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George Hristov

On July 21st, 2023, After a successful  [governance vote](https://app.nexusmutual.io/governance/view?proposalId=197)  from Nexus Mutual, CoW Swap processed a  [large trade for the insurance protocol](https://twitter.com/CoWSwap/status/1682450015237857280?s=20)  using the exchange’s signature intent-based trading design and MEV protection.

## Trade Details

Nexus Mutual swapped 14,390 ETH from its capital pool for an equivalent amount in rETH. They did so in two separate orders, the first order swapped  [250 ETH for 231.8 rETH](https://explorer.cow.fi/orders/0x29a83c4990db493b7fbf47ed821288340b4e9394524b1da151251d274d64e150cafea5c050e74a21c11af78c927e17853153097d64baae44?tab=overview)  and the second order swapped  [14,140 ETH for 13,117.148 rETH](https://explorer.cow.fi/orders/0x5e84d3e19341b77c362f37e706b153e460deb929d850bec7d9697a631fe4596fcafea5c050e74a21c11af78c927e17853153097d64bab666?tab=overview).

The overall order stats:

-   **USD value of the trade**: $27.3 million
-   **Minimum asset amount**: 13,362 rETH
-   **Maximum asset amount**: 13,400 rETH
-   **Amount the DAO received**: 13,409.04 rETH

## Why CoW Swap?

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

CoW Swap provided several benefits for this trade:

1.  Protection from attack vectors caused by the delayed execution
2.  A limit order that guarantees some minimum amount for the assets
3.  Minting rETH through CoW Swap directly, instead of swapping for the liquidity on the market

For this swap, Nexus Mutual 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](/learn/cow-swap-for-daos)  to learn why DAOs such as  [Aave](/learn/aave-trade-breakdown),  [ENS](/learn/ens-trade-breakdown), 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=NexusM-article).





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


Nexus Mutual Trade Breakdown

## Overview

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

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

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

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

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

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

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

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

## How backrunning works

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

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

## Backrunning example

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

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

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

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

## Related MEV tactics

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

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

## How harmful is backrunning?

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

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

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

## How CoW Swap protects against backrunning

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

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

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

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

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

## MEV Blocker — Profit from backrunning

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

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

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

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

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

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What is Backrunning? — MEV Attacks Explained



# How to create a LVR Protected Liquidity Pool on CoW AMM

## Accessing the creation page UI

CoW AMM is a new type of AMM built from the group up to protect LPs from price exploitation in the form of [LVR](https://cow.fi/learn/what-is-loss-versus-rebalancing-lvr). Liquidity providers expect their tokens to earn yield, but most liquidity pools are actually not profitable after accounting for stale prices. Arbitrageurs exploit these stale prices at the expense of LPs. CoW AMM fixes LVR once and for all, with liquidity pools proven to outperform reference Balancer and Uniswap pools.

Now, you can create your own CoW AMM pools too! To get started, navigate to the [Balancer CoW AMM pool creator](https://pool-creator.balancer.fi/cow).

You can access the pool creator in several ways. The first is to navigate to the [CoW AMM liquidity pools page](https://balancer.fi/pools/cow), scroll down to the bottom, and click “create a pool.”

![Cowamm_poolguide_1.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_1_8dcf4f3760.png)
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You can also open the pool creator from the banner on the [CoW Swap](https://swap.cow.fi/) homepage.

![Cowamm_poolguide_3.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_3_70c3bd8093.png)

The third way is to access the pool creator directly at [https://pool-creator.balancer.fi/](https://pool-creator.balancer.fi/) and click the icon to enter the pool creation page.

![Cowamm_poolguide_4.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_4_0aef667f89.png)

Once inside, you’ll see the following interface:

![Cowamm_poolguide_5.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_5_fb12211f1f.png)

## Configuring your own LVR Protected pool for deployment

To get started, select the tokens you want to use to create your LVR-protected pool.

![Cowamm_poolguide_6.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_6_542472caad.png)

After selecting your tokens, specify the deposit amounts. Keep in mind that the pool creator currently only supports 50/50 pools so add an equivalent dollar amount of both assets.

![Cowamm_poolguide_7.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_7_124b34dcdb.png)

After selecting your assets and amounts, tick the checkbox confirming that you understand assets must be added proportionally or you risk loss of funds via arbitrage. Once you’ve done this, click the “Preview” button.

![Cowamm_poolguide_8.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_8_84c160ab40.png)

## Deploying your LVR Protected pool onchain

Creating a pool requires several approval and swap steps through your wallet. The first is the actual pool creation, to initiate this click the “Create Pool” button and check your connected wallet interface.

![Cowamm_poolguide_9.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_9_7a477d22d7.png)

In your wallet, approve the pool creation by signing. Remember to double check that you are signing the correct transaction!

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Once you’ve created the pool, click “Approve” to approve the first token you want to create a pool for.

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Sign the transaction in your wallet.

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The next step is to approve the second asset you’re adding to the pool by clicking the “Approve” button once again.

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Sign the transaction in your wallet.

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The next transaction adds the initial funds for your first asset to the pool.

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Sign the transaction in your wallet.

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The transaction after that adds the initial funds for your second asset to the pool.

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Sign the transaction in your wallet.

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Almost there! The second to last transaction sets the swap fee for the pool. Currently, all CoW AMM pools must set the swap fee to the maximum amount (99.99%)

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Sign the transaction in your wallet.

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Last, click the “Finalize” button to make your last transaction and finalize the pool creation.

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Sign the transaction in your wallet.

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Once created, you can view your pool by clicking the “View on Balancer” button.

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Your new pool will now appear in the [list of CoW AMM pools on Balancer](https://balancer.fi/pools/cow)! Once created, users can LP their own tokens, growing the size of the pool for the two assets you’ve selected.

![Cowamm_poolguide_9.96.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_9_96_6c0d9f5c17.png)

You can click on the pool to view its current size, APR, yield, and more.

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The interface also showcases the exact amount of liquidity you specifically have added out of everyone for this pool, as well as the pool composition split between assets.

![Cowamm_poolguide_9.98.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_9_98_2fd5e07452.png)
![Cowamm_poolguide_9.99.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Cowamm_poolguide_9_99_1636bf73fd.png)

Congratulations! You’ve created your first CoW AMM Balancer pool.

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A step-by-step guide to creating a LVR Protected Liquidity Pool using CoW AMM on Balancer. CoW AMM safeguards liquidity providers from price exploitation due to stale prices, ensuring better yield protection and profitability than traditional pools.

How to create a LVR Protected Liquidity Pool on CoW AMM

CoW DAO, which builds user-protective products like CoW Swap and MEV Blocker, is launching the first MEV-capturing AMM — CoW AMM.

While CoW DAO’s other products protect traders from MEV, CoW AMM is the first product from CoW DAO built to protect liquidity providers. CoW AMM is the first product on any blockchain to tackle the LVR problem head on.

## The LVR Problem

First described by Jason Milionis, Ciamac C. Moallemi, Tim Roughgarden, and Anthony Lee Zhang in the paper  [Automated Market Making and Loss-Versus-Rebalancing](https://arxiv.org/abs/2208.06046), LVR is defined as the losses LPs incur due to arbitrage bots constantly rebalancing liquidity pools.

Research suggests that:

-   Liquidity providers for major token pairs lose 5–7% of their liquidity due to LVR¹
-   In aggregate, arbitrageurs are responsible for well over $500M in LP losses every year²
-   LVR accounts for more MEV than frontrunning and sandwich attacks combined

LVR disincentivizes liquidity provision in DeFi, restricting its potential utility and growth. And LVR is a contributing factor to block-builder centralization, which many people consider undesirable for Ethereum as a whole.

## How CoW AMM Works

The CoW AMM is a special kind of automated market maker designed to help liquidity providers capture MEV from arbitrageurs. According to research by Andrea Canidio and Robin Fritsch in the paper “[Arbitrageurs’ profits, LVR, and sandwich attacks: batch trading as an AMM design response](https://arxiv.org/pdf/2307.02074v3.pdf),” the most promising way to capture LVR is by using batch auctions to rebalance liquidity pools based on surplus.

![1-cow-dao-launches-cow-amm.gif](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_cow_dao_launches_cow_amm_303d6058bb.gif)

CoW AMM, therefore, works as follows:

1.  Liquidity providers deposit tokens into protected CoW AMM liquidity pools
2.  This liquidity becomes available to CoW Swap traders, who can access it similarly to other sources of liquidity
3.  Solvers bid to rebalance CoW AMM pools whenever there is an arbitrage opportunity
4.  The solver that offers the most surplus to the pool wins the right to rebalance the pool

This design eliminates LVR by capturing arbitrage value for LPs and shielding it from MEV bots.

Said another way: while most AMMs allow arbitrageurs to make money at the expense of their LPs, CoW AMM protects this money for the LPs instead.

## Expected Outcomes

Research suggests that CoW AMM LPs will fare as well if not better than CFAMM LPs.  [Backtesting over 6 months in 2023](https://arxiv.org/pdf/2307.02074v3.pdf)  shows that LP returns on CoW AMM would have been equal to or greater than returns on Uniswap in 10 of the 11 most liquid, non-stablecoin pairs.

## Why is CoW DAO launching CoW AMM?

Launching CoW AMM is a natural extension of CoW DAO’s mission to protect Ethereum users from MEV. With two successful products (MEV Blocker and CoW Protocol) aimed at traders, the time is right to extend MEV protection to liquidity providers.

LVR is a large problem, estimated to be responsible for over $500M in value lost to MEV bots every year — more than all trading-related forms of MEV combined.

CoW DAO is uniquely capable of bringing an FM-AMM design to market, as it relies on a surplus-capturing solver network to balance liquidity pools. CoW Protocol currently runs the largest solver competition on Ethereum, with 19 active solvers.

**Find out more about CoW AMM here:** [**cow.fi/cow-amm**](http://cow.fi/cow-amm)

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The novel AMM design protects liquidity providers from MEV bots by eliminating LVR (loss-versus-rebalancing), which costs LPs more than $500M every year


CoW DAO launches the first MEV-capturing AMM


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

On CoW Protocol, rather than sending on-chain transactions with predefined swap instructions, users submit signed  [intent-to-trade messages](/learn/cow-protocol-glossary#:~:text=Intent%20to%20Trade). These messages contain some order details, like which assets to trade in which amounts, but leave other details to be optimized by  [solvers](https://docs.cow.fi/cow-protocol/tutorials/solvers).

One important parameter of these intents is min_out — the minimum amount of buy tokens a user is willing to receive for their sell tokens (or the buy amount, minus the maximum allowable slippage set by the user). Min_out works really well when a trade is intended for immediate or near-immediate execution, because it allows solvers to improve prices for users while protecting them from unfavorable price movements. However, when prices fluctuate a lot, min_out can be overly-restricting.

## **What is delayed execution trading?**

Simply put, delayed execution trades are trades intended to execute at some point far in the near future.

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

-   DAOs that need trades to execute after passing a governance process
-   Groups that need hours to collect signatures to execute trades from a multisig wallet
-   Applications that process automated swaps years in the future (e.g. for payroll or treasury management)

With extra time, prices can fluctuate wildly — and this creates a dilemma for traders:

If the buy token price falls and the min_out is too high, the order might not execute. But if the min_out is too low, the trader risks getting an unnecessarily poor execution price. (CoW Protocol solvers compete against each other to give users better prices, but placing such a high level of trust in solvers can be undesirable for very high-volume traders.)

![1-what-is-milkman.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_what_is_milkman_0518ebe1f4.webp)

If a user signs an intent to swap 1 ETH for a “min out” of 2000 USDC, there is no way for the trade to return any less than 2000 USDC

![2-what-is-milkman.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_what_is_milkman_08ab1cbaac.webp)

But setting a low “min out” risks leaving money on the table

## **What is Milkman?**

Milkman is a smart contract that solves the above dilemma for smart contract wallets.

It does this by allowing smart contracts to specify an on-chain data source (such as an oracle) to use as a reference for min_out — effectively turning min_out into a dynamic price backstop for their trade.

Let’s say you want to sell 1000 ETH for USDC, but you want to do it far in the future. To protect yourself from volatile price movements, you can supply Milkman to create the order based on with the Chainlink price feed for ETH/USDC, and Milkman at the time of order placement will dynamically adjust the minimum amount you’ll receive based on that price feed.

When the time comes to execute your trade, CoW Protocol will receive it with a min_out that accurately reflects prices at that point in time; and solvers will compete to improve the price on top of that, as they always do.

![3-what-is-milkman.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_what_is_milkman_7f4ab32979.webp)

## **Milkman for DAOs**

Milkman is particularly well-suited to many DAO-related use cases, because DAO governance processes often delay trades and because amounts traded by DAOs can be very large.

Several well-known DAOs, including  [Aave](/learn/aave-trade-breakdown)  and  [ENS](/learn/ens-trade-breakdown), have already used Milkman to trade over $20M worth of tokens. Beyond allowing these DAOs to count on reliable prices, Milkman lets them reduce their overall number of governance votes and gives them standard CoW Swap benefits like best price execution and  [best-in-class](https://eigenphi.substack.com/p/sandwich-mevs-impact-on-cow-swap)  MEV protection — critical for large trades.

Milkman is also natively integrated as a  [recipe on Tally](/learn/tally-recipe-for-cow-swaps), the widely-used DAO management platform — removing even more trading friction for DAOs.

## **Technical details**

Milkman follows a UniV2-style interface. To interact with Milkman, smart contracts need only to call the following function:

> _function requestSwapExactTokensForTokens(_
> 
> _uint256 amountIn,_
> 
> _IERC20 fromToken,_
> 
> _IERC20 toToken,_
> 
> _address to,_
> 
> _address priceChecker,_
> 
> _bytes calldata priceCheckerData_
> 
> _)_

The priceChecker is the data feed provider, and priceCheckerData is an array of arbitrary bytes that the function passes to the price checker (e.g. the desired slippage tolerance).

Price checkers have been deployed for Chainlink, Curve, SushiSwap, Uniswap V2, Uniswap V3, and combinations of these. The core Milkman code can be found  [here](https://github.com/cowdao-grants/milkman). Anyone can run a  Milkman bot, which simply functions as a hook that watches for new swap requests and surfaces them to CoW Protocol. Running a bot is fairly easy if you have a Kubernetes cluster; the instructions are in the repo.

Milkman was developed by  [Yearn Finance](https://yearn.fi/)  in partnership with CoW Protocol, through the  [CoW Grants Program](https://grants.cow.fi/).

Long live Milkman! And may you benefit from his commitment to bringing you favorable prices!

![4-what-is-milkman.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_what_is_milkman_185027226b.webp)


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Milkman is a simple contract that lets DAOs and other smart contract wallet users set dynamic price backstops for orders that will execute in the future!


What is Milkman? CoW Swap’s Solution for Delayed Execution Trading

Since its inception, DeFi has relied on  [automated market makers (AMMs)](/learn/cow-protocol-glossary#:~:text=amm)  directly to facilitate the majority of trading volume. More recently, however, auctions have emerged as an innovative trading mechanism that addresses some of the major shortcomings of AMMs.

Below, we examine these shortcomings and compare and contrast two popular auction solutions— Dutch auctions and batch auctions.

## The Shortcomings of AMMs

CF-AMMs, first proposed by Gnosis in 2017 and later popularized by protocols like Uniswap, are a natural fit for a world of frequent token launches and volatile assets. The core function of a CF-AMM is the rebalancing of token prices as orders come in. These AMMs rely on permissionless liquidity pools to facilitate trades for any ERC-20 token pair.

Due to their design, however, CF-AMMs leave traders exposed to price exploitation in the form of  [maximal extractable value (MEV)](/learn/understanding-mev-protection). Since orders on AMMs get executed sequentially, malicious parties can re-order trades in the Ethereum mempool and take advantage of users. MEV has become a lucrative industry for the most resourceful traders out there, but those profits come directly out of the pockets of everyday users.

The propensity of AMMs to be exploited indicates that continuous-time venues may not be the ideal solution for trading on decentralized exchanges.

## The Benefits of Auctions

![1-batch-auctions-vs-dutch-auctions.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_batch_auctions_vs_dutch_auctions_20effdf8c3.webp)

At its core, Ethereum is an auction — each block is limited in space, so validators auction off “blockspace” to the highest bidders. It turns out that a similar mechanism works well when it comes to trading. Auctions have presented a viable alternative to continuous-time trades in a new field known as “[Order Flow Auctions](/learn/understanding-order-flow-auctions).”

There are several points to consider when examining how auctions make sense in the context of blockchains:

1.  Blockchains aren’t continuous, so trading on a continuous system doesn’t make sense. It only leads to a “first come, first serve” mode of operation that ultimately becomes a race to the bottom.
2.  Auctions work to benefit traders as there can be multiple bidders for any given order, providing better prices by aggregating fragmented liquidity.
3.  Grouping multiple orders together in an auction presents opportunities for matching liquidity peer-to-peer rather than having to tap on-chain AMMs.

Auction mechanisms are not monolithic however. There are multiple types of auctions to take into account when considering what may make the most sense for Ethereum traders.

## Dutch Auctions

![2-batch-auctions-vs-dutch-auctions.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_batch_auctions_vs_dutch_auctions_fbaf900f7b.webp)

_([Source](https://medium.com/coinlist/a-primer-on-dutch-auctions-525036d24d10))_

One of the most common auction mechanisms is the Dutch auction. Dutch auctions work by offering an asset at a high starting price and then lowering the price over time until a willing bidder is found. This method identifies buyers quickly, making for a fast settlement.

Trading solutions like  [UniswapX](https://blog.uniswap.org/uniswapx-protocol)  employ Dutch auctions to settle trades with the speed of a traditional AMM, but with some added benefits.

### Pros

**Solver Competition**: Multiple parties, or “solvers,” can bid on a given asset, finding the most competitive price for the user’s assets.

**MEV Protection**: Dutch auctions protect users from MEV by relying on a third party for execution, meaning the user is never exposed to an AMM where their trade could be front-run or sandwiched.

### Cons

**Centralized**: Market makers have to have the assets in their inventory, leading users to essentially be at the mercy of the liquidity that the bidding parties have on hand.

Dutch auctions provide important benefits over continuous order trading. However, they only support auctioning one token at a time and they suffer from liquidity fragmentation as liquidity for a single token is spread across various venues.

It was this problem that inspired the creation of Gnosis Protocol V1 — the precursor to CoW Swap. This protocol relied on a different auction mechanism: the batch auction.

## Batch Auctions

![3-batch-auctions-vs-dutch-auctions.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_batch_auctions_vs_dutch_auctions_7431306f4d.webp)

_An illustration of the batch auction mechanism on CoW Swap_

A batch auction groups together a set of orders intents and executes the entire batch as a single transaction.

This allows multiple users to trade multiple assets within a single auction (unlike Dutch auctions). Having multiple orders in a single batch even enables  [peer-to-peer swaps](/learn/what-are-cows-on-cow-swap)  which provide better prices than any on-chain venue.

Finally, while Dutch auctions rely on a price-decay bidding process, batch auctions encourage solvers to find the best execution route for each trade, incentivizing better execution rather than just the quickest settlement.

### Pros

**Solver Competition & MEV Protection**: Just like Dutch auctions, batch auctions rely on a delegated execution model where solvers compete to find the best prices for users and protect orders from MEV.

**Surplus Capturing Orders**: Batch auctions provide an extra layer of efficiency over Dutch auctions by grouping multiple orders together. This allows liquidity to be shared between orders peer-to-peer, providing better prices than any on-chain venue. When orders  _do_  have to go on-chain, batching provides gas efficiency, further contributing to savings.

**Multiple Trades Per Auction**: Batch auctions aren’t limited to just a single asset per auction. This means that a single settlement may include multiple traders, each trading a different asset.

### Cons

**Speed**: While other modes of trading settle orders instantaneously, batches have to be open for some period of time to collect orders before executing them on-chain. Speed issues can be mitigated by executing one batch per Ethereum block, making batch auctions run at the speed of Ethereum block settlement.

Batch auctions make sense as a natural fit for Ethereum, mirroring the Order Flow Auction mechanism of the block but at the dApp level. Today,  [CoW Swap](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=dutch-vs-batch)  is the largest production-scale implementation of batch auctions for DeFi trades.

## The CoW Approach to Batch Auctions

![4-batch-auctions-vs-dutch-auctions.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_batch_auctions_vs_dutch_auctions_eb922dc3cf.webp)

[CoW Swap](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=dutch-vs-batch)  utilizes batch auctions to ensure traders get optimal prices while being protected from MEV.

The process starts with traders sending signed “intent to trade” messages to an order book, which CoW Swap then groups into batches. Solvers then search both on-chain and off-chain liquidity pools for the best prices. An auction is conducted for each batch to select the solver that provides the highest price surplus (the difference between the quoted and actual execution prices) for the orders. Finally, the winning solver executes these orders on-chain, ensuring users benefit from a uniform clearing price for all assets.

The future of batch auctions lies in targeting smaller batches where one batch is equal to one Ethereum block. This mitigates all speed issues related to batch auctions, making them execute as quickly as any other type of DeFi trade.

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Auctions are all the rage these days… but which auction method is really the best?


Batch Auctions vs. Dutch Auctions in Crypto

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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

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

_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.


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A DappCon Talk by Olga Fetisova of CoW DAO


MEV Transparency: Ensuring Fairness In DeFi Markets

**Overview**

-   Many Ethereum traders receive suboptimal prices and face risks from MEV bots when trading on traditional decentralized exchanges (DEXs)
-   CoW Swap is a solution that provides price improvement technology to ensure traders get the best possible prices on their trades while also enjoying MEV Protection
-   CoW Swap uses batch auctions to find the optimal clearing price for all trades in a batch, as well as  [Coincidences of Wants (CoWs](/learn/what-are-cows-on-cow-swap)) that enable peer-to-peer transactions, among other types of optimizations
-   CoW Swap improves pricing and increases market depth, providing traders with greater access to liquidity and better overall trading conditions

For far too long, Ethereum traders have been forced to deal with suboptimal pricing when trading tokens.

Unfortunately, many traders are unaware they may receive a bad deal on their trades when using traditional Decentralized Exchanges (DEXs). To make matters worse, some traders may also fall victim to manipulative MEV bots, whose damages total billions of dollars in exploited value.

## How does CoW Swap work?

![1-price-improvement.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_price_improvement_01d71021ba.webp)

_Figure 1: Showing how Batch Auctions work on CoW Swap_

CoW Swap has introduced a revolutionary approach to trading: A delegated trading model through an Order Flow Auction that runs on “batch auctions” to find the best settlement for all the trades.

When using batch auctions, traders submit their intent to trade a particular token pair without having to settle their raw Ethereum trades directly on-chain, as the  [solvers](https://docs.cow.fi/cow-protocol/tutorials/solvers)  (auction settlers) will be the ones creating the transaction for them. This innovative approach means that traders don’t have to fine-tune their own trading parameters — such as what liquidity pools to use and what slippage to set — all while enjoying better prices and MEV protection.

Unlike traditional DEX orders, intent-based trades protect traders from getting MEV’ed. This ensures that traders can execute their trades with greater confidence, security, and efficiency while getting the best possible price. With CoW Swap, users can trade without worrying about the typical pitfalls of trading on a DEX, and rest assured that any price improvement is forwarded to them (not kept by the protocol.)

### What is price improvement?

CoW Swap is revolutionizing how traders approach decentralized exchanges by providing price improvement technology (in the form of “surplus”) that ensures they get the best possible price on every trade.

Once a trader submits an intent to trade by submitting a signed order, it gets sent to an off-chain orderbook and inserted into a batch auction where solvers can search all available on-chain liquidity to find the optimal order clearing price. CoW Swap’s batch auction mechanism helps improve pricing by batching orders together and establishing a uniform clearing price. By doing this, CoW Swap creates a more liquid trading environment that matches  [Coincidences of Wants (CoWs)](/learn/what-are-cows-on-cow-swap)  and finds other optimizations which improve the trader’s price.

CoWs enable traders to conduct peer-to-peer transactions directly with each other, eliminating the need for intermediary AMM pools and providing a more efficient trading price.

Many times, CoWs allow traders to entirely bypass any on-chain liquidity and directly exchange tokens, avoiding slippage and any fees they might incur. In the trading UI, CoW Swap quotes the minimum price the trader will receive whenever the trade executes. In most cases, CoW Swap forwards price surplus to traders by giving them more of their purchase tokens.

![2-price-improvement.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_price_improvement_5d98d04842.webp)

_Figure 2: Showing CoW Swap’s UI_

To illustrate the power of CoW Swap, let’s take a look at  [this CoW Swap Batch Auction Settlement](https://explorer.cow.fi/tx/0x0e9877bff7c9f9fb8516afc857d5bc986f8116bbf6972899c3eb65af4445901e?tab=orders).

In this settlement, 8 different trades were executed in a single batch, forming a CoW and also leveraging the best possible on-chain liquidity for all traders involved. If we take a close look at the settlement, we can see that some USDC-ETH traders are overlapping meaning a portion of their trade can be matched directly in a CoW instead of tapping into an AMM. For the rest of the trades, the settlement tapped into the best on-chain liquidity available.

Thanks to the batch auction mechanism, CoW Swap provided all traders with a surplus on top of their quoted price, maximizing their returns and minimizing their exposure to risks. In this example, the average surplus was 1.66%, giving traders a bunch of extra tokens than no other DEX can give since these price improvements are only possible by leveraging batch auctions as a trading mechanism.

![3-price-improvement.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_price_improvement_ed5d2db540.webp)

![4-price-improvement.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_price_improvement_6cb916a682.webp)

_Figure 3: Showing a Coincidence of Wants_

## Find the most price improvement on CoW Swap

In an ever-evolving DeFi landscape, CoW Swap redefines the trading experience on decentralized platforms. By integrating the innovative batch auction mechanism and leveraging Coincidences of Wants, the mooo-st efficient DEX offers traders price improvement not found anywhere else, all while protecting you from MEV-related threats.

[Place your first order](https://swap.cow.fi/#/1/swap/WETH?utm_source=medium&utm_campaign=price-improvement)  on CoW Swap and start getting more for your trades!


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CoW Swap’s innovative approach to finding optimal prices while providing MEV protection


What is price improvement and why is it unique to CoW Swap?

To celebrate the  [recent launch of TWAP orders](https://blog.cow.fi/cow-swap-launches-twap-orders-d5583135b472), the CoW team is running a trading raffle with several prizes up for grabs. To enter,  **all you have to do is make at least one TWAP trade during the month of September (TWAP-tember)**!

At the end of the month, the CoW team will select one Safe address to receive the grand prize:

> **_🏆 FREE CoW Swap orders for the month of October (aka, Up-tober_**_📈_**_)*_**

That’s right, Swap for free all month long… how’s that for greener pastures?

But we’re not done milking the fun, while only one lucky winner will receive the grand prize, there’s still more up for grabs:

-   **⌚5 people**  will receive CoW Swap-branded watches, to help time your trades
-   **💳 10 people**  will receive custom CoW Swap-branded  [Gnosis Pay](https://gnosispay.com/)  cards

Keep in mind, Ethereum mainnet TWAPs start at a minimum of $5k per part, but you can  [TWAP on Gnosis Chain](https://swap.cow.fi/#/100/advanced/WETH?utm_campaign=twap-tember-medium)  with only $5 per part! **In fact, TWAPs on Gnosis Chain have lower fees (thanks to lower gas costs) and lower $$ minimums than mainnet** (which should also come in handy for Safe deployment).

So what are you waiting for anon? Grab your  [Safe](https://safe.global/)  wallet and head over to  [CoW Swap](https://swap.cow.fi/#/1/advanced/WETH?utm_campaign=twap-tember-medium)  to get your TWAP on. If you’re new to TWAP, we’ve created a handy  [how-to guide](/learn/how-to-use-cow-swap-twap-orders-via-safe-wallet)  to help you with your first trade.

## 🐮 Let TWAP-tember begin! 🐮

Visit  [CoW Swap today to TWAP](https://swap.cow.fi/#/1/advanced/WETH?utm_campaign=twap-tember-medium)  your way to the top.

The winning addresses will be announced on the  [CoW Swap Twitter](https://twitter.com/CoWSwap)  so keep an eye on it for instructions on how the winners can claim their physical prizes!

_Terms & Conditions: To receive waived fees, orders must take place between the 1st and 31st of October, 2023. A maximum of $5000 in fees will be refunded._

**———————————————————————**

**UPDATE:**  The winners of TWAP-tember have been announced!

**Grand Prize Winner:** 0x4cb5eE1ad8Bf1B9d75422f9aD086Da2F84BD91B4

**Winners of the CoW-branded Watch & Gnosis Pay Card:**

1.  0xef5e42549886b9b060ee0381a3819ecaf0fdaeda
2.  0x38fe3792cea65f37cac5474dca8fff887e6d90b1
3.  0x2a4e4ab5e6680b76e00ad4555e39d2dcca42a659
4.  0x23a02d9e5d6ad9419128663976315689204be895
5.  0xf4a82a72faf46b2c55cdad3bcf7c0c1b564bab30

**Winners of just the Gnosis Pay Card**:

1.  0x3bc0cb287f74504347d50fe3ada6d90214e6f512
2.  0x952656cb0121d79a320bb0a7188fb4abb2b5dd94
3.  0x2855159d938d09d00d4fccf42f69ccb8f5b620e2
4.  0xdb72b7dc6ddf0c95468ce19b6539b9a44e561679
5.  0x3e23fd468f65e77aea8f548ebd382e86e7a99309

Congratulations to the winners and thank you to everyone who participated!

To claim your prize, please  [DM us on Twitter](https://twitter.com/CoWSwap)  by November 1st.



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Attention all traders, the CoW Swap herd is thrilled to announce TWAP-tember, the greatest trading extravaganza of the year!


Introducing TWAP-tember

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](/learn/what-are-cows-on-cow-swap) 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](/learn/all-you-need-to-know-about-cow-swap-new-safe-fallback-handler).

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](/learn/how-to-use-cow-swap-twap-orders-via-safe-wallet).

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?

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

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

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

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

## Benefits of gasless approvals

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

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

## Gasless approvals under the hood

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

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

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

## Now live on CoW Swap

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

As always, on CoW Swap:

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

Happy trading!

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Announcing Gasless Approvals on CoW Swap


[CoW DAO](https://cow.fi/), which builds user-protective products like CoW Swap, Cow Protocol, CoW AMM and MEV Blocker, has partnered with Sky, formerly MakerDAO to help the project migrate its tokens as it transitions to its next chapter.

  

The team behind Sky approached CoW DAO to integrate CoW Protocol into their SWAP feature to allow users to seamlessly, and safely swap their tokens between DAI and its replacement, USDS, and its governance token MKR to SKY.

  

This is sizeable task: the MakerDAO transition is one of the largest token migrations. DAI is one of the world’s largest stablecoins, with a market cap of $5.3 billion and [more than 500,000 holders.](https://etherscan.io/token/0x6b175474e89094c44da98b954eedeac495271d0f) MKR, meanwhile, has a market cap of $1.5 billion and more than [100,000 token holders.](https://etherscan.io/token/0x9f8f72aa9304c8b593d555f12ef6589cc3a579a2)

  

“Sky selected CoW Protocol as its primary partner for token migration because it recognizes that CoW's unique batch design enhances both user experience and price efficiency," says Anna George, co-founder and CEO of CoW Protocol.

  

Sky's choice to work with CoW DAO on such an important upgrade demonstrates that CoW Protocol is the place big projects go when they want to do big things.

## How will it all work?

[CoW Swap](https://cow.fi/cow-swap) is being integrated into Sky’s native swap system, meaning that, in addition to facilitating swaps between DAI, USDS, MKR, and SKY, CoW Protocol will handle all token swaps within the Sky UI going forward. This represents a step change in the amount of volume CoW Protocol will handle going forward.

This will take place on Sky.money, decentralized gateway to the Sky Ecosystem and provides access to the key features of the Sky Protocol, including upgrading DAI to USDS, and MKR to SKY. But users can also use [CoW Swap](https://cow.fi/cow-swap) to upgrade their old MKR and DAI tokens to the new SKY and USDS.

The upgraded stablecoin of the Sky Ecosystem is USDS. USDS can be upgraded from DAI or converted from USDC at a 1:1 ratio, on Sky.money and other frontends. USDS can also be converted back to DAI. Upgrading is optional.

The Governance Token of the Sky Ecosystem is SKY. MKR holders can upgrade their MKR to SKY, and SKY can also be converted back to MKR. Upgrading is optional. Users get 24,000 SKY per MKR when they upgrade.

## Bringing DeFi to a Wider Audience

Decentralized Finance is at an inflection point. The industry has successfully matured and scaled and, with the right push, is poised to begin providing large scale value to regular people. By focusing on delivering innovative ways for everyday users to unlock the inherent benefits of DeFi, Sky will do its part in bringing the benefits of DeFi to the mass market.

CoW DAO believes in this mission too. By providing a safe and simple way for DeFi users to swap tokens without fear of MEV attacks helps DeFi achieve mass market adoption.

## Follow CoW DAO

-   [X](https://x.com/CoWSwap)
    
-   [Discord](https://discord.com/invite/cowprotocol)
    
-   [Github](https://github.com/cowprotocol)
    
-   [Forum](https://forum.cow.fi/)
    
-   [Snapshot](https://snapshot.org/#/cow.eth)

cow protocol partnership with makerDAO sky

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CoW Protocol has partnered with Sky, formerly MakerDAO to help the project migrate its tokens as it transitions to its next chapter. 

CoW Protocol Powers MakerDAO’s Transition


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

## Add Custom Tokens

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

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

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

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

## Step 1

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

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

## Step 2

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

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

## Step 3

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

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

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

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

## Step 4

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

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

## Step 5

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

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

## Step 6

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

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

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

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How to Add Custom Tokens on CoW Swap

An MEV blocker is a piece of blockchain infrastructure that protects orders from price exploitation resulting from MEV (Maximal extractable value).

Under the hood, it’s  [RPC endpoints](https://www.quicknode.com/docs/ethereum)  that function as MEV Blockers by routing transactions through specialized mempools which protect them from MEV and even send rebates back to traders when their trades leave money on the table.

There’s a lot of moving parts when it comes to MEV blockers, so let’s break the topic down one step at a time.

## What is MEV?

An MEV blocker is a piece of software that protects user transactions from suffering MEV exploitation… but what is MEV?

MEV (Maximal extractable value) is a hidden tax on all types of Ethereum transactions. Any time you make a large trade, mint a valuable NFT, or even provide liquidity to a liquidity pool, you are at risk of experiencing price exploitation through MEV. To date, MEV has caused over $1 billion in trading losses and continues to increase by the millions each day.

![1-what-does-an-mev-blocker-do.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_what_does_an_mev_blocker_do_80b9b36ca6.webp)

MEV is carried out by traders known as “searchers” who monitor pending Ethereum transactions and  bribe block builders  to order the transactions in a specific order, extracting profit in the process.

Find out more about the specifics of how MEV attacks work in our  [“Understanding MEV” series](/learn/understanding-mev-protection).

## How do MEV Blockers Work?

Since MEV relies on  [reordering transactions](/learn/understanding-mev-protection)  from the order in which they were submitted to a new, more profitable order, it’s possible to cut the process short by sending transactions to a specialized network of searchers bound by unique rules that ensure favorable execution for users.

These searchers cannot frontrun or sandwich transactions. Rather, they capture value by  [backrunning](/learn/what-is-backrunning-mev-attacks-explained)  large orders and sending a large portion of the backrunning profits back to the users as a rebate. So, as a user, you’re not only protecting yourself from harmful price exploitation in the form of frontrunning and sandwich attacks, you also have someone looking out for you any time you leave money on the table.

## What is an RPC endpoint?

We mentioned earlier that under the hood, MEV blockers run through RPC endpoints. An RPC endpoint is a communication layer between the blockchain and a user’s wallet. RPC endpoints relay messages from the wallet that  [RPC nodes](https://www.alchemy.com/overviews/rpc-node)  use to add orders to the blockchain.

RPC endpoints are the perfect place for MEV protection because they are an intermediary layer between the wallet and the blockchain, safely re-routing transactions towards the specialized network of searchers we mentioned earlier, rather than letting them end up in the public  [mempool](https://www.blocknative.com/blog/mempool-intro)  where malicious searchers lie in wait.

## Order Flow Auctions for MEV Blockers

![2-what-does-an-mev-blocker-do.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_what_does_an_mev_blocker_do_7de134111f.webp)

MEV Blocker RPCs rely on an emerging blockchain mechanism known as  [order flow auctions](/learn/understanding-order-flow-auctions). Order flow auctions are bidding mechanisms used at various levels of the Ethereum stack which pit multiple execution parties against each other to find the one that can provide users with the best value for their transaction.

Currently, block building incentivizes MEV extraction by awarding the privileges of creating the next block to the builder who can extract the most value from the trades. Order flow auctions invert this dynamic — incentivizing auction participants (in the case of MEV blockers, this is the specialized network of searchers) to instead find as large of a rebate as possible for the user submitting the transaction. The searcher who bids the most to backrun a trade wins the auction, capturing some small value of the proceeds for themselves and sending the rest back to the user as a rebate.

## Should you use an MEV Blocker?

While many people have yet to learn about MEV blockers, they’re quickly being adopted by some of the most savvy traders to protect their trades, NFT swaps, LP positions, and more. MEV is an increasingly significant problem for traders of all sizes and MEV blockers are designed to outsmart the searchers with the latest innovations in market mechanics.

You may have heard that MEV is only a problem for large trades, but as searchers get more and more sophisticated, this is becoming less true. Searchers can also extract value from small trades, especially in volatile markets, and beginner traders are especially susceptible to price exploitation as they may not yet know how to protect themselves.

MEV blockers provide robust protection without many downsides. As a user, you install the MEV blocker through your wallet and forget about it, meanwhile it’s quietly protecting you from price exploitation and even forwarding rebates from any money your trades leave on the table.

## MEVBlocker.io — CoW DAO’s Approach to MEV Blocking

![3-what-does-an-mev-blocker-do.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_what_does_an_mev_blocker_do_cc9833e466.webp)

[CoW DAO](https://cow.fi/)  became a first mover in the MEV blocker space when it introduced  [MEV Blocker](https://mevblocker.io/)  (yes, we coined the term) in April of 2023.

MEV Blocker (capital “B”) is an RPC endpoint developed by CoW DAO in collaboration with  [Beaver Build](https://beaverbuild.org/)  and  [Agnostic Relay](https://agnostic-relay.net/)  that’s built to protect Ethereum transactions from frontrunning and sandwich attacks. MEV Blocker sends transactions to a mempool of searchers who bid for the opportunity to backrun the trades, sharing any profits 90/10 with users (90% to users, 10% to searchers.)

To join  [over 600,000 Ethereum users receiving more than 1,000 ETH](https://dune.com/cowprotocol/mev-blocker)  in rebates, add MEV Blocker to your wallet by following the instructions  [here](https://mevblocker.io/).

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MEV blockers have made headlines in the blockchain space, but what are they and how do they work?


What does an MEV Blocker do?

## 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

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

CoW Protocol November 2023 Highlights

## TL;DR

-   During the month of  **August**, CoW Protocol handled a total volume of  **$1.05B**, and generated a surplus of  **$5.3M**
-   In exciting news, CoW Protocol  [launched TWAP orders](https://blog.cow.fi/cow-swap-launches-twap-orders-d5583135b472), added  [native support for Trezor wallets](https://twitter.com/CoWSwap/status/1696902398164316377?s=20), and was  [featured on the 0xResearch podcast](https://twitter.com/0xResearch/status/1695065029563838767?s=20)
-   In terms of Governance, CoW DAO executed CIPS  [28](https://snapshot.org/#/cow.eth/proposal/0x269163793f84ceded1b4c902ca1d368e49f4c5991cb4780493feca2a0b640f1b),  [29](https://snapshot.org/#/cow.eth/proposal/0x22fde20fee09167dbde2981a8e9b7552dcb67af887474b0005d15eedb2a8a6d9), and  [30](https://snapshot.org/#/cow.eth/proposal/0xbb52a603325a81e2f4e2cb0bb17d6626d8929737f2511d18e184cdeb94f7f3de)

## Protocol Stats

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

![1-august-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_august_2023_highlights_164dca9836.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/0x549099b6116bbe176ae524b33ac56c92b768b92ab76fd88de351c94d25870f64?tab=graph)**)**. The total batch volume was  **$41,401,** and it was created by two traders who were CoWed for  **40%**  **($16,401)**  of the batch volume. One trader was buying  **stETH**  with  **DAI**, and the other trader was selling  **DAI**  for  **stETH.**


![2-august-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_august_2023_highlights_f74091792f.webp)

-   **Batch containing the highest volume (**[**Transaction details**](https://explorer.cow.fi/tx/0x094f33db1244c18dd34a026e36bcf42653eaf51ce4731ea4b3cee663daa081dc?tab=graph&vis=transfers)**):**  The total batch volume was  **$9,988,935.71** and it was created by a single trader who was swapping  **USDT to**  **USDC**.


![3-august-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_august_2023_highlights_c84ee58c09.webp)

-   **Batch with the highest amount of surplus (**[**Transaction details**](https://explorer.cow.fi/tx/0x55c195cbc41c7547d7e30e02a89d626abeddcaa0d6e6d4e5f48934c5414e0da0?tab=orders&vis=transfers)**)**: The total batch volume was  **3,545.97 ETH** and it was created by two traders who were swapping  **ETH**  to  **stETH** and  **ETH**  to  **DAI**. Combined, these two traders achieved the largest surplus for the month of  **August**, by getting  **$127,719.33K**  (**2.01%**  surplus) extra.


![4-august-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_august_2023_highlights_b536caa80f.webp)

During the month of  **August**, the top 10 traders traded a total of  **$109M.**


![5-august-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/5_august_2023_highlights_08c9d1d339.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  **$100M** in trades with CoW Protocol this month.


![6-august-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/6_august_2023_highlights_46765e7ebb.webp)

## Solvers

In  **August**, solvers generated a total of  **$5.2M**, which is money in the pockets of traders.


![7-august-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/7_august_2023_highlights_7de2003217.webp)

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


![8-august-2023-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/8_august_2023_highlights_62263bcf59.webp)

## Governance

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

### Executed Proposals

This month we executed three important proposals:

-   [CIP 28 — Should CoW DAO send its profits to the CoW Treasury Core unit to generate extra revenues?](https://snapshot.org/#/cow.eth/proposal/0x269163793f84ceded1b4c902ca1d368e49f4c5991cb4780493feca2a0b640f1b)
-   [CIP-29: Renewal of the solver rewards program](https://snapshot.org/#/cow.eth/proposal/0x22fde20fee09167dbde2981a8e9b7552dcb67af887474b0005d15eedb2a8a6d9)
-   [CIP-30: Implementing oSnap for Optimistic Governance in CoW DAO](https://snapshot.org/#/cow.eth/proposal/0xbb52a603325a81e2f4e2cb0bb17d6626d8929737f2511d18e184cdeb94f7f3de)

### Draft Proposals

There has been a new proposal asking for feedback before moving into the next phase, a final CIP, in its current form:

-   [Fees and CoW bonding for MEVBlocker](https://forum.cow.fi/t/fees-and-cow-bonding-for-mevblocker/1876)

### Technical Discussions

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

1.  [Measuring and banning overbidding](https://forum.cow.fi/t/measuring-and-banning-overbidding/1874)

Make sure to read through it and leave comments — your feedback is highly appreciated and will help move 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 August we  [launched the much anticipated TWAP (Time-Weighted Average Price) special order type](https://blog.cow.fi/cow-swap-launches-twap-orders-d5583135b472)  on Ethereum Mainnet and Gnosis Chain
-   Added  [native support for Trezor](https://twitter.com/CoWSwap/status/1696902398164316377?s=20)  — Trezor users can now interact with CoW Swap natively without having to connect via a third party wallet
-   CoW Swap’s co-founder and CTO, Felix, was a guest on the  [0xResearch podcast](https://twitter.com/0xResearch/status/1695065029563838767?s=20)  where he discussed strategies for eliminating MEV
-   Participated in a  [Twitter space on “Intent-ifying the future”](https://twitter.com/CoWSwap/status/1689268085574758400?s=20)  with Across Protocol
-   MEV Blocker was featured in the  [Our Network newsletter](https://ournetwork.substack.com/p/ournetwork-issue-178)  as a solution to the problem of MEV
-   CoW DAO’s treasury manager, Karpatkey, built out a  [slick dashboard](https://twitter.com/CoWSwap/status/1689649381925163008?s=20)  showcasing the treasury operations of CoW DAO
-   Keystone wallet partnered with CoW Swap to give customers  [15% off its new CoW-branded Keystone 3 Pro](https://twitter.com/CoWSwap/status/1691554495296160073?s=20)
-   [Coinshift integrated CoW Swap](https://twitter.com/0xCoinshift/status/1694029063042871365?s=20)  to bring CoW’s multi-sig swap functionality to Coinshift apps
-   A grant proposal for a Software Engineer Core Contributor was  [posted to the forum](https://forum.cow.fi/t/core-contributor-software-engineer-aug-2023-jan-2024-inclusive/1870)  and  [passed in voting on Snapshot](https://snapshot.org/#/cowgrants.eth/proposal/0x0202a88c6792d1bd1e534cf1da94769130f495e72247e666b4afff8b22da9db0)
-   A grant proposal for a Copywriter Core Contributor was  [posted to the forum](https://forum.cow.fi/t/core-contributor-copywriter-september-2023-february-2024/1873/2)  and  [passed in voting on Snapshot](https://snapshot.org/#/cowgrants.eth/proposal/0xd1efd4784310bbbdb8ea1d566202d11e8dda26eb73711307076433a25a475f97)
-   Published several articles on our blog:  [What is price improvement and why is it unique to CoW Swap?](https://blog.cow.fi/what-is-price-improvement-and-why-is-it-unique-to-cow-swap-e21d86e756be),  [Aave Trade Breakdown](https://blog.cow.fi/aave-trade-breakdown-e17a7563d7ba),  [ENS Trade Breakdown](https://blog.cow.fi/ens-trade-breakdown-a8eb00ddd8c0),  [Nexus Mutual Trade Breakdown](https://blog.cow.fi/nexus-mutual-trade-breakdown-4aacc6a94be8),  [CoW Swap Launches TWAP Orders](https://blog.cow.fi/cow-swap-launches-twap-orders-d5583135b472),  [How to use CoW Swap’s TWAP orders via Safe Wallet](https://blog.cow.fi/how-to-use-cow-swaps-twap-orders-via-safe-wallet-1a0854484dfb), and  [All you need to know about CoW Swap’s new Safe fallback handler](https://blog.cow.fi/all-you-need-to-know-about-cow-swaps-new-safe-fallback-handler-8ef0439925d1)

## Product Updates

**Backend**

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

-   Worked on storing more required data in colocated mode
-   Implemented a new strategy for fetching the current block to reduce system lag by 1 block
-   Made a strong push towards verified quotes and CIP-27
-   Implemented a change so that solvers are no longer allowed to give strange values from the score (specifically overbidding), the driver will now always calculate the score
-   Improved driver colocation by deploying Goerli as expected and refactoring how we setup legacy estimators in the infrastructure
-   Launched TWAP
-   Implemented a metrics fix for determining which solver provides the “winning” quote
-   Removed a bunch of code related to surplus fee computation

**Frontend**

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

-   Released CowSwap 1.44.0
-   Worked on integration of hardware wallets (Trezor, Ledger)
-   Added support for permitable tokens (EIP-2612)
-   Made lots of progress on TWAP and released the feature
-   Added support for WalletConnect v2
-   Did lots of work on the WatchTower — an important piece of infrastructure for TWAP and Composable orders
-   Exposed the interface to composable orders via cow-sdk

## Open Job Positions

The CoW Protocol team is currently looking to hire:

### Engineering

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

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



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


CoW Protocol August 2023 Highlights

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

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

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

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

## How it works

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

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

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

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

## Learn more

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

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

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

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

CoW DAO integrates oSnap for decentralized governance

_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

MEV or “maximal extractable value” is a hidden tax on all types of Ethereum transactions. Any time you make a DeFi trade, buy or sell an NFT, or lend tokens to a liquidity pool, opportunistic users known as “searchers” may manipulate your trades, resulting in unfavorable prices, failed transactions, and missed opportunities.

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

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

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

## How Does MEV Work?

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

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

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

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

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

## Understanding MEV Terms

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

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

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

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

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

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

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

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

## The Different Types of MEV

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

### Frontrunning

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

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

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

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

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

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

### Backrunning

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

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

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

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

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

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

### Sandwich Attacks

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

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

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

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

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

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

### Loss-Versus-Rebalancing (LVR)

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

LVR is different from the swap-based versions of MEV we’ve covered so far. It occurs when liquidity providers lose out on potential profits due to stale prices. Many liquidity providers haven’t even heard of LVR, but it costs them 5–7% of their liquidity, resulting in hundreds of millions lost each year. In fact, when accounting for LVR, many of the largest liquidity pools are not profitable for LPs at all.

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

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

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

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

### Other MEV

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

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

## An Example of an MEV Attack

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

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

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

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

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

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

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

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

## Why is MEV Bad?

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

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

However, MEV makes money for searchers, block builders, and Ethereum validators at the expense of regular users… especially beginners who don’t know how to protect themselves. As of the time of writing, sandwich attacks on AMMs and aggregators alike generate [almost $1 million in profit for searchers each week](https://eigenphi.io/mev/ethereum/sandwich).

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

Over time, persistent MEV erodes market confidence as traders realize they are at a constant disadvantage to more sophisticated actors. Ultimately, MEV may pose an existential threat to blockchain ecosystems like Ethereum so it’s imperative for solutions to emerge that protect everyday traders from price exploitation.

## How to Protect Yourself from MEV

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

### Reduce Slippage

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

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

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

### Use a Custom RPC Endpoint

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

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

A Remote Procedure Call (RPC) endpoint is an intermediate layer that routes transactions from a user’s wallet to the blockchain itself. Transactions pass through RPC endpoints before getting to the mempool, so RPCs can provide additional functionality across any blockchain application or protocol.

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

One of the most popular specialized RPC endpoints is [MEV Blocker](https://cow.fi/mev-blocker). As the name suggests, MEV Blocker provides protection against MEV across all of Ethereum. The RPC works by managing a permissionless network of searchers and hiding transactions from the public mempool. These searchers cannot frontrun or sandwich user transactions. Instead, they capture value through backrunning. Anytime a searcher backruns a user’s transaction, the searcher keeps up to 10% of the value and sends the other 90% back to the user as a rebate.

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

### Use an MEV-Protected DEX

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

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

[CoW Swap](https://swap.cow.fi/#/) is a meta DEX aggregator that finds the best prices for trades and provides comprehensive MEV protection. The protocol uses a unique trading mechanism that relies on batch auctions and intents to achieve the best outcomes for users. Thanks to a powerful combination of delegated trade execution, batch auctions, and protected transaction flow through MEV Blocker, CoW Swap users benefit from thorough MEV protection on all trades.

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

## Maximal Extractable Value — Ethereum’s Existential Battle

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

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

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

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

What is MEV? — Maximal Extractable Value Explained

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

Wait? Smart contract wallet?

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

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

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

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

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

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

## What is a Safe fallback handler?

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

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

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

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

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

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

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

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

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

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

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

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

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



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Don’t worry, trade happy! Upgrading your Safe fallback handler is a secure process. This Safe fallback handler extension has been developed by the CoW Swap team in collaboration with the Safe team, and has undergone a successful audit.

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

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](/learn/cow-swap-for-daos)  to learn why DAOs such as  [Aave](/learn/aave-trade-breakdown),  [Nexus Mutual](/learn/nexus-mutual-trade-breakdown), 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).



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ENS Trade Breakdown


## TL;DR

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

## Protocol Stats

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

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

The top batches worth highlighting are the following:

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

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

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

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

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

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

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

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

## Solvers

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

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

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

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

## Governance

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

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

## Executed Proposals

The DAO executed one important proposal this month:

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

## Draft Proposals

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

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

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

## CoWmunity News

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

## Open Job Positions

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

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

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


CoW DAO June 2024 Highlights

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](/learn/why-twap)  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).

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