned with its vision. CoW DAO is focused on fair and decentralized trading systems — in particular, building, maintaining and advancing the CoW Protocol. CoW Protocol technology powers a network of traders and solvers, enabling trustless and efficient peer-to-peer trading. Leveraging batch auctions as a key concept uniquely positions CoW Protocol as native trading infrastructure for discrete-time settlement layers like Ethereum and enables fair and accessible trading to its users.

🐦 [Twitter](https://twitter.com/CoWSwap)| 📒 [Documentation](https://docs.cow.fi/)| 💬  [Forum](https://forum.cow.fi/)  | 📊  [Analytics](https://dune.com/cowprotocol)  | 📸 [Snapshot](https://snapshot.org/#/cow.eth)

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Bring your DAO trades to the next level with governance-initiated swaps

Tally Recipe for CoW Swaps


## TL;DR

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

## Protocol Stats

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

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

The top 3 batches worth highlighting are the following:

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

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

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

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

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

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

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

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

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

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

## Solvers

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

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

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

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

## Governance

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

## Executed Proposals

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

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

## Draft Proposals

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

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

## CoWmunity News

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

## Product Updates

**Backend**

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

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

**Frontend**

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

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

## Open Job Positions

There are currently no open positions.

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

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CoW Protocol February 2024 Highlights

**Intent to Trade:** When users submit orders on CoW Swap, they are not actually initiating a blockchain transaction, like they would on Uniswap. Instead, orders are submitted as signed “intent to trade” messages which include the details of the intended trade, but are not actually submitted to the blockchain. From here, independent parties known as “[solvers](https://docs.cow.fi/cow-protocol/tutorials/solvers)” find the best execution path for the specified trade and execute the trade on-chain on behalf of the user. If a trade route cannot be found for any reason, the transaction will not execute and the user will not be charged a fee for the failed transaction.

**Delegated trade execution**: When it’s time to actually execute a settlement (which can contain multiple trades),  [solvers](https://docs.cow.fi/solvers/solvers)  lock in the execution path and submit the transaction to the blockchain. Note here that it is the solvers who are completing the transaction on behalf of the user, meaning that they determine the correct slippage tolerance to use, the right amount of gas fees, as well as taking on the risk of negative price movements or MEV.

The delegated trading model also means that traders using CoW Swap do not have to spend ETH to cover gas. Instead, gas fees come out of the sell token when making trades.

**AMM**: Automated Market Makers, also known as “DEXs,” 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 amount of slippage tolerance is always necessary because the prices of crypto assets are constantly fluctuating. By the time your trade executes, the price may have moved. Setting your slippage tolerance too high, however, leaves room for searchers to sandwich your trades.

**Price Impact**: Crypto markets, like all markets, are based on supply and demand. AMMs maintain “liquidity pools” of assets which they use to fill trades. Each trade drains some amount of this liquidity and moves the asset's price. 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 only 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.

**EOA Wallets:**  Externally owned accounts (EOAs) are Ethereum accounts controlled by private keys. EOA wallets — for example: MetaMask, Rainbow, and Rabby Wallet — allow users to (1) send, hold, and receive Ethereum-native tokens, and (2) interact with smart contracts. Unlike smart contract wallets, EOA wallets are usually generated with a seed phrase and do not have any code associated with them.

**Milkman**: The  [Milkman](https://github.com/charlesndalton/milkman)  smart contract ensures trades are executed for the real-time price or better by utilizing a price checker, such as a Uniswap pool or an oracle. Instead of setting a fixed slippage tolerance based on the current market price, DAOs can utilize Milkman to determine a maximum percentage deviation from a real-time price sourced from a price checker, guaranteeing that their trade will finalize at a fair market price. If a trade can’t be executed within the defined price or better, the order remains pending until the price condition is met, or until the trader cancels the order.

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A list of terms & definitions related to CoW Protocol


CoW Protocol Glossary

## 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.

## About CoW DAO

CoW DAO is an open organization of developers, traders, market makers and many more community members aligned with its vision. CoW DAO is focused on fair and decentralized trading systems — in particular, building, maintaining and advancing the CoW Protocol. CoW Protocol technology powers a network of traders and solvers, enabling trustless and efficient peer-to-peer trading. Leveraging batch auctions as a key concept uniquely positions CoW Protocol as native trading infrastructure for discrete-time settlement layers like Ethereum and enables fair and accessible trading to its users.

🐦 [Twitter](https://twitter.com/CoWSwap)| 📒 [Documentation](https://docs.cow.fi/)| 💬  [Forum](https://forum.cow.fi/)  | 📊  [Analytics](https://dune.com/cowprotocol)  | 📸 [Snapshot](https://snapshot.org/#/cow.eth)

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CoW Protocol June 2023 Highlights

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

## Trade Details

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

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

## Why CoW Swap?

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

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

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

## Milkman

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

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

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

## CoW Swap: The leader in DAO trading

The largest DAO trades take place on CoW Swap, and the exchange is single-handedly responsible for more than 30% of all DAO trades. Check out  [CoW Swap for DAOs](https://blog.cow.fi/cow-swap-for-daos-8d67831c2a13)  to learn why DAOs such as  [Aave](https://blog.cow.fi/aave-trade-breakdown-e17a7563d7ba),  [Nexus Mutual](https://blog.cow.fi/nexus-mutual-trade-breakdown-4aacc6a94be8), and more trust CoW Swap with their large trades.

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

## About CoW DAO

CoW DAO is an open organization of developers, traders, market makers and many more community members aligned with its vision. CoW DAO is focused on fair and decentralized trading systems — in particular, building, maintaining and advancing the CoW Protocol. CoW Protocol technology powers a network of traders and solvers, enabling trustless and efficient peer-to-peer trading. Leveraging batch auctions as a key concept uniquely positions CoW Protocol as native trading infrastructure for discrete-time settlement layers like Ethereum and enables fair and accessible trading to its users.

🐦 [Twitter](https://twitter.com/CoWSwap)| 📒 [Documentation](https://docs.cow.fi/)| 💬  [Forum](https://forum.cow.fi/)  | 📊  [Analytics](https://dune.com/cowprotocol)  | 📸 [Snapshot](https://snapshot.org/#/cow.eth)

large_ens-trade-breakdown-cover-photo.webp

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ENS Trade Breakdown

## 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)

## About CoW DAO

CoW DAO is an open organization of developers, traders, market makers and many more community members aligned with its vision. CoW DAO is focused on fair and decentralized trading systems — in particular, building, maintaining and advancing the CoW Protocol. CoW Protocol technology powers a network of traders and solvers, enabling trustless and efficient peer-to-peer trading. Leveraging batch auctions as a key concept uniquely positions CoW Protocol as native trading infrastructure for discrete-time settlement layers like Ethereum and enables fair and accessible trading to its users.

🐦 [Twitter](https://twitter.com/CoWSwap)| 📒 [Documentation](https://docs.cow.fi/)| 💬  [Forum](https://forum.cow.fi/)  | 📊  [Analytics](https://dune.com/cowprotocol)  | 📸 [Snapshot](https://snapshot.org/#/cow.eth)

CoW Protocol July 2023 Highlights


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

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

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

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

## How does a DEX aggregator work?

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

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

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

### Traditional DEX Aggregators

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

_1inch DEX Aggregator_

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

### Meta DEX Aggregators

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

_DeFi Llama Meta DEX Aggregator_

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

### Intent-Based DEX Aggregators

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

_CoW Swap Intent-Based DEX Aggregator_

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

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

## Benefits of Using a DEX Aggregator

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

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

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

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

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

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

## What is the Best DEX aggregator?

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

## CoW Swap: The Leading Intent-Based Aggregator

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

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

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

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

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

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


What is a DEX Aggregator

## TL;DR

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

## Protocol Stats

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

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

The top 3 batches worth highlighting are the following:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

## Governance

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

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

### Executed Proposals

This month the DAO executed three important proposals:

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

### Draft Proposals

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

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

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

## CoWmunity News

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

## Open Job Positions

The CoW Protocol team is currently not hiring

## About CoW DAO

CoW DAO is an open organization of developers, traders, market makers and many more community members aligned with its vision. CoW DAO is focused on fair and decentralized trading systems — in particular, building, maintaining and advancing the CoW Protocol. CoW Protocol technology powers a network of traders and solvers, enabling trustless and efficient peer-to-peer trading. Leveraging batch auctions as a key concept uniquely positions CoW Protocol as native trading infrastructure for discrete-time settlement layers like Ethereum and enables fair and accessible trading to its users.

🐦 [Twitter](https://twitter.com/CoWSwap)| 📒 [Documentation](https://docs.cow.fi/)| 💬  [Forum](https://forum.cow.fi/)  | 📊  [Analytics](https://dune.com/cowprotocol)  | 📸 [Snapshot](https://snapshot.org/#/cow.eth)



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


CoW Protocol October 2023 Highlights

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

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

## Benefits of TWAP orders

### Dollar-Cost Averaging (DCA)

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

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

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

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

### Reduce your price impact

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

### Reduce your slippage

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

## Why TWAP with CoW Swap?

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

### Always receive 100% of your order surplus

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

In our tests, selling 1,000 ETH in four parts of 250 ETH each allowed us to get a price for the order that was 3.5% better than selling the 1,000 ETH all at once! This was in large part thanks to CoW Swap’s batch auctions that include finding  [Coincidence of Wants](https://blog.cow.fi/what-are-cows-on-cow-swap-e72baaa4678a)  and other price improvements.

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

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

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

## Get started with CoW TWAP

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

Don’t have a Safe? No problem! Create one  [here](https://app.safe.global/share/safe-app?appUrl=https%3A%2F%2Fswap.cow.fi&chain=eth). After you make a Safe, you’ll also need to upgrade your fallback handler. Learn what this means and how to do it  [here](https://blog.cow.fi/all-you-need-to-know-about-cow-swaps-new-safe-fallback-handler-8ef0439925d1).

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

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

You can find the full how-to guide on CoW TWAP orders  [here](https://blog.cow.fi/how-to-use-cow-swaps-twap-orders-via-safe-wallet-1a0854484dfb).

As always, on CoW Swap:

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

Happy TWAPping!
![2-why-twap.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_why_twap_6f088c5738.webp)

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


Why TWAP?

MEV, or maximal extractable value, is a form of price exploitation that acts as a “hidden tax” on Ethereum transactions.

To date, MEV has caused over a billion dollars in losses for everyday traders, especially beginners who often don’t know how to protect themselves.

![1-understanding-mev-protection.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_understanding_mev_protection_5c36d92e50.webp)

In this article we’ll take a look at what MEV is and explore some of the popular protection solutions.

## What is MEV protection?

MEV protection refers to a broad set of strategies that keep users safe from price manipulation when trading, providing liquidity, minting NFTs, and more.

### What exactly are you protecting against?

To understand MEV, we must first understand how Ethereum transactions are processed.

![2-understanding-mev-protection.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_understanding_mev_protection_9bb7157306.webp)

When a user places an order, it initially gets submitted to a holding area for pending Ethereum transactions known as the “mempool.” Transactions in the mempool are public, meaning that MEV bots (known as “searchers”) can monitor them for exploitation opportunities. MEV relies on reordering transactions from the order in which they were submitted to a new, more profitable order.

To better understand this process, let’s trace the flow of a sandwich attack — the worst type of MEV.

![3-understanding-mev-protection.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_understanding_mev_protection_b1a61b2259.webp)

Essentially, traders place orders on  [AMMs](/learn/cow-protocol-glossary#:~:text=amm)  by designating a  [slippage tolerance](/learn/cow-protocol-glossary#:~:text=Slippage%20Tolerance). Searchers can exploit these orders by placing similar trades before and after the user trade, manipulating the price of the assets on the AMM and forcing the victim trade to execute at a higher price.

Searchers pocket this difference in price for themselves. Their only cost is the amount of money they spend bribing the Ethereum block builders to order the transactions in a specific way.

To learn more about the different types of MEV, check out our articles on  [sandwich attacks](/learn/what-is-a-sandwich-attack-and-how-can-you-protect-yourself),  [frontrunning](/learn/what-is-frontrunning), and  [backrunning](/learn/what-is-backrunning-mev-attacks-explained).

Now let’s take a look at how you can protect yourself from MEV.

## Slippage tolerance and MEV protection

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.

## RPC endpoint tools for MEV protection

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.

### MEV Blocker

One of the most popular specialized RPC endpoints is  [MEV Blocker](https://mevblocker.io/).

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](/learn/what-is-backrunning-mev-attacks-explained).

Anytime a searcher backruns a user’s transaction, the searcher keeps up to 10% of the value and send the other 90% back to the user as a rebate. So even when a transaction leaves money on the table, MEV Blocker puts it back into the pockets of users.

MEV Blocker provides protection for any type of Ethereum transaction (not just swaps), and it works with all Ethereum wallets. Install the MEV Blocker RPC endpoint by following the instructions  [here](https://mevblocker.io/).

## Decentralized applications and MEV protection

While RPC endpoints provide significant MEV protection, the most complete protection comes at the application layer.

As MEV has become more prevalent, decentralized applications (especially decentralized exchanges — DEX’s) 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.

### Native MEV protection on CoW Protocol

CoW Protocol 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](/learn/cow-protocol-glossary#:~:text=Intent%20to%20Trade)  to achieve the best outcomes for users.

![4-understanding-mev-protection.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_understanding_mev_protection_cf34f8959e.webp)

Starting at the application level, CoW Protocol provides end-to-end MEV protection through its unique protocol design:

**Delegated Trade Execution**: On CoW Protocol, bonded third parties known as “solvers” execute transactions on behalf of users. Solvers source liquidity across multiple DEX’s and even offchain liquidity sources to find the best prices for any given trade. Solvers also execute transactions on behalf of users, meaning they are never exposed to the blockchain directly.

**Coincidences of Wants**  **(CoWs)**: Thanks to CoW Protocol’s batching mechanism, trades may be matched using peer-to-peer liquidity in a  [Coincidence of Wants (CoW)](/learn/what-are-cows-on-cow-swap). This method of trading bypasses AMMs, reducing fees and preventing MEV.

**Uniform Clearing Prices**: Another benefit of batching is that duplicate trade pairs within a given batch clear for the same price. For example, if multiple users are trading ETH and USDC in the same batch, the assets will execute for the same price across the various trades. This makes transaction reordering useless, removing the opportunity for price exploitation.

Thanks to a powerful combination of delegated trade execution, batch auctions, and protected transaction flow through MEV Blocker, CoW Protocol users benefit from thorough MEV protection on all trades.

## CoW DAO protects you from MEV

MEV is a billion dollar problem for the Ethereum ecosystem. CoW DAO builds products to protect users from negative outcomes for transactions of all types and sizes.

DeFi traders can rely on  [CoW Swap](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=understanding-mev-article)  as the most trusted decentralized exchange when it comes to MEV protection. For all other use-cases, including liquidity providing, NFT trading, and more,  [MEV Blocker](https://mevblocker.io/)  provides extensive MEV protection anywhere on Ethereum.

If you want to learn more about MEV, check out “[MEV Transparency: Ensuring Fairness In DeFi Markets](/learn/mev-transparency-ensuring-fairness-in-defi-markets)” and “[How CoW Swap solves the MEV problem](/learn/how-cow-swap-solves-the-mev-problem).”

Safe trading!

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MEV is a billion-dollar problem, but many Ethereum users still don’t know how to protect themselves.


Understanding MEV Protection

## TL;DR

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

## Protocol Stats

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

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

The top 3 batches worth highlighting are the following:

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

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

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

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

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

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

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

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

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

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

## Solvers

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

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

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

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

## Governance

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

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

### Executed Proposals

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

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

### Draft Proposals

There were no new draft proposals this month.

## CoWmunity News

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

## Product Updates

### Backend

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

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

### Frontend

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

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

## Open Job Positions

### Engineering

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

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


CoW DAO April 2024 Highlights

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?

CoW Protocol is proud to announce the launch of CoW Hooks. You can now implement custom-coded DeFi actions that execute directly before and/or after your trades.  **CoW Hooks can be used to chain together complex actions such as trading, bridging, staking, depositing, and much more.**

The best part?  **CoW Hooks execute your entire sequence as a single transaction and, true to the CoW Protocol model, you pay gas fees in your sell token if, and only if, your transaction succeeds.**

> If you are interested in #BUIDLing, reach out, grants are available for great ideas @  [https://grants.cow.fi/](https://grants.cow.fi/)

## Background

In recent months, the crypto industry has been absorbed in discussions on “intent” messages on Ethereum and the new possibilities that this innovation unlocks.

So far, the only production-ready intents system live on Ethereum is CoW Swap. The rest has only been theory and research papers covering the possibilities of intents. What’s more, these papers frame the user transaction as an “intent” but they don’t usually allow for composability. This is why the CoW Swap model asks the user to sign the trade instead of executing it directly on chain… This allows solvers to optimize the order by composing it with other strategies and optimizations. Composability unlocks the real power of intents, as they are meant to abstract the user away from complex interactions.

CoW Swap has been the leader in the intent space for a while and has built one of the most widely-used intent-based models. On CoW Swap, users delegate their trade execution to a network of solvers that complete the transaction on their behalf. This delegated trading model makes way for composability as solvers can batch trades together, find  [Coincidence of Wants](https://blog.cow.fi/what-are-cows-on-cow-swap-e72baaa4678a)  (CoW) matches, update the trading path at the moment of execution (rather than the moment of creation) and more.

Today, CoW Swap is proud to announce the launch of an overhauled intents system that allows for composability of a wide range of actions before and after a swap.

It’s called CoW Hooks.

## What are CoW Hooks?
![1-cow-hooks.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_cow_hooks_801e54dabe.webp)

CoW Hooks are arbitrary Ethereum “calls” that attach to an order and execute before and/or after the order. Developers and advanced traders can use code to express an intent that performs some action before a swap (pre-hooks) and after a swap (post-hooks).

**Pre-hooks**  can be used to “set up” conditions for an order. Examples include executing the code necessary for validating an on-chain signature, or setting the required approvals through an EIP-2612 permit.

**Post-hooks**  execute after a swap takes place and the receiver address receives the funds. Post-hooks provide an opportunity to put the funds to use immediately through staking, liquidity providing, bridging tokens to L2s, and much more.

## How do CoW Hooks work?

CoW Hooks let you do anything you can imagine. You can use whatever you can encode on-chain as a pre or post hook. The only requirement is that your action includes a trade on CoW Swap.

With CoW Hooks, users define:

-   A list of pre-hooks intents
-   The swap intent
-   A list of post-hooks intents

The flexibility of creating CoW Hooks opens up a world of possibilities — all you need to do is encode your actions in the right order for your particular use-case.

### Fresh Address Receives tokens: Permit, Swap & Bridge

Let’s say that you receive USDC and you would like to bridge the funds to another chain. You can use CoW Hooks to execute a token approval, swap, and bridge all at once.

-   **Pre-hooks**: Use a pre-hooks action to approve the token for a swap
-   **Swap**: Use CoW Swap to swap your USDC to the token you would like
-   **Post-hooks**: Send your new tokens to the bridge contract as a post-hook

And just like that, you have received, swapped, and bridged your tokens to a different chain all in one set of transactions. As a bonus, all of your gas fees will be charged in your sell token (USDC in this case,) which means that you can move your received funds without first sending ETH to cover gas costs.

If you are interested in learning more about the code behind this example, we’ve created a walkthrough on how to reproduce this exact set of actions in our CoW Hooks  [documentation](https://docs.cow.fi/overview/cow-hooks), as well as on YouTube:

### Flash Loan payback adapter for CDPs via Stop loss orders

You can also use CoW Hooks to repay debt or manage collateral levels. In this case, your hooks actions might look like this:

-   **Pre-hooks**: Approve the tokens you would like to swap
-   **Swap**: Use CoW Swap to swap for the tokens you need to service your debt
-   **Post-hooks**: Repay your debt and close your position, or use your tokens to add collateral so as to not be undercollateralized

We’ve also put together a walkthrough for how to code this set of hooks, you can view it here:

## Use CoW Hooks for everything

The examples illustrated above are just some of the uses of DeFi assets, but the possible use-cases for CoW Hooks are really endless. Here are some more examples:

-   **Repaying a debt & staking**: You could use CoW Hooks to repay a debt, close a position, swap assets for a yield bearing token, and stake your tokens all-in-one. To do this, you would set your pre-hook action to repaying the debt and closing the position, then you would use CoW Swap to swap your assets, and finally use a post-hook to deposit your new assets into a staking vault.
-   **Opening an LP position**: You can also work with only a pre-hook and a swap or only a post-hook and a swap. For example, if you wanted to open an LP position, you could first swap some assets for ETH, and then use a post-hook for the rest. If you wanted to do this via a CDP, you could deposit your ETH as collateral, borrow stablecoins, swap some stables to the other LP token side, and open a liquidity provider position.
-   **JIT (Just-in-time) smart orders**: Say that you want to leverage the benefits of programmable smart contract wallets to deploy a Safe and also trade via the composable CoW framework (ERC-1271). Using CoW Hooks, you can express the entirety of your transaction sequence at no cost. Connect the deployment of the Safe, execute your custom smart contract approval and swap, and even add on another post-swap action all in one. The entire sequence is conditional on every step being able to execute, otherwise none of it goes through.
-   **NFT sniping & selling:** CoW Hooks also come in useful in the NFT world. You can, for example, sell an NFT and encode a CoW Hooks action to immediately swap those funds for a token of your choice. Or, alternatively, you could place a limit order to purchase crypto at a certain price and then buy an NFT directly after.
-   **Bridging to another chain**: If you want to swap some tokens and bridge them to another chain, you could use CoW Hooks. In your flow, you would first swap your tokens and then send them to a bridge contract in order to combine both the approval and the bridging.
-   **Claiming airdrops**: While they’re not as common as they used to be, airdrops are a core part of many Ethereum projects. You can use CoW Hooks to sell your airdrops without spending any ETH on gas. Simply approve the token in your wallet and add a swap transaction to sell it. Your gas fees will be taken in the sell token, so you can enjoy holding on to your precious ETH.
-   **Unstaking and restaking**: If you’re an Ethereum validator and you want to claim your rewards, you’ll first need to unstake your 32 ETH in order to perform any action with them. With CoW Hooks, you can unstake your ETH, approve and swap to a token of your choice, and then re-stake your new assets somewhere else, all in a single set of encoded transactions.
-   **Automatically growing your LP position:** Let’s say that you’re a liquidity provider for a EUR — USDC pool on Gnosis chain that rewards you in GNO tokens. You can use CoW Hooks to automatically convert your GNO to EUR/USDC in a 50/50 split through CoW Swap and then use each of the assets to increase your LP position.

## What are you going to build with this anon?

The best part about CoW Hooks? They’re fully-featured and already live at the protocol level! So, if you are a developer or an advanced technical user, get your wallets ready and step into a new era in DeFi!

To get started, check out our  [documentation](https://docs.cow.fi/overview/cow-hooks). We’re really excited about all the possibilities with CoW Hooks so if you need help implementing them or have an exciting idea, please reach out on  [Twitter](https://twitter.com/CoWSwap)  or by  [joining CoW Protocol Discord](https://discord.com/invite/cowprotocol).

Happy hooking!

## About CoW DAO

CoW DAO is an open organization of developers, traders, market makers and many more community members aligned with its vision. CoW DAO is focused on fair and decentralized trading systems — in particular, building, maintaining and advancing the CoW Protocol. CoW Protocol technology powers a network of traders and solvers, enabling trustless and efficient peer-to-peer trading. Leveraging batch auctions as a key concept uniquely positions CoW Protocol as native trading infrastructure for discrete-time settlement layers like Ethereum and enables fair and accessible trading to its users.

🐦 [Twitter](https://twitter.com/CoWSwap)| 📒 [Documentation](https://docs.cow.fi/)| 💬  [Forum](https://forum.cow.fi/)  | 📊  [Analytics](https://dune.com/cowprotocol)  | 📸 [Snapshot](https://snapshot.org/#/cow.eth)

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The CoW Protocol intent language just got enhanced through CoW Hooks, making a single intent matching engine into a multi purpose intent execution engine!


CoW Hooks: You are in control!

## TL;DR

-   During the month of  **November**, CoW Protocol handled a total volume of  **$1.49B**, and generated a surplus of  **$11.2M**
-   In terms of Governance, CoW DAO executed CIP-33 and received two important CIP drafts in regards to charging protocol fees and changing the method in which the protocol collects fees
-   In exciting news, CoW Protocol launched a new class of orders called “Programmatic Orders,” launched a configurable CoW Swap widget, took over Istanbul during Devconnect, and participated in several Twitter spaces and podcasts

## Protocol Stats

This month, CoW Protocol settled a total of  **$1.49B.**

![1-November-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_November_2023_highlights_ff892a4ef9.webp)

The top 3 batches worth highlighting are the following:

-   **Batch with the highest % of CoW trades**  ([Transaction details](https://explorer.cow.fi/tx/0x3dea3947bfd480bdfed6251c4a31ff4d040c14cc430338afa110ba7885e3de17?tab=graph)**)**. The total batch volume was  **$747,799.76** , and it was created by two traders who were perfectly CoWed for  **98%**  ($734,793.86) of their volume. One trader was buying tBTC for  **$371,378.52**, and the other trader was selling tBTC for  **$384,428 via a partially fillable limit order**.

![2-November-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_November_2023_highlights_2d2caf95bb.webp)

-   **Batch containing the highest volume**  ([Transaction details](https://explorer.cow.fi/tx/0x0c41ee0a2d1c75034c9258579069dd2e8e7a2a5e59703865e2c0ac47343102c7?tab=graph&vis=transfers)**)**: The total batch volume was  **$8,813,659** and it was created by a single trader who was swapping  **$8.8M of USDT**  **for**  **$8.7M of USDC**.

![3-November-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_November_2023_highlights_550a6dba21.webp)

-   **Batch with the highest amount of surplus**  ([Transaction details](https://explorer.cow.fi/tx/0xb9a63242596218936cb0cd83d2cc460bf7504c563d54a4c2b3e8674f38975d20/?tab=graph&vis=transfers)**)**: The total batch volume was  **$133,898** and it was created by a single trader who was swapping  **RLB**  **for**  **USDC**. This trader achieved the largest surplus for the month of  **November**  by getting 99.33% surplus, which at the time of trade was roughly $**133,002 USDC**, proving once again that solvers are here to improve your trades, not to attack them.

![4-November-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_November_2023_highlights_90bab101e1.webp)

During the month of  **November**, the top 10 traders traded a total of  **$56M.**

![5-November-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/5_November_2023_highlights_79e346c7a3.webp)

In the table below you can see the total volume for this month’s biggest trades. The most active trader executed a whopping  **$27M**  in trades with CoW Protocol this month.

![6-November-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/6_November_2023_highlights_de62650639.webp)

## Solvers

In  **November**, solvers generated a total of  **$11.2M**  in surplus, which is money in the pockets of traders.

![7-November-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/7_November_2023_highlights_09eda2bfdd.webp)

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

![8-November-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/8_November_2023_highlights_a807afb001.webp)

## Governance

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

### Executed Proposals

This month the DAO executed one important proposals:

-   [CIP-33: Should the CoW Treasury Core unit be added to the MEVBlocker Rebates Safe?](https://snapshot.org/#/cow.eth/proposal/0x999a4840ecb71e7edb4102caf19ea5f9ee7b237ece649a0d22eec74f7c1f1c16)

### Draft Proposals

This month, there was 2 new proposals asking for feedback before moving into the next phase, final CIPs, in their current form:

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

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

## CoWmunity News

-   [Launched a new class of orders with the release of the Programmatic Order Framework](https://x.com/CoWSwap/status/1722735351972983030?s=20)
-   [Launched a CoW Swap widget](https://x.com/CoWSwap/status/1724037068610056354?s=20)  to make it easier for projects to integrate with CoW Protocol and enjoy its benefits
-   [Proposed to CoW DAO an entirely new fee collecting method](https://x.com/CoWSwap/status/1729508014686601621?s=20)  aimed to reduce the selling pressure of $COW tokens by solvers.
-   [Took over Istanbul with our packed participation across different events during the Devconnect week](https://x.com/CoWSwap/status/1722341346827202687?s=20). Here are all the available talks:
  → Arbitrageurs’ profits, LVR, and sandwich attacks: batch trading as an AMM design response
-   Intent.wtf →  [Talk](https://www.youtube.com/watch?v=-OXMPmpzFXU)  → Advancing Beyond Swap Intents |  [Panel](https://www.youtube.com/watch?v=1gxweVY9edU)  → The Role of Intent-Driven Transactions in DeFi’s Evolution
-   Good intentions →  [Talk](https://www.youtube.com/watch?v=CTwC204N-68)  → CoW Swap more than swap intents |  [Panel](https://www.youtube.com/watch?v=4n2ChWn1ksQ)  → Intents and MEV Panel
-   Decentralized Scaling summit →  [Talk](https://www.youtube.com/watch?v=evyjRRteZCg)  → The rise of smart orders |  [Panel](https://www.youtube.com/watch?v=v4Y-hf5BTWk)  → How do we balance privacy and surveillance?
-   MEV & Intents Day →  [Talk](https://www.youtube.com/watch?v=hoFVSFn181Y)  → The rise of smart orders |  [Panel](https://www.youtube.com/watch?v=xauLHm98zYc)  → Intents
-   [Sponsored the ETH Global Hackthon Istanbul where we had a great list of submissions for our bounties](https://x.com/CoWSwap/status/1726242733466280436?s=20)
-   Appeared on  [the Bell Curve Podcast to do a breakdown of Frequent Batch Auctions](https://x.com/thebellcurvepod/status/1725193559748272441?s=20), covering why they are superior to other auction types when it comes to DEX trading
-   [Mastercow launched his own treasure hunt](https://x.com/CoWSwap/status/1725579868581306859?s=20)  to make developers race for a treasure and understand the inner workings of the new Programmatic Order Framework
-   [Brave wallet improved the signing modal for CoWSwap](https://x.com/CoWSwap/status/1723027440472400107?s=20)  trades to make it easier for their users to understand what the intent they were signing was
-   Wrote an article about the DAO tooling product “[Milkman](https://x.com/CoWSwap/status/1727326002202935304?s=20)” explaining what it is, and how it works to your DAO’s benefit
-   Joined a Twitter space organized by Taiko debating if “[intents exists outside of Twitter](https://x.com/CoWSwap/status/1729818776013840586?s=20)”
-   Got featured by Chainpatrol.io on  [“Case studies in web3 brand protection”](https://x.com/ChainPatrol/status/1720096549009838328?s=20)
-   Covered CoW Swap in  [Spanish extensively at the DeFi Lab podcast](https://x.com/DeFi_LaB/status/1720113820624974279?s=20)
-   Wrapped up the MEV series articles with our latest article explaining  [what backrunning is](https://x.com/CoWSwap/status/1720143397527368001?s=20)
-   Posted a draft on the  [CoW DAO forum listing the reasons on why adding a protocol fee for CoW Protocol](https://x.com/CoWSwap/status/1720513622474920157?s=20)  is beneficial to the ecosystem and how CoW DAO should approach it
-   CoW Swap got  [integrated into Caddi Finnance](https://x.com/CoWSwap/status/1721559378401034573?s=20)
-   Jumped on a twitter spaces with Diego Defi to explain to our  [Hispanic community what CoW Swap is](https://x.com/diego_defi/status/1721921766132478295?s=20)  (Alta falopa ;) )

## Product Updates

**Backend**

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

-   Worked on several Driver Colocation tests in prod for the new solver set up
-   Fixed error parsing score_cap CLI argument (caused slightly suboptimal score bidding)
-   Optimised driver pipeline (solve → encode → verify / simulate)
-   Worked on several performance optimization fixes for fetching liquidity for quoting
-   Worked on the liveness/readiness probe for the driver to improve rollover when deploying to the cluster
-   Migrated shadow competition to colocated setup (helps debug performance issues)
-   Worked on several performance improvements for the Enso simulator used in the solver submission checks

**Frontend**

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

-   Worked on the landing page for the CoW Swap widget, as well as on the configurator website
-   Widget codebase has been reiterated a few times
-   Improved the performance of loading balances on the CoW Swap UI
-   Improved the robustness of the WatchTower for TWAP orders
-   Worked on expanding the WatchTower capabilities to allow the indexing of all new programmatic order types by implementing an allow/deny list
-   Added widget theming 🌈 to allow teams to configure it to their branding

## Open Job Positions

The CoW Protocol team is currently not hiring

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

CoW Protocol November 2023 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

## TL;DR

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

## Protocol Stats

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

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

The top 3 batches worth highlighting are the following:

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

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

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

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

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

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

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

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

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

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

## Solvers

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

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

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

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

## Governance

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

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

## Executed Proposals

The DAO did not execute any proposals.

## Draft Proposals

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

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

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

## CoWmunity News

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

## Product Updates

**Backend**

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

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

**Frontend**

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

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

## Open Job Positions

The CoW Protocol team is currently not hiring

CoW Protocol December 2023 Highlights

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

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

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

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

## What is MEV?

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

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

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

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

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

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

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

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

**Frontrunning attacks**

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

**Backrunning attacks**

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

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

**Sandwich attacks**

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

Let’s take a deeper look into sandwich attacks.

## Sandwich attacks on the blockchain

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

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

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

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

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

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

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

## MEV Attacks in Practice

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

## Transparency Initiatives

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

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

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

## MEV Blocker

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

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

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

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

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

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

## Dedicated dApps

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

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

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

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

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

## Conclusion

There are many challenges in combating MEV.

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

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


## About CoW DAO

CoW DAO is an open organization of developers, market makers, and community contributors on a mission to create a fairer, more protective financial system. CoW DAO currently supports  [CoW Swap](http://swap.cow.fi/),  [CoW Protocol](https://cow.fi/), and  [MEV Blocker](https://mevblocker.io/)  — DeFi products that leverage order flow auctions to protect users from MEV attacks and give them more than they ask for.

🐦 [Twitter](https://twitter.com/CoWSwap)| 📒 [Documentation](https://docs.cow.fi/)| 💬  [Forum](https://forum.cow.fi/)  | 📊  [Analytics](https://dune.com/cowprotocol)  | 📸 [Snapshot](https://snapshot.org/#/cow.eth)


large_mev-transparency-a-dappcon-talk-cover-photo.png

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thumbnail_mev-transparency-a-dappcon-talk-cover-photo.png

mev-transparency-a-dappcon-talk-cover-photo.png

A DappCon Talk by Olga Fetisova of CoW DAO


MEV Transparency: Ensuring Fairness In DeFi Markets


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!

large_add-custom-tokens-cover-photo.webp

medium_add-custom-tokens-cover-photo.webp

small_add-custom-tokens-cover-photo.webp

thumbnail_add-custom-tokens-cover-photo.webp

add-custom-tokens-cover-photo.webp

How to Add Custom Tokens on CoW Swap

_CoW Swap, a DEX trading platform, has undergone a remarkable transformation over the last few years._

_The platform has transformed substantially from its early days as a dutch auction swap to a leading authority on intents forging new ground through conditional programmatic orders. In a recent presentation, Alex Vinas, the Product Marketing Manager at CoW Swap, traced CoW Swap’s journey and offered insights into its history, pivotal developments, and the promise of the brand new_ [_Programmatic Order Framework_](/learn/introducing-the-programmatic-order-framework-from-cow-protocol) _(Please Note: At the time of the presentation, the Programmatic Order Framework was known as “Composable CoW.”)_

<iframe width="560" height="315" src="https://www.youtube.com/embed/6dA4V_yYn8A?si=M5UYcWadWAU5Mifo" 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 Alex’s talk:_

## A Brief History of CoW Swap

![1-navigating-the-evolution-of-cow-swap.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_navigating_the_evolution_of_cow_swap_ebc6a318b6.webp)

Cow Swap’s journey began back when its current team was a part of Gnosis. At the time, the team was working on decentralized mechanisms for trading prediction market outcomes. It was this work that helped bring to life the famous “x*y=k” formula for AMMs back in 2017 — earlier than even the founding of Uniswap.

### Dutch Auctions

While their initial ideas were good, Gnosis recognized the vulnerabilities of the traditional AMM design and its weakness toward MEV, so the team pivoted to Dutch auctions.

However, this mechanism also came with its own set of downfalls.

It worked well for initial coin offerings and wasn’t susceptible to MEV, however it fell short when faced with the growing diversity of tokens on Ethereum. Dutch auctions also had to compromise on speed, resulting in a slow trading experience for users.

### Batch Auctions

The team realized they needed a new auction mechanism for trading large amounts. It was here that the batch auction was born.

After cycling through several different iterations of batch auction DEX’s, CoW Protocol was born in 2021. CoW Protocol was built on the learnings from earlier projects and introduced innovative features like an intents-based architecture and comprehensive MEV protection.

The product was designed to address the challenges faced by retail users, smart contract accounts, and decentralized autonomous organizations (DAOs). At the core of the protocol is a delegated trading execution model in which bonded third parties known as “solvers” handle order execution on behalf of users.

The delegated trading model of CoW Protocol offers several benefits:

-   **For retail users**, it abstracts away Ethereum complexities such as gas fees, MEV, and the need to search for the most up-to-date AMM pools
-   **For smart contract wallets,** it enables a seamless trading experience. Before CoW Swap, smart contract wallets often had their trade execution paths expire by the time they gathered signatures. Today, smart contract wallets only commit to a particular  _price_  (rather than a specific trading path), leading to more flexibility and optimizing order execution
-   **For DAOs**, features like the  [Milkman](/learn/what-is-milkman-cow-swaps-solution-for-delayed-execution-trading)  contract bridge the gap in time between a governance proposal and an on-chain swap by allowing the DAO to specify an on-chain price feed from which to pull real-time prices (rather than specifying a fixed price)

### The Path Toward Smart Contract Intents

Initially, gasless trading was limited to EOAs since smart contract wallets don’t have private keys and thus can’t sign messages. It wasn’t until the introduction of  [ERC-1271](https://eips.ethereum.org/EIPS/eip-1271)  smart orders that gasless trading was enabled for smart contracts using a new method called “isValidSignature.” This allowed smart contracts to delegate order placement while maintaining control through interactive signature verifications.

The first implementation of smart orders in CoW Swap was the  [native ETH flow](https://medium.com/@cow-protocol/moooove-over-weth-native-eth-trading-is-now-live-on-cow-protocol-96f107e53a49)  which allowed traders to trade ETH just like they would any other ERC-20 token. The second implementation was the  [Milkman](/learn/what-is-milkman-cow-swaps-solution-for-delayed-execution-trading)  contract. Milkman protects governance-based swaps from price exploitation as users specify an on-chain data source from which to pull prices rather than specifying a fixed amount and slippage. This allows the “minOut” variable of a swap to be modular and enables much more streamlined governance-based swaps.

While ERC-1271 smart orders have advantages including conditional on-chain guarantees, they also have drawbacks: they are gas-heavy for autonomous execution, require trust in an intermediary contract holding funds, and are limited to one order per signature.

## Enter the Era of Programmatic Orders

Programmatic orders build on top of batch auctions to enable even more user-friendly, trustless, and autonomous trading.

Programmatic orders take advantage of ERC-1271 smart orders to unlock intents for smart contracts. This has been transformative for the ecosystem, as it allows smart contracts to delegate order placement while still ensuring secure and customizable trading conditions.

[The Programmatic Order Framework from CoW Protocol](/learn/introducing-the-programmatic-order-framework-from-cow-protocol)  allows users to execute unlimited smart orders in parallel, with enhanced gas efficiency and full self-custody. The Framework opens the door to a number of use-cases including automated fee collection, DAO payrolls, TWAP orders, and even private conditional orders such as stop-loss.

### Understanding the Programmatic Order Framework Architecture

Programmatic orders operate through a decentralized architecture that ensures trustless execution by holding assets in the user’s safe.

![2-navigating-the-evolution-of-cow-swap.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_navigating_the_evolution_of_cow_swap_93d6afc424.webp)

The Programmatic Order Framework involves four main customizable parameters which combine with the order handling of CoW Protocol to allow developers to deploy ANY codeable strategy.

Each conditional order has the following properties or data available at settlement:

-   _handler_  — verifies the conditional order parameters via a smart contract (Programmatic Order Framework)
-   _salt_  — allows for multiple conditional orders of the same type and data (Merkle root)
-   _staticData_  — data available to ALL discrete orders created by the conditional order
-   _offchainData_  — data optionally provided from off-chain to a discrete order

## The Future of Programmatic Orders

Programmatic Orders open a world of possibilities by allowing users to turn their Safes into autonomous traders. While the Programmatic Order Framework is currently developer-focused, it unlocks a wide range of use-cases for retail users as well. The integration of  [CoW Hooks](/learn/cow-hooks-you-are-in-control)  in the future could further enhance the user experience, combining composable smart orders with additional functionalities.

In conclusion, CoW Swap’s journey to perfect DeFi orders embodies the protocol’s commitment to users and innovation. The Programmatic Order Framework emerges as a pivotal milestone, showcasing CoW Swap’s adaptability and dedication to meeting the evolving needs of the crypto community.

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Navigating the Evolution of CoW Swap: From Market Orders to Programmatic Orders

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

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

## What is a batch auction?

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

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

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

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

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

### How decentralized exchanges work

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

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

This is where batch auctions come in.

## How batch auctions mitigate the MEV problem

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

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

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

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

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

## CoW Protocol’s batch auction process explained

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

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

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

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

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

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

### An example batch auction on CoW Protocol

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

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

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

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

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

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

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

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

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

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

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

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

## Batch auctions: The future of fair trading

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

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

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

Happy batching!

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


Understanding Batch Auctions

[MEV bots](https://www.blocknative.com/blog/mev-and-creating-a-basic-arbitrage-bot-on-ethereum-mainnet)  monitor pending transactions in the mempool and place their transaction ahead of others, capitalizing on the order of transactions within a block. This approach allows them to gain a significant edge, profiting from traders placing transactions. Frontrunning occurs when an MEV bot monitors the mempool for a trader’s pending transaction. Spotting a potential trade, the bot quickly duplicates the users transaction so that they can be the one to get the tokens or the opportunity that the user detected.

This issue permeates various blockchain ecosystems — from decentralized exchanges to non-fungible token (NFT) marketplaces.

According to recent  [data](https://dune.com/jhackworth/mevmevmev), over 2.7 million MEV transactions have been processed on Uniswap alone. This alarming statistic underscores the widespread and high-stakes nature of MEV exploitation.

## How frontrunning works

Frontrunning takes advantage of the open nature of the blockchain mempool, as anyone can view transactions. MEV Bots exploit this transparency to hijack trades. Here’s a basic rundown of the process:

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 examples

A notable example of DeFi frontrunning involves the notorious MEV bot named “[jaredfromsubway.eth](https://www.theblock.co/post/230218/jaredfromsubway-mev-bot).” In one case, a user,  [0x3a7822](https://zeromev.org/block?num=17508508), intended to trade 2 ETH for another token, $BOB. This trade was noticed by the bot jaredfromsubway.eth, which continuously monitors the mempool for transactions it could take advantage of.

Once the transaction entered the mempool, Jaredfromsubway.eth quickly executed its own transaction to buy $BOB with ETH, strategically placing it as the first in the block, and knowing that he would get the assets at a discount as the transactions behind will pamp the pricer. MEV allows validators to prioritize transactions that are of the most value to them. Consequently, the bot’s transaction, being the first one in the block, was confirmed ahead of the user’s transaction.

![1-frontrunning.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_frontrunning_6077287d3c.webp)

The frontrunning attack triggered an increase in the price of $BOB tokens due to the additional demand created before the user’s transaction was processed. When the user’s original order of 145M $BOB was executed, it was conducted at this now-inflated price, leading to user 0x3a7822 receiving way fewer $BOB tokens, hence losing out on the value they could have otherwise captured.

Jaredfromsubway.eth completed its MEV attack by  [selling](https://etherscan.io/tx/0xff31ba1a8a61933e0093bc4afba95018929e9e1599fec204a3f503c6b7851cb1)  its $BOB tokens at an increased price, resulting in a profit, a second move that made this MEV attack a  [sandwich attack](https://blog.cow.fi/what-is-a-sandwich-attack-and-how-can-you-protect-yourself-b101c9a9b9b3). In this scenario, the price slippage triggered by the frontrunning bot meant that user 0x3a7822 encountered a worse trade-off, ultimately making a loss while the MEV bot profited — an estimated gain of 0.1 ETH.

Another form of frontrunning would have been for example, if user, 0x3a7822 identified an liquidation opportunity faster than anyone else and sent its transaction to the mempool to get the discounted assets from the liquidation in the first place, then Jaredfromsubway.eth would have seen this and would have replaced the users transactions with the transaction of its own, but with a higher gas fee, and thus more likelyhood to get processed faster, and effectively stealing the opportunity of capturing value away from the user.

### How Harmful is Frontrunning?

While frontrunning may seem harmless or even clever to some, it can adversely affect individual traders and compromise the overall integrity of the Ethereum network. Here’s how:

1.  **Impact on Traders**: Frontrunning disrupts the fair operation of financial markets. By exploiting pending transactions, frontrunners manipulate market conditions to their benefit. This can lead to distorted prices, impacting regular traders who abide by market rules. What’s more, these traders miss out on the value they would have otherwise derived from their trades. But most importantly, frontrunning attacks prevent users from receiving the value of the trading opportunity they identified
2.  **Long-term Market Consequences**: Over time, persistent frontrunning can erode market confidence. As traders realize they are consistently at a disadvantage due to frontrunning, they may lose faith in the integrity of the market and choose to leave. This could result in diminished market participation and liquidity, both of which are critical for overall market health and efficiency
3.  **Network Effects**: Frontrunning can also have wider implications for the underlying network. It can cause network congestion, since unnecessary transactions in a block slow down transaction processing times

CoW Swap takes a firm stance against all forms of Maximal Extractable Value (MEV), including frontrunning, as they are detrimental to traders and the wider Ethereum ecosystem. CoW Swap was built to cultivate a fair and transparent trading environment that best serves the interests of all market participants.

### How to protect against frontrunning?

Mitigating frontrunning and other forms of MEV can pose a challenge, given the transparent and permissionless nature of the Ethereum blockchain. However, CoW Swap gives traders the necessary tools to outsmart the MEV bots:

1.  **Batch Auctions**: Instead of executing orders immediately, CoW Swap orders are gathered and grouped into collections known as “batches.”  [Solvers](https://docs.cow.fi/cow-protocol/tutorials/solvers), or the algorithms that provide an order settlement solution for a batch, compete to deliver optimized solutions. This batch auction method ensures all trades within a batch share the same uniform clearing price, preventing MEV Bots from reordering trades. Through batch auctions, CoW Swap affords traders the opportunity to pool liquidity among their orders, enabling users to trade directly with each other or access specialized markets to complete transactions that would otherwise be impossible to do in a peer-to-peer manner — this is known as  [Coincidence of Wants](https://blog.cow.fi/what-are-cows-on-cow-swap-e72baaa4678a)  (CoW)
2.  **MEV Blocker**:  [MEV Blocker](https://mevblocker.io/)  is a straightforward solution to the MEV problem. It is an RPC endpoint that protects all types of transactions from MEV. MEV Blocker organizes an auction among searchers, who are given the chance to backrun your transactions and forward up to 90% of the backrun value to the user. In exchange, they protect you from both frontrunning and sandwich attacks
3.  [**Use CoW Swap**](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=frontrunning-article)**:** CoW Swap is a meta DEX aggregator that uses batch auctions and facilitates an efficient trading process, preventing all forms of MEV, including frontrunning

### The CoW approach to frontrunning

CoW Swap distinguishes itself in the trading ecosystem with its innovative and comprehensive approach to combating frontrunning and other MEV tactics, thereby creating a safer trading environment for users. The platform has meticulously crafted multiple layers of protection, each targeting a distinct aspect of the MEV issue.

The initial line of defense is  **Delegated Trade Execution**. In conventional DeFi platforms, every transaction a user initiates is instantaneously visible in the public mempool, providing an opportunity for searchers to exploit it. As opposed to other exchanges, on CoW Swap, users sign an “intent to trade” which protects them from directly interacting with the mempool. CoW Swap directs all intents through a network of decentralized ‘[solvers](https://docs.cow.fi/cow-protocol/tutorials/solvers).’ These solvers are responsible for securing the best execution price for your trades, while also shielding you from direct exposure to the public mempool, effectively making you undetectable to MEV bots. Moreover, CoW Swap harnesses the power of  [‘Coincidence of Wants](https://blog.cow.fi/what-are-cows-on-cow-swap-e72baaa4678a)’ (CoW). This allows the platform to match orders off-chain, fostering peer-to-peer trades that not only save on gas and liquidity provider fees but also substantially reduce the risk of MEV attacks by circumventing public liquidity pools. CoWs that don’t rely on on-chain liquidity pools eliminate a key opportunity for MEV exploits.

The platform also introduces a  **Uniform Clearing Price**  for all orders in a batch. In a typical decentralized exchange, simultaneous trades clear at marginally different prices in the same block due to sequential transaction processing. This provides an opening for MEV attacks. CoW Swap counters this by ensuring all orders within the same batch auction are settled at the same clearing price within a block. As a result, the order of transactions within a batch becomes irrelevant, effectively preventing MEV attacks and giving users in the batch a fair price.

CoW Swap’s strategy to tackle frontrunning hinges on eliminating opportunities for searchers to exploit trades. This helps maintain the integrity of user transactions and safeguards user value. By leveraging its unique batching technology, CoW Swap remains resilient against frontrunning and other MEV attacks.

### Trade safe from MEV on CoW Swap

Given the severity and frequency of MEV attacks, protecting your trades from MEV should be a top priority. CoW Swap offers unparalleled protection with its pioneering anti-MEV features, making it an invaluable tool for every trader.

Get started with CoW Swap by  [placing your first trade](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=frontrunning-article)  and enjoy the freedom and peace of mind of the best prices and the best MEV protection!

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Frontrunning is a crypto strategy exploiting blockchain’s transparency to extract value from a transaction.


What is Frontrunning


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

As a pioneer in the field of intents, CoW Swap has consistently brought faster, easier, and safer trading to DAOs and DeFi enthusiasts.

As DeFi grows and transactions become ever-more complex, the friction of having to sign and make orders manually becomes more pronounced. Traders looking to place recurring orders as a part of a complex trading strategy, DAO operators responsible for managing a treasury, and individuals tired of signing repetitive transactions could all benefit from a system that allows for automated order placement.

Today, CoW Protocol is proud to announce the release of two features that take the pain out of order placement and open up a wide range of possibilities for automation.

To start off, we’re introducing a new order primitive to the world of DeFi. We call it “Programmatic Orders”. Programmatic Orders are orders that create more orders. They require just one signature to create, then execute when on-chain conditions (prices, volumes, balances, times, etc.) are met. Programmatic Orders can execute indefinitely into the future, automating everything from complex trading strategies to advanced order types, portfolio management, DAO operations, and more.

Alongside Programmatic Orders, CoW Protocol is launching the Programmatic Order Framework. As the name implies, it’s a framework that allows for the easy creation of Programmatic Orders.

Below, we take a deeper look at Programmatic Orders, the Programmatic Order Framework, and the technical details necessary for implementation. We also call on the DeFi ecosystem to submit proposals for building applications on top of the Programmatic Order Framework through the  [CoW Grants Program](https://grants.cow.fi/).

## The current state of programmatic actions

The DeFi space currently supports very simple programmatic actions — for example, individual limit orders. Unfortunately, users have to trust a centralized operator to execute these actions correctly and fairly.

Despite the rise of autonomous agents in the wake of initiatives like ERC-1271, the vast majority of interactions are performed manually, which means there is a dependency on individuals, and a central point of failure.

Even when orders are executed properly, users still have to sign a transaction every time they want to place a new order. This may not be an issue for one-off transactions, but it starts to become a nuisance for frequent, recurring transactions.

The Programmatic Order Framework is built to address these problems.

## The Programmatic Order Framework: A decentralized solution for automated orders

At its core, the Programmatic Order Framework brings simplicity to order creation 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.

Users can create advanced order types (such as Stop Loss and TWAP orders), automate DAO payrolls, and create or destroy multiple orders with just one on-chain transaction. Thanks to a “WatchTower” relayer, orders built with the Programmatic Order Framework execute automatically whenever certain on-chain conditions are met, eliminating the need for tedious and repetitive signatures for programmatic actions.

The framework is a plug-and-play system that takes in order logic and executes orders in perpetuity based on on-chain conditions. Creating orders only requires coding the order logic itself. The rest of the swap components like order creation, order validation, signature validation, API calls, order placement, and order settlement are provided by the framework itself.

![1-programmatic-order-framework.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_programmatic_order_framework_5ee644e722.webp)

The key unlock of the Programmatic Order Framework is the low cost of deploying, updating, and deleting orders in large quantities. Developers only need to write code specifying the particular type of order they’d like to execute and the framework takes care of everything else — storing the data, validating parameters, and placing orders.

The WatchTower relayer verifies that order conditions are met, validates the order signature, and places the order on behalf of the user’s smart contract. To make deploying Programmatic Orders easy, CoW Protocol runs a default WatchTower that users can route orders through. However, users can also run their own WatchTower instance for maximum privacy.

## The all-in-one order automation kit

With the Programmatic Order Framework, a single signature can create hundreds of Programmatic Orders. The WatchTower monitors on-chain order conditions continuously and places orders whenever these conditions are met.

For example, a DAO with a diverse treasury can set up conditional orders for each token within its treasury. Based on these conditions, the framework may initiate a swap to rotate into stables when the treasury value rises above a certain threshold, or it may initiate a payout for DAO contractors on a given day of the month.

As the treasury receives various tokens, the framework executes trades accordingly, making DAO financial operations simple and automatic.

## Benefits of the Programmatic Order Framework

The Programmatic Order Framework unlocks a world of convenience for individuals and on-chain organizations:

-   **Leverage on-chain conditions**: Build highly complex use-cases that rely on custom conditional order logic through the Programmatic Order Framework. Create orders that get picked up by the WatchTower on a certain date, once the balance of your contract or wallet is above a defined threshold, or based on other on-chain conditions
-   **Deploy orders en masse**: Create hundreds or even thousands of orders with a single on-chain transaction. Developers can also mass-update orders all at once with a single gas payment by simply updating the Merkle root with another transaction
-   **Execute many orders in parallel**: In a traditional smart contract wallet, orders execute sequentially. With the Programmatic Order Framework, the WatchTower monitors your orders and executes them as soon as the on-chain conditions are met, meaning you can execute many orders simultaneously

Most importantly, the framework is  **fully decentralized**, providing 100% trustless execution with no intermediate contracts or centralized parties.

## Examples & use-cases

With the Programmatic Order Framework, you can program a limitless number of use-cases:

-   **Special order types**: Gone are the days of centralized exchanges offering order types you can’t get in DeFi. Program intricate order types like stop-loss, good-after-time, and take-profit orders — plus many more. CoW Swap’s very own  [TWAP feature](https://blog.cow.fi/why-twap-25d9a0f690f4)  is built using the Programmatic Order Framework
-   **Automated DAO operations**: Blockchain-native organizations like DAOs process hundreds or even thousands of transactions every month. Thanks to the Programmatic Order Framework, your DAO can automate payroll, treasury diversification, fee collection, or any other type of repetitive transaction
-   **Portfolio rebalancing**: Set up order logic to programmatically rebalance assets based on a portfolio value. Automatically diversify based on market conditions or use custom logic to manage loan risk, farm yield, or hedge positions
-   **Private conditional orders**:  Thanks to the framework’s support for private WatchTower configurations, traders can place highly complex conditional orders while simultaneously keeping them private. Buy and sell tokens through a recurring strategy while keeping your parameters hidden
-   **Protocol integrations**: The Programmatic Order Framework isn’t  _just_  for Safe! DeFi protocols can leverage its power to assist with recurring protocol-level transactions like loan liquidations
-   **Easy transaction modules**: Program custom functionality into any order type. Companies can build DAO tooling with a fraction of the complexity. Focus on building adoption rather than fiddling with backend tech

With just a few lines of code, the Programmatic Order Framework brings convenience and predictability to all types of DeFi actions.

## What will you build, anon?

CoW Protocol is bringing Programmatic Orders to Ethereum through the Programmatic Order Framework. Create any order type you can imagine and deploy it instantly — all within the security of your own smart contract wallet.

The  [CoW Grants Program](https://grants.cow.fi/)  is also putting out a request for proposals relating to the Programmatic Order Framework. Have an idea for a solution built on top of the framework (especially one that includes a UI)? Submit a grant proposal!

The Programmatic Order Framework is now live. Read the documentation  [here](https://hackmd.io/pmZX_qT2Q1yw59KiiT6TPQ)  to get started.

Have questions? The CoW Protocol team is here to help: join us on  [Discord](https://discord.com/invite/cowprotocol)  or send us a  [Twitter DM](https://twitter.com/CoWSwap).

## About CoW DAO

CoW DAO is an open organization of developers, traders, market makers and many more community members aligned with its vision. CoW DAO is focused on fair and decentralized trading systems — in particular, building, maintaining and advancing the CoW Protocol. CoW Protocol technology powers a network of traders and solvers, enabling trustless and efficient peer-to-peer trading. Leveraging batch auctions as a key concept uniquely positions CoW Protocol as native trading infrastructure for discrete-time settlement layers like Ethereum and enables fair and accessible trading to its users.

🐦 [Twitter](https://twitter.com/CoWSwap)| 📒 [Documentation](https://docs.cow.fi/)| 💬  [Forum](https://forum.cow.fi/)  | 📊  [Analytics](https://dune.com/cowprotocol)  | 📸 [Snapshot](https://snapshot.org/#/cow.eth)

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Programmatic Orders enable a world of possibilities in DeFi; they’re now easier to create than ever thanks to CoW Protocol’s Programmatic Order Framework