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


## TL;DR

-   During the month of  **May**, CoW Protocol handled a total volume of  **$2.4B**  and generated a surplus of  **$16.5M**
-   In exciting news, the CoW Swap widget got integrated by Safe {Wallet], MEV Scanner was launched, and CoW DAO Revenue & CoW AMM Performance dashboards went live
-   In terms of Governance, CoW DAO executed CIPS 43 & 44

## Protocol Stats

This month, CoW Protocol settled a total of  **$2.4B.**

![1-may-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_may_2024_highlights_a5aa5bc848.webp)

The top batches worth highlighting are the following:

-   **Batch with the highest % of CoW trades**  **(**[**Transaction details**](https://explorer.cow.fi/tx/0x80335524b00f7fb0ca810781b8097acd9f3a26c160a3829e6d2fbe49caa08fc0?tab=orders)**)**. The total batch volume was  **$2,165,670**, and it was created by two traders who were perfectly CoWed for  **90% ($1.9M)**  of their volume. One trader was buying  **WETH-WFTM**, and the other trader was selling  **WETH-WFTM**.

![2-may-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_may_2024_highlights_3a87975f5a.webp)

-   **Batch containing the highest volume**  **(**[**Transaction details**](https://explorer.cow.fi/tx/0x93f390d0a9ba487cadca006270ec5b092df9a1104438fdb7f630a0cbf64271c8?tab=orders&vis=transfers)**)**: The total batch volume was  **$15,968,035.14** and it was created by three traders who were swapping  **DAI** to **USDC, ETH** to **BTRFLY,** and **WETH** to **TOKE**.

![3-may-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_may_2024_highlights_c5df911595.webp)

-   **Batch with the highest amount of surplus**  **(**[**Transaction details**](https://explorer.cow.fi/tx/0xc8c849f6e8f1638b366782946b2004b6c2225f74fe9821004e9107d7b3788531?tab=orders)**)**: The total batch volume was  **$8,534,108.21** and it was created by a single trader who was swapping  **ETH to**  **USDC**. This trader achieved the largest surplus for the month of May by getting  **$173,922.78 USDC**  extra, which was roughly 2**%**  surplus.

![4-may-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_may_2024_highlights_152ab79f09.webp)

During the month of  **April**, the top 10 traders traded a total of  **$22M.**

![5-may-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/5_may_2024_highlights_8e3c3abf09.webp)

In the table below you can see the total volume for this month’s biggest trades. The most active trader executed a whopping  **$5.6M**  in trades with CoW Protocol this month.

![6-may-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/6_may_2024_highlights_c078f604e4.webp)

## Solvers

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

![7-may-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/7_may_2024_highlights_c0bac7f1ea.webp)

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

![8-may-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/8_may_2024_highlights_5277340481.webp)

## Governance

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

![9-may-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/9_may_2024_highlights_25544c8f9c.webp)

## Executed Proposals

The DAO executed three important proposals this month:

-   [CIP-43: Operational CoW DAO Safe Renewal](https://snapshot.org/#/cow.eth/proposal/0xcf0cea1d434e3036d07cb61d3d155b2bd45af0d83d280897eb11ce69f5e1f34b)
-   [CIP-44: Reduced bonding requirements](https://snapshot.org/#/cow.eth/proposal/0x1b6f1171633ec3d20c4370db37074aa1bd830486d4d0d6c26165915cc42d9412)

## Draft Proposals

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

-   [CIP-Draft: Balancer and CoW jointly creating CoWAMM pools](https://forum.cow.fi/t/cip-draft-balancer-and-cow-jointly-creating-cowamm-pools/2429)

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

-   [Safe{Wallet} launched Native Swaps powered by CoW Swap widget](https://x.com/CoWSwap/status/1790352311124213912)
-   In collaboration with CoW Grants,  [MEV Scanner was launched](https://x.com/CoWSwap/status/1796184453007458496)  — a new tool to find how much MEV various wallets have suffered. Available on X, Discord, and Telegram!
-   Released the new  [CoW DAO Revenue Dashboard](https://x.com/CoWSwap/status/1792657133861056513)  so that anyone can check in real time how much money CoW DAO is making.
-   [Published a CoW AMM digest](https://forum.cow.fi/t/4-months-of-cow-amm-what-we-have-learned-and-the-next-steps/2432)  explaining all things happening around CoW AMM for the 4 months that it has been live
-   [Released a CoW AMM Dune Dashboard](https://x.com/CoWSwap/status/1788616025635967222)  that includes stats like aggregate pool APYs and CoW AMM performance compared to a reference pool.
-   [CoW AMM got extensively covered on the latest Blockworks Research deep dive on LVR.](https://x.com/blockworksres/status/1791184122951704758)
-   Hear our  [story how we got started in crypto](https://x.com/CoWSwap/status/1791891046668136919)
-   Had our say in the DOJ episode with our  [“MEV is theft” tweet](https://x.com/CoWSwap/status/1790889428887470243)
-   [FairyCoW Swap launched](https://x.com/CoWSwap/status/1787514538692096264)  its programmable encryption on top of CoW Protocol orders
-   Published an example of what  [optimal settlements in DeFi look like](https://x.com/CoWSwap/status/1787893735453564992)
-   Participated in  [FuruRadio Episode 8](https://x.com/furucombo/status/1790773019872465355)  twitter spaces cover all things Solver related
-   Published several blog articles:  [How to Avoid MEV Bots](https://blog.cow.fi/how-to-avoid-mev-bots-38c63584921e),  [What is a Smart Contract?](https://blog.cow.fi/what-is-a-smart-contract-13a7f33ed7c7), and  [What is Slippage in Crypto?](https://blog.cow.fi/what-is-slippage-in-crypto-59937f801663)

## Product Updates

**Backend**

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

-   Allowed solvers to simulate orders without needing to hit another backend endpoint
-   Worked on solver competition by verifying solver quotes
-   Worked on collocated driver solver quoting
-   Worked on backend refactoring to enable running a circuit breaker in the autopilot (a requirement for actual colocation where solvers run their own drivers)
-   Merged CoW AMM fixes, unblocking further progress on the CoW AMM feature
-   Worked on Arbitrum deployment, including various fixes, gas price estimator, and a core component that subscribes to new blocks from the blockchain
-   Made further progress on full colocation, creating an execution plan and starting implementation
-   The backend team attended DappCon

**Frontend**

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

-   Fixed automatic IPFS publishing with a new ENS deployment (good for the decentralization of CoW Swap and the protocol): [https://cowswap.eth.limo](https://cowswap.eth.limo/)
-   The frontend team had a retreat in Turkey, where they worked on several new and upcoming features
-   Launched CoW Swap and the CoW Explorer on Arbitrum
-   Launched EIP 6963 (injected wallets), reducing the number of default wallets and finally supporting Rabby and all wallets that support the standard
-   Worked on several features that will soon be revealed

## Open Job Positions

### Marketing

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

### Other

[Name Your Role Remote — Lisbon](https://boards.eu.greenhouse.io/cowswap/jobs/4341959101)

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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 May 2024 Highlights

George Hristov

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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


Maximal extractable value, or MEV, is a pernicious form of price exploitation that is responsible for over $1.3 billion in losses for everyday traders. Most MEV takes place on the Ethereum ecosystem and adversely affects transactions across decentralized exchanges, liquidity pools, NFT marketplaces, and more.

MEV is captured by MEV bots programmed  to seek out and exploit price differences. Since blockchain markets are built to be always-on, there are always arbitrage opportunities on networks like Ethereum. MEV bots exploit beginners and seasoned traders alike, so it’s important to understand how they work and how to avoid them.

## What is MEV?

Before diving into the specifics of how to avoid MEV bots, let’s first make sure we understand MEV conceptually.

Maximal Extractable Value is, as the name suggests, a measure of the maximum amount of value that can be extracted from the contents of a given Ethereum block. Ethereum transactions are not all equally valuable, and validators (the parties responsible for creating the blocks) can pick and choose how to order transactions in blocks to maximize their profits.

This means that transactions are not necessarily executed in the order they are received; instead, they are arranged in a way that maximizes the compensation for validators.

![1-how-to-avoid-mev-bots.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_how_to_avoid_mev_bots_ffb5692931.webp)

_How MEV occurs in an Ethereum block_

Upon order submission, Ethereum transactions get sent to a “mempool” where they wait to be added to a block. In this mempool, MEV bots (also known as “searchers”) can view pending transactions and bribe validators to reorder them, exploiting the little guy and profiting in the process.

## What is an MEV Bot?

An MEV bot is a program designed to monitor decentralized exchanges, NFT marketplaces, lending platforms, and other on-chain venues to spot profit opportunities. There are several distinct types of MEV bots, each targeting different kinds of transactions.

**Trading MEV bots**: The most common type of MEV bots exploit decentralized exchanges that users rely on to swap cryptocurrencies. They specifically take advantage of the mechanisms used by  [automated market makers (AMMs)](/learn/cow-protocol-glossary#:~:text=amm).

When users trade on decentralized exchanges, they set a slippage tolerance to manage the price difference between the time an order is submitted and when it actually executes. Normally, slippage tolerances range from around 0.1% for stable assets like stablecoins, to 1–2% for blue-chip cryptos like Ethereum, and sometimes upwards of 10% for highly volatile cryptocurrencies like memecoins.

![2-how-to-avoid-mev-bots.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_how_to_avoid_mev_bots_311ef2c62c.webp)

_How a sandwich attack occurs_

DEX MEV bots exploit the slippage tolerance set by users to manipulate trades through a technique called a “sandwich attack.” In a sandwich attack, MEV bots identify a target trade and execute a frontrunning trade just before it, driving up the asset’s price to the slippage tolerance limit. Once the victim’s transaction goes through and raises the price further, the bots dump the token, keeping the profits for themselves.

**LP MEV bots**: Liquidity providers (LPs) on decentralized exchanges can also fall prey to MEV bots. MEV for LPs is known as “[loss versus rebalancing” or LVR](/learn/what-is-loss-versus-rebalancing-lvr). This value extraction arises from the arbitrage between a given LP pool and a reference rebalancing pool that has more up-to-date pricing.

LVR is a problem on decentralized exchanges because price discovery for assets typically occurs off-chain. Centralized exchanges like Binance generally have more liquidity for tokens so they serve as the most accurate source of truth for up-to-the-minute prices.

MEV bots exploit this arbitrage opportunity by continuously trading against DEX pools, capturing upside for themselves at the expense of the LPs.

**NFT MEV bots**: MEV bots can also hijack NFT mints through a process called “frontrunning.” If an MEV bot detects a transaction in the mempool from a user attempting to purchase a valuable NFT, it can submit an order to buy the NFT for itself that executes before the user’s transaction. This is similar to frontrunning swaps on DEXs but applied to NFT mints instead.

## How to Avoid MEV Bots

While MEV is a pervasive problem across all of Ethereum, there are multiple ways to keep yourself safe.

### Use tight slippage when trading

The simplest way to defend against MEV is by setting a low slippage tolerance.

Since MEV exploits slippage for price manipulation, transactions with a lower slippage tolerance provide searchers with less opportunity to exploit trades.

For users not using any other MEV protection tools, setting a lower slippage tolerance can serve as an initial line of defense. However, it’s not a complete solution. Setting the slippage tolerance too low can often result in failed transactions. Even with optimal slippage, MEV bots may still manage to extract value from your trades.

### Trade on pools with large liquidity

Fundamentally, MEV relies on arbitrage opportunities. One way to reduce exposure to such arbitrage is to restrict your trading only to pools with large liquidity. On these pools, individual trades won’t have much  [price impact](/learn/cow-protocol-glossary#:~:text=Price%20impact), so it will be more difficult for MEV bots to extract value.

This strategy limits much of DeFi, of course, as there are constantly new coins launched, and even popular coins may suffer from low liquidity on certain exchanges or during certain times.

### Install an MEV protection RPC

An increasingly popular type of MEV protection that provides a comprehensive solution to the problem is the use of an MEV blocking RPC like  [MEV Blocker](https://mevblocker.io/).

An RPC (Remote procedure call) is a piece of software that sits between a user wallet and the blockchain, transmitting transactions. Normally, RPCs are a boring piece of blockchain infrastructure. Recently, however, specialized RPCs have begun incorporating extra security guarantees for transactions before they reach the blockchain.

The most popular specialized RPC endpoint is  [MEV Blocker](https://mevblocker.io/). As its name suggests, MEV Blocker provides protection against MEV across the entire Ethereum network. This RPC manages a permissionless network of searchers and conceals transactions from the public mempool. These searchers cannot frontrun or sandwich user transactions; instead, they capture value through backrunning. Whenever a searcher backruns a user’s transaction, they keep up to 10% of the value and return the remaining 90% to the user as a rebate. This means that even when a transaction leaves money on the table, MEV Blocker ensures users get most of that value back.

MEV Blocker protects all types of Ethereum transactions, not just swaps, and is compatible with all Ethereum wallets. You can install the MEV Blocker RPC endpoint by following the instructions  [here](https://mevblocker.io/).

### Use intent-based trading solutions

While RPC endpoints provide protection against MEV across many different types of trades, the most comprehensive solutions take place at the application level.

In recent years, there has been a surge in the popularity of intent-based trading solutions like CoW Swap, with leading exchanges like 1inch and Uniswap launching their own intent-based solutions in 1inch Fusion and Uniswap X. Unlike traditional decentralized exchanges, intent-based trading solutions rely on professional execution parties known as “solvers’’ to execute trades on behalf of users.

Delegating execution to professional third parties helps users get the best prices for their trades, as solvers can determine the optimal liquidity sources to tap into. It also means that the risk of MEV gets taken on by the solver themselves, and users are protected from direct price exploitation.

![3-how-to-avoid-mev-bots.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_how_to_avoid_mev_bots_523b1b6663.webp)

_The flow of a transaction on CoW Swap_

### (For LPs) Use an MEV-capturing AMM

Until recently, there wasn’t a great solution to MEV in the form of loss-versus-rebalancing (LVR). LPs basically had to accept that providing liquidity for tokens comes with a tax paid to the MEV bots that constantly rebalance the pools (at the expense of the liquidity providers themselves).

This all changed, however, with the launch of  [CoW AMM](https://cow.fi/cow-amm) — a first-of-its-kind MEV-capturing AMM that redirects profits from pool rebalancing to liquidity providers. CoW AMM works sort of like MEV Blocker in that it makes the MEV bots work FOR users rather than against them. To trade against the liquidity in CoW AMM pools, solvers must bid to provide the most surplus to the pool, thereby giving the majority of LVR profits to the LPs.

## Why MEV bots are bad for Ethereum

As a permissionless, public platform, Ethereum serves as a battleground of opinions on whether MEV is good, bad, or should even be allowed in the first place.

Those sympathetic to the practice argue that MEV is a natural market mechanism that enhances market efficiency and encourages price discovery. While litigating the specifics of the issue is beyond the scope of this article, there are important arguments to be made for why MEV bots are harmful to individual users.

![4-how-to-avoid-mev-bots.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_how_to_avoid_mev_bots_c7aafd4451.webp)

_A snapshot of total MEV value extraction_

### Reduce fairness

At its core, value extraction prioritizes sophisticated traders who have the means and know-how to exploit transactions and profit off minute arbitrage opportunities.

Users who may simply be making trades on exchanges or minting NFTs have no way to compete with these value extractors unless they themselves are capable of writing better bots to protect their transactions.

### Disproportionately target beginners

Those new to DeFi are particularly vulnerable to being exploited. The world of decentralized trading is complex for beginners, who may not even understand settings like slippage tolerance, making them easy prey for bots waiting to take advantage of inexperienced traders.

This creates a negative equilibrium for decentralized trading that may drive newcomers away, hurting the ecosystem as a whole.

### Engage in market manipulation

While there are arguments to be made for MEV encouraging market efficiency and price discovery, this is not the case with every type of MEV.

For example, trading MEV bots rely on exploiting slippage tolerances by raising prices up to a threshold and then selling immediately after in a sandwich attack. In this scenario, the AMM does not benefit from price discovery, but instead experiences an artificial pump-and-dump at the expense of a single trader. In traditional markets, such a move could be considered market manipulation as it adds nothing to the market and is designed solely to profit off a market participant.

## CoW DAO: Protecting Ethereum Users from Negative Outcomes

Ultimately, the goal of Ethereum is to serve as a public platform that enables innovation. MEV as a problem emerges from a largely unrestricted marketplace. This benefits innovation by encouraging novel market mechanisms, but it also poses risks to uninformed traders. For this reason, it’s important for users to be aware of the solutions available for protecting themselves.

Regardless of what side of the MEV debate you stand on, most of us agree that we don’t want our trades exploited. To this end, CoW DAO has your back with products that protect you from Ethereum’s dangers and work to ensure positive outcomes.

Install MEV Blocker here:  [www.mevblocker.io](http://www.mevblocker.io/)

LP on CoW AMM:  [https://cow.fi/cow-amm](https://cow.fi/cow-amm)

Swap on CoW Swap:  [www.swap.cow.fi](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=protect-from-mev-bots-article)

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The nasty culprits of MEV lurk in every corner of Ethereum… Find out how to keep yourself safe


How to Avoid MEV Bots

A smart contract is an executable program on a blockchain network. Smart contracts make up the backbone of the web3 industry as they enable many of the use-cases that blockchains are known for including staking, swapping, lending, borrowing, and much more.

Blockchains eliminate the need for a central authority or intermediary when it comes to running a mass, decentralized network of nodes. Smart contracts bring these benefits to specific use-cases by enabling the creation of decentralized apps (dApps).

Smart contracts were first popularized with the launch of the Ethereum blockchain in 2015. Ethereum also includes a programming language for creating smart contracts known as “Solidity.”

## How do Smart Contracts Work?

Smart contracts are created as computer code that is hosted and executed on a blockchain network. A decentralized set of nodes keep a copy of the entire state of the blockchain, including all deployed smart contracts, in order to ensure that the smart contracts are executed in a reliable and transparent way.

Let’s take a look at the process of creating and deploying a smart contract:

**Contract Creation**: Developers write smart contracts using programming languages compatible with the blockchain, such as Solidity for Ethereum. The code within the smart contracts include rules for execution and the logic necessary for the smart contract to perform its function — such as lending, swapping, borrowing, etc.

**Compiling**: After it’s written, the smart contract is compiled into bytecode. This is the machine-readable language that execution environments such as the Ethereum Virtual Machine (EVM) use.

**Deployment**: Once it’s compiled, the smart contract is deployed to the blockchain through a transaction that includes the contract’s code. This transaction is then broadcast to the network and assigned a unique address on the blockchain, similar to how blockchain wallets have addresses.

**Trigger**: Smart contracts are designed to automatically execute when predefined conditions are met. They can be triggered by various events, including receiving a certain amount of cryptocurrency, the expiration of a timer, receiving a trigger from an external data source, and more.

**Execution**: Once a contract is triggered, blockchain nodes execute the contract’s code. Since every node on the network independently runs the code, the execution is verified and validated multiple times. This multi-party validation is what provides the security and transparency smart contracts are known for.

**State Change**: All actions taken by a smart contract are treated as transactions. These transactions can change the state of the contract, interact with other contracts, alter user balances, and more.

**Results**: The state change caused by the execution of the smart contract is recorded on the blockchain and assimilated by the various nodes. Changes in balances, variables, ownership records, and more are recorded on the blockchain in an immutable manner.

**Continuous Interaction**: Smart contracts can remain on the blockchain indefinitely, ready to be triggered again under the right conditions.

An important aspect of smart contracts is that they are permisionless, meaning that anyone can develop and deploy a smart contract on any public blockchain. All they have to do is pay the necessary gas fees to deploy the smart contract.

## What are Smart Contracts Used For?

Smart contracts are at the heart of decentralized apps (dApps). They power the entire world of decentralized finance (DeFi) as well as other fields like blockchain insurance, gaming, NFTs, social networks, and much more.

### Decentralized Exchanges

dApps that enable trading, like Uniswap, rely on smart contracts for processing user funds, finding liquidity, and executing swaps.

More complex decentralized exchanges such as  [CoW Swap](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=smart-contracts-article)  use smart contracts to power solver competitions where multiple independent parties find liquidity on behalf of users. In this case, smart contracts are essential for enforcing the rules of the competition and ensuring users get the best deal for their trades.

### Lending & Borrowing Platforms

Platforms like Aave allow blockchain users to take out overcollateralized crypto loans without relying on traditional counterparties. These dApps utilize smart contracts to allow users to lend out their crypto assets or borrow against them.

The platform works by having users deposit crypto tokens into liquidity pools managed by smart contracts and allowing borrowers to take out loans from these liquidity pools by providing collateral. Smart contracts automatically enforce the terms of the loan, such as collateral requirements, interest rates, and repayment terms. They also managing liquidations whenever necessary.

Additionally, on-chain lending platforms use algorithmically determined dynamic interest rates, which adjust based on the current supply and demand for each asset in the pools. Smart contracts calculate and update these rates in real-time, ensuring that lenders receive competitive returns and borrowers pay fair rates.

### Liquidity Providing

Exchanges that rely on automated market makers (AMMs) use smart contracts not only for the swap process, but also for allowing users to provide liquidity.

[AMMs](/learn/cow-protocol-glossary#:~:text=amm)  allow users to trade assets without the need for a centralized intermediary, or even a traditional orderbook. Whenever a user swaps tokens, they interact with the appropriate liquidity pool’s smart contract. The contract calculates the amount of tokens that can be received based on the current ratio of tokens in the pool, with the goal of ensuring that the pool remains balanced. The transaction is then executed automatically by the smart contract without requiring a traditional buyer-seller match.

### Staking

Many smart-contract-enabled blockchains, such as Ethereum, use proof-of-stake consensus mechanisms. These systems require users to lock up, or “stake,” tokens in order to validate the state of the blockchain. Smart contracts are essential to this process.

Tokens used for staking are locked in a smart contract that ensures that the tokens cannot be spent elsewhere while they are staked. This contract typically specifies conditions such as the minimum staking period, the minimum and maximum stake amounts, and other rules governing the staking process.

Smart contracts also calculate the rewards distribution for stakers, select which validators should create the next block, slash (penalize) validators in case of misconduct, and facilitate unstaking and withdrawals.

**In summary, smart contracts are crucial to the functions of modern-day blockchains.** They ensure these systems run according to certain rules, with no down-time, and with set rules for processing all submitted transactions. All with no centralized control or trusted intermediary!

## What are the Benefits of Smart Contracts?

So far, we’ve seen that smart contracts ensure that dApps are online 24/7 and function without the need for counterparties. Below we take a look at some additional benefits.

**Automation**: Smart contracts are automatically executed, meaning they effectively eliminate counterparty risk. Various parties in transactions also have their funds transferred automatically without having to wait for signatures, notaries, or other forms of manual verification.

**Transparency**: Smart contracts deployed on blockchains are publicly visible, meaning anyone can audit the code and determine what the smart contract does. This transparency encourages trust as malicious code can be quickly identified and there is no doubt about what steps a smart contract will take when executed.

**Immutability**: As a corollary to transparency, smart contracts are also immutable, meaning that they cannot be changed without these changes becoming public. This adds an additional layer of transparency which ensures smart contracts perform what they are supposed to with no malicious code and without censoring outputs.

## What are the Limitations of Smart Contracts?

The main downside of smart contracts is (aptly) known as “smart contract risk” — which is the risk that the smart contract has a bug that prevents it from executing properly or puts user funds at risk.

A powerful benefit of smart contracts is that they are immutable, meaning no one can sneak changes in. This can also prove to be a headache, however, if a smart contract is deployed with an error. For this reason, it’s extremely important that code deployed on blockchains is as error-free as possible. In service of this goal, the cottage industry of smart contract audit services has emerged to help make sure deployed code has no bugs and smart contract risk is well managed.

## How Smart Contracts Enable Decentralized Finance

Decentralized finance, or “DeFi” is an emerging field that aims to transform the way individuals move money, ending the reliance on centralized intermediaries like banks.

![1-what-is-a-smart-contract.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_what_is_a_smart_contract_80275c1ffb.webp)

A core DeFi function is the ability to swap cryptocurrencies from one to another permissionlessly. One of the leaders in this space, CoW Swap, is a meta DEX aggregator that enables the most efficient and price optimal swaps in DeFi.

CoW Swap relies on smart contracts for much of its functionality. Not only do smart contracts enable the nuts and bolts of processing user funds, they also govern the solver competition that sets CoW Swap apart from other decentralized exchanges.

Smart contracts ensure that CoW Swap users receive the best prices for their trades through a decentralized solver competition where independent third parties compete for the right to settle user trades. The best solution is algorithmically determined based on which solver provides the most surplus to users. Thanks to smart contracts, CoW Swap users know that they are getting the best deals for their trades.

Give CoW Swap a shot and put its smart contracts to work for you:  [swap.cow.fi](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=smart-contracts-article).

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Smart Contracts enable the majority of decentralized apps and are critical to modern blockchain ecosystems


What is a Smart Contract?

## TL;DR

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

## Protocol Stats

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

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

The top 3 batches worth highlighting are the following:

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

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

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

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

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

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

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

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

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

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

## Solvers

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

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

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

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

## Governance

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

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

### Executed Proposals

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

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

### Draft Proposals

There were no new draft proposals this month.

## CoWmunity News

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

## Product Updates

### Backend

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

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

### Frontend

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

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

## Open Job Positions

### Engineering

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

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


CoW DAO April 2024 Highlights

Slippage is the difference between the price at which an order is submitted and the price at which it’s executed.

Since crypto prices fluctuate constantly, it’s necessary to set a “slippage tolerance” for every trade which allows users to accept a slightly higher or slightly lower price for their trades at execution time.

## What is Slippage?

Slippage is the amount that a trade price may vary by between the time the trade is placed and the time it actually executes.

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

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

## What is a Slippage Tolerance?

![1-what-is-slippage.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_what_is_slippage_0b1a557216.webp)

_The slippage setting on_ [_CoW Swap_](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=slippage-article)

Decentralized exchanges require users to set a “slippage tolerance” percentage every time they make a trade. This determines how much deviation the trader is willing to accept in the price of the asset they are trading.

For example, if a user wants to buy 1 ETH, it might cost them $3,000 at the time they place their trade, but by execution time that price may have changed to $2,950 (approximately 2% less). If they had no slippage tolerance, their trade would fail, potentially still incurring gas fees and forcing them to resubmit the transaction.

Meanwhile, if they set a slippage tolerance of 2% when they place their trade, their trade would be able to execute at prices 2% below or 2% above the quoted price. In this example, this would allow the trade to go through as long as 1 ETH is between $2,940 and $3,060 at execution time.

All decentralized exchanges use slippage tolerances for user trades, so it’s important to understand the concept and know what percentage to use.

## What Slippage Tolerance Should I Use?

As a rule, you should try to use the smallest slippage you can get away with. On most exchanges, the default slippage tolerance is between 0.5% and 2%, however, the optimal slippage tolerance depends on the type of asset you’re trading.

Generally speaking, the more volatile a crypto asset is, the higher a slippage tolerance you’ll need to use.

**For stable assets**: Assets like stablecoins generally require a low slippage tolerance because their prices don’t fluctuate by much. Exchanges specializing in stablecoins (such as Curve) set the default slippage tolerance for these assets at between 0.25% and 0.5%.

**For standard assets**: The standard slippage tolerance for most trades is between 0.5% and 2%. This is a good range to stick to when trading established assets with medium volatility profiles such as Ethereum.

**For volatile assets**: When it comes to cryptocurrencies whose prices jump wildly — such as memecoins or new token launches — users will often need to use a higher slippage tolerance than 2%. There is no hard and fast rule here. Depending on the volatility of the asset, user trades may require a double-digit slippage, maybe even in the high double-digits, in order for the trade to go through.

It’s important to understand, however, that setting a high slippage tolerance leaves you vulnerable to price exploitation in the form of maximal extractable value (MEV).

## The Dangers of High Slippage

While setting a high slippage tolerance helps ensure that your transaction goes through, using too high of a slippage tolerance can be dangerous.

Blockchains like Ethereum process transactions sequentially, meaning that transactions in a block execute one after the other. This, combined with the mechanism of  [automated market makers (AMMs)](/learn/cow-protocol-glossary#:~:text=amm), means that value-extracting bots can strategically place transactions before and after your trade to exploit your slippage tolerance and extract value from you. This type of price exploitation is known as maximal extractable value (MEV).

### Sandwich Attacks

![2-what-is-slippage.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_what_is_slippage_e0af2a8fb5.webp)

_The flow of a sandwich attack_

A  [sandwich attack](/learn/what-is-a-sandwich-attack-and-how-can-you-protect-yourself)  is a form of MEV that can occur whenever a user places a trade with a high slippage tolerance. Specifically, this is a slippage tolerance that is larger than what the market price may call for.

When a user places this trade, an MEV bot (known as a “searcher”) places another transaction before the user transaction, pushing the price of the traded asset up to the original user’s maximum slippage tolerance. The original user’s transaction then goes through, pushing the price up even further. Finally, the searcher sells the asset, cashing out on the price difference.

In the end, the user loses out because their transaction could have gone through at a lower slippage. Instead, the searcher forced the user’s transaction to execute at the limit of its slippage tolerance and kept the difference for themselves.

This isn’t a rare occurrence either, MEV is a systemic problem for chains like Ethereum where MEV losses total over $1.3 billion to date.

## What is Auto-Slippage?

Unfortunately, there is no perfect way to predict what the ideal slippage should be for every trade. In crypto, users are often competing against more sophisticated trading parties and bots who can take advantage of their sub-optimal traders for their own profit.

To protect users from MEV, some exchanges offer auto-slippage functions which automatically calculate the slippage tolerance that trades should use based on the assets they are trading and market conditions.

## CoW Swap: Premium Auto-Slippage and Delegated Trade Execution

![3-what-is-slippage.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_what_is_slippage_4170bdeb89.webp)

One of the exchanges with the most advanced auto-slippage features is CoW Swap. CoW Swap is an intents-based DEX aggregator that uses third parties known as “solvers” to execute trades on behalf of users. Solvers calculate the optimal slippage tolerance for user trades and take on all the risks of MEV.

![4-what-is-slippage.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_what_is_slippage_4f3c2ce1e4.webp)

In fact,  [data shows](https://blog.cow.fi/do-cows-slip-age-less-389150154f84)  that CoW Swap offers a low default slippage the overwhelming majority of the time compared to 0x and 1inch.

On CoW Swap, you can make the perfect trade every time, even if you’ve never heard of “slippage” before!

Trade worry-free at  [swap.cow.fi](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=slippage-article).

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Slippage occurs in most crypto trades, and it’s an important concept for traders to understand


What is Slippage in Crypto?


A 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

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


## TL;DR

-   During the month of  **March**, CoW Protocol handled a record-breaking total volume of  **$3.42B**  and generated a surplus of  **$23.4M**
-   In exciting news, CoW Protocol saw its  [largest month ever in terms of trading volume](https://dune.com/queries/2508216/4127586), the CoW team touched grass with an off-site retreat in Portugal, and a protocol fee report  [showed 130 ETH generated with no impact on user retention](https://twitter.com/CoWSwap/status/1773163707331461620?s=20)
-   In terms of Governance, CoW DAO executed  [CIP 39](https://snapshot.org/#/cow.eth/proposal/0xd4b23381a63b19d971e625e1fcef6ffa26d6d685df8b28ca590c251506669a53)  and received several important proposals regarding  [MEV Blocker fees](https://forum.cow.fi/t/cip-40-mev-blocker-fees/2366),  [CoW DAO’s SHU token allocation](https://forum.cow.fi/t/cip-41-claim-and-delegate-cow-daos-shu-token-allocation/2360), and  [strategies for enhancing treasury asset usage](https://forum.cow.fi/t/cip-42-enhancing-treasury-asset-usage/2361)

## Protocol Stats

This month, CoW Protocol settled a total of  **$3.42B.**

![1-cow-dao-march-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_cow_dao_march_2024_highlights_2ba332d346.webp)

The top 3 batches worth highlighting are the following:

**1. Batch with the highest % of CoW trades (**[**Transaction details**](https://explorer.cow.fi/tx/0x613e4155d95f1f9ca7e15a210e54a6b446c5f69ae2638da572289cddc099e4aa?tab=orders&vis=transfers)**):**  The total batch volume was  **$89,900**, and it was created by two traders who were CoWed for  **$85,813, (95.5%)**  of the total batch volume. One trader was buying USDC, the other was selling USDC, and the CoW was facilitated through a common hop in WETH.

![2-cow-dao-march-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_cow_dao_march_2024_highlights_1e110aa48d.webp)

**2. Batch containing the highest volume (**[**Transaction details**](https://explorer.cow.fi/tx/0xe2f795665577f65b4985b6003761ab8e6364222cbec122388b7ee467644dd712?tab=orders)**):**  The total batch volume was  **$20,193,757** and it was created by a single trader swapping  **ETH for USDC**.

![3-cow-dao-march-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_cow_dao_march_2024_highlights_5e00b79ce8.webp)

**3. Batch with the highest amount of surplus (**[**Transaction details**](https://explorer.cow.fi/tx/0xe2f795665577f65b4985b6003761ab8e6364222cbec122388b7ee467644dd712?tab=orders)**):**  The batch with the highest surplus was the same as the batch with the highest volume, for a total volume of  **$20,193,757** and a surplus of  **325,762 USDC (1.58%).**

![4-cow-dao-march-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_cow_dao_march_2024_highlights_adfaa341fe.webp)

During the month of  **March**, the top 10 traders traded a total of  **$44,898,507.**

![5-cow-dao-march-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/5_cow_dao_march_2024_highlights_468f2d3834.webp)

In the table below you can see the total volume for this month’s biggest trades. The most active trader executed a whopping  **$19,601,868**  in trades with CoW Protocol this month.

![6-cow-dao-march-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/6_cow_dao_march_2024_highlights_3095ac6111.webp)

## Solvers

In  **March**, solvers generated a total of  **$23M**  in surplus, which is money in the pockets of traders.

![7-cow-dao-march-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/7_cow_dao_march_2024_highlights_e1caf63a45.webp)

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

![8-cow-dao-march-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/8_cow_dao_march_2024_highlights_2c3cb003af.webp)

## Governance

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

![9-cow-dao-march-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/9_cow_dao_march_2024_highlights_d5eee98f7e.webp)

## Executed Proposals

The DAO  **executed one important proposal**  this month:

-   [CIP-39: Continued funding for development services — Service Agreement №3](https://snapshot.org/#/cow.eth/proposal/0xd4b23381a63b19d971e625e1fcef6ffa26d6d685df8b28ca590c251506669a53)

## Draft Proposals

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

-   [CIP-40: MEV Blocker fees](https://forum.cow.fi/t/cip-40-mev-blocker-fees/2366)
-   [CIP-41: Claim and Delegate CoW DAO’s SHU Token Allocation](https://forum.cow.fi/t/cip-41-claim-and-delegate-cow-daos-shu-token-allocation/2360)
-   [CIP-42: Enhancing Treasury Asset Usage](https://forum.cow.fi/t/cip-42-enhancing-treasury-asset-usage/2361)

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

## CoWmunity News

-   In March, CoW Protocol had its  [largest month ever](https://dune.com/queries/2508216/4127586), with a trading volume of over  **$3.4 billion**. The CoW is quickly becoming a bull 😈

![10-cow-dao-march-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/10_cow_dao_march_2024_highlights_ae68c0eeda.webp)

-   The CoW team came together in Portgual for a yearly off-site that included a hackathon, presentations, and valuable in-person quality time
-   After taking the DeFi world by storm in February, CoW AMM  [received a Safe App announced by none other than Steve Ballmer](https://x.com/CoWSwap/status/1767587714826956807)  in a new video
-   A  [first report](https://twitter.com/CoWSwap/status/1773163707331461620?s=20)  of the newly-enabled out-of-market limit orders has identified they’ve generated 130 ETH for the protocol with no negative impact on user retention
-   The marketing team featured a new  [Widget](https://x.com/CoWSwap/status/1770489389900292344?s=20)  campaign, added new terms to the  [CoW glossary](https://x.com/CoWSwap/status/1765396565504717225?s=20), and posted a  [transaction highlight featuring surplus-capturing limit orders](https://twitter.com/CoWSwap/status/1773759519522533509?s=20)
-   CoW Protocol  [joined in the call to unblock crypto](https://x.com/CoWSwap/status/1765756459755634824)  together with some of the biggest names in DeFi
-   Anna from the CoW team was featured on the  [Deus Ex DAO](https://x.com/CoWSwap/status/1764621816633385090?s=20)  podcast
-   The blog received an update with a new article: “[MEV Bots: Switch From Searcher to Solver](/learn/mev-bots-switch-from-searcher-to-solver)”

## Product Updates

**Backend**

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

-   Replaced orders with custom appdata
-   Transitioned solvers to a new API
-   Made steady progress on protocol and partner fees
-   Rolled out verified quotes on staging

**Frontend**

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

-   Released CowSwap 1.62.0 which includes a partner fee option for the Cow Swap Widget, a “recreate limit order” option which allows users to duplicate their limit orders in a couple of clicks, and a redesign of the fee display
-   Prepared the CoW Swap “I’m Feeling Lucky” feature as an April Fool’s joke
-   Worked on a feature that allows placing limit orders for amounts beyond what a user currently has in their wallet

## Open Job Positions

### Engineering

[DevOps Engineer](https://boards.eu.greenhouse.io/cowswap/jobs/4311312101)

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


CoW DAO March 2024 Highlights

After three years and thousands of hours of research with crypto whales, DeFi degens, finance bros, and specialized fortune tellers called “blockchain oracles”, CoW Swap has discovered that the secret to investing in crypto is simply  _getting lucky_.

That’s why CoW Swap is proud to announce its newest innovation — the “I’m Feeling Lucky” button.

That’s right — inspired by Google’s iconic search feature, CoW Swap is adding a splash of luck to web3. Just select a sell token, tap “I’m Feeling Lucky”, and let CoW Swap’s best-in-class solver network buy a random shitcoin for you.

## Putting the “luck” in “hodl”

Have you ever seen a crypto millionaire and thought “Damn, that was all luck!”

Wish you could “get lucky” the same way?

Well now you can.

Just head over to  [CoW Swap](https://swap.cow.fi/#/swap?utm_campaign=blog-feeling-lucky)  and use the “I’m Feeling Lucky” button right in the swap modal to let luck pick your new favorite token!

![1-feeling-lucky.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_feeling_lucky_609c959c95.webp)

## How to get lucky

To get lucky, simply:

1.  Navigate to  [CoW Swap](https://swap.cow.fi/#/swap?utm_campaign=blog-feeling-lucky)
2.  Pick ETH or a stablecoin as your sell token
3.  Click the “I’m feeling lucky” button where the “Swap” button normally appears
4.  CoW Swap will then pick a random “lucky” token for you as your “buy” token
5.  ????
6.  Profit!!!! (not financial advice)

Don’t worry — you’ll have a chance to confirm your trade before you place it. If you trust the luck of the CoW draw, simply click “Swap” once your random token appears and your transaction will proceed as normal.

## Luck out with CoW Swap this April 1

So if you’re tired of being the fool, let CoW Swap turn your luck around. No joke, the feature is real and  [live on CoW Swap](https://swap.cow.fi/#/swap?utm_campaign=blog-feeling-lucky)  for both Ethereum Mainnet and Gnosis Chain!

They say anything goes up in a bull market… While we can’t guarantee that your lucky token will pump, we can promise that your trades will always be backed by CoW Swap’s signature MEV protection and the best prices in DeFi.

Degen in peace this April 1 and let luck take the wheel with  [CoW Swap](https://swap.cow.fi/#/swap?utm_campaign=blog-feeling-lucky)!

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Find your lucky clover in CoW Swap’s greener pastures


CoW Swap Introduces “I’m Feeling Lucky” Mode for DeFi Trades


## TL;DR

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

## Protocol Stats

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

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

The top 3 batches worth highlighting are the following:

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

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

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

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

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

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

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

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

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

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

## Solvers

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

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

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

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

## Governance

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

## Executed Proposals

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

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

## Draft Proposals

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

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

## CoWmunity News

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

## Product Updates

**Backend**

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

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

**Frontend**

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

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

## Open Job Positions

There are currently no open positions.

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

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CoW Protocol February 2024 Highlights

Maximal extractable value (MEV) has become a controversial topic in the DeFi community over the last few years as the practice has gained wider adoption. Some blockchain projects take steps to protect their users from suffering MEV, but there are also advocates of the practice who argue that it contributes to market efficiency and validator compensation.

[CoW DAO](https://cow.fi/)  creates products that protect Ethereum users from negative outcomes, so it’s clear that participants in the DAO are no fans of MEV. The technical innovations that MEV searchers have pioneered in the pursuit of maximizing profits, however, are indeed impressive.

Thankfully, this tech can be put to good use in a way that benefits users and still makes money: Rather than being MEV searchers, these users should consider becoming CoW Protocol solvers.

## What is a Searcher?

Searchers are DeFi market participants, most often bots, that monitor pending Ethereum transactions for arbitrage opportunities.

Captured arbitrage is known as  [maximal extractable value (MEV)](/learn/understanding-mev-protection), and it’s a pernicious form of price exploitation that occurs across all types of transactions. To date, MEV has cost traders over $1.5 billion in losses. Most of these losses have been facilitated by searchers who pocket a large portion of the arbitrage for themselves.

## What is a Solver?

![1-switch-from-searcher-to-solver.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_switch_from_searcher_to_solver_7763c26103.webp)

CoW Protocol is a meta DEX aggregator that relies on bonded third parties known as “[solvers](https://docs.cow.fi/cow-protocol/concepts/introduction/solvers)” to execute user trades. The protocol uses an  [intents-based trading system](https://docs.cow.fi/cow-protocol/concepts/introduction/intents)  where user intents get grouped into  [batches](https://docs.cow.fi/cow-protocol/concepts/introduction/batch-auctions). The solver that can execute the orders at the best price wins the right to settle the batch (find out more about how CoW Protocol works  [here](https://docs.cow.fi/category/concepts).)

Solvers are compensated in COW tokens for settling batches, incentivizing them to compete to find better prices and win the right to execute user intents. In return for this compensation, solvers provide users with a number of benefits including:

-   Finding optimal prices for the trades in a batch
-   Protecting users from MEV by executing transactions on their behalf
-   Providing abstraction that allows for benefits like gasless trades, transaction bundles, directly tapping into LPs, and more

## Searchers vs. Solvers

Fundamentally, searchers and solvers optimize for the same thing: maximizing profits. However, they serve different purposes, so their incentives diverge.

Searchers make money by performing MEV attacks on vulnerable transactions — giving users worse prices and keeping the difference for themselves. Searchers are incentivized to maximize their profits while ensuring that they are bidding enough for their transactions to be included in the next block.

In Ethereum, searchers work to out-bid each other to have their transactions included and make money. This is similar to what solvers do on CoW Protocol. The difference, of course, is that  **searchers benefit validators while solvers benefit users.**

## Why Become a Solver?

The fundamental difference between searchers and solvers is that searchers extract value from user transactions while solvers add value to them.

MEV may be a profitable enterprise in the short-term, but it hurts users and makes for a more toxic ecosystem. This turns potential new entrants away, feeding a vicious cycle — after all if there are no users left, who will searchers make money off of?

Solvers are the opposite: they take the same tech but they leverage it for the benefit of users. This cycle is virtuous, rather than toxic. Users achieve better prices, so they’re incentivized to use the product more, which means more order flow and better compensation for solvers.

From a technical standpoint, the methods searchers use to find arbitrage opportunities can be used to instead find solutions to batches. Searchers can leverage their existing nodes, algorithms, servers, AMM-indexed liquidity, simulation services, and more to become a good solver. This means that the lift to turn a searcher into a solver is relatively minor, while the upside is significant.

## Who can be a Solver?

CoW Protocol was the first DEX to implement intent-based trading, a model that the entire DeFi industry is now moving towards. This means that  [opportunities for solvers](https://dune.com/cowprotocol/solver-info)  will only grow in the coming years.

Thanks to a permissionless structure, anyone can become a solver. The main requirement is to put up a bond which serves as a guarantee that the solver will follow the  [rules](https://docs.cow.fi/cow-protocol/reference/core/auctions/competition-rules)  or risk getting slashed.

Solvers that do well find good solutions to the  [batch auction problem](https://docs.cow.fi/cow-protocol/reference/core/auctions/the-problem). They also generally:

-   Develop an efficient optimization algorithm
-   Identify and solve special problem instances that are easy to solve
-   Consider diverse liquidity sources
-   Integrate external market makers

## How to Become a Solver

Transforming a searcher setup into a solver setup or writing a new solver takes some technical expertise. We won’t go into it in this article, but you can find the requirements and specifications for becoming a solver in the  [CoW Protocol solver documentation](https://docs.cow.fi/cow-protocol/tutorials/solvers).

We also answer questions and provide technical support through the CoW Protocol  [Discord](https://discord.gg/cowprotocol).

Happy solving!

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Searchers make Ethereum worse for everyone, but with just a few tweaks they could contribute to the ecosystem instead


MEV Bots: Switch From Searcher to Solver


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

Providing liquidity to automated market makers (AMMs) like Uniswap has become one of the most popular ways to earn yield in crypto.

While other yield-bearing methods like staking and lending depend on protocol economics and aggregate market demand, there is always alpha in providing liquidity. Between new token launches, incentive programs from ecosystem grants, and ever-evolving AMM models, liquidity providing is one of the most mature sectors for earning returns on crypto assets.

However, liquidity providing has one major downside: it is subject to a pernicious form of price exploitation known as loss-versus-rebalancing (LVR).

LVR is a form of maximal extractable value (MEV) responsible for more price exploitation than all other forms of MEV combined. 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**.

How can this be? Let’s examine how liquidity providing works to learn what loss-versus-rebalancing is and where it comes from.

## What is LVR

First coined by a  [team of researchers from Columbia University](https://arxiv.org/abs/2208.06046), 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 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.

To better understand LVR as a process, however, we first need to understand the nature of automated market makers, as well as the pre-cursor to LVR — impermanent loss.

## The CF-AMM Design

Most AMMs (such as Uniswap) are examples of constant function automated market makers—CF-AMMs.

These AMMs take in two assets and automatically re-calculate prices after each trade to ensure ample liquidity at all times. As one asset gets depleted, the other must trade at a higher price in order to maintain a constant ratio where the value of all “A” tokens in a pool is equal to the value of all “B” tokens.

CF-AMMs use the constant product function  _x*y=k_  to calculate the ratio of assets, where  _x_  and  _y_  are the two tokens and  _k_  is the constant maintained. Thus, all trades on a CF-AMM can be mapped on the constant product function curve:

![1-what-is-lvr.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_what_is_lvr_8d10b97884.webp)

### Liquidity Positions

Let’s look at an example of providing liquidity which will help illustrate the design (and shortcomings) of CF-AMMs.

Let’s say that the price of ETH is $1,000 and we have 2 ETH worth $2,000 that we would like to earn yield on. We can start by providing liquidity to, say, an ETH-USDC pool. In order to do this, we must first split the value of our holdings into 50% ETH and 50% USDC (remember, most AMMs require LP positions to be split 50/50 between your two assets.)

> **LP Position:**   
> 1 ETH   $1,000 USDC  
> _Total value: $2,000_

Over time, we earn LP fees on this position for our service of providing liquidity to traders. So our $2,000 is slowly growing by just sitting in a liquidity pool… sounds great, right?

## Loss-Versus-Holding (Impermanent Loss)

In our example, we’re making free money off LP fees up until the moment ETH starts to move in price. This is where we risk incurring “impermanent loss” which can be thought of as the opportunity cost of our LP position compared to what we would have had if we just held the assets (without putting them in a liquidity pool). That’s right—LPing is not automatically better.

Let’s take a look at how this shakes out for our particular example:

In an extreme scenario, let’s say the price of ETH jumps from $1,000 per ETH to $4,000 per ETH. The liquidity pool will adjust so that our assets are still 50% ETH and 50% USDC.

To calculate the new position, we use the formula  [_x=√(p1ETH∗p2ETH_](https://medium.datadriveninvestor.com/impermanent-loss-in-defi-the-risks-involved-in-providing-liquidity-67c54fdf1cfc)_)_,  where _p1ETH_ represents the original price of ETH and _p2ETH_ represents the new price of ETH. Solving for  _x_  will give us the updated (dollar-denominated) value of each asset after the AMM re-calculates prices back to 50/50 in this new price environment.

The  _sqrt(1000*4000) = 2,000_, meaning that the dollar value of each asset in our liquidity pool will be $2,000 after the recalculation. This leaves us with $2,000 USDC, and 0.5 ETH in our liquidity pool, for a total of $4,000. We started out with $2,000 and we end up with $4,000 — doubling our money.

> **Original LP Position:**   
> 1 ETH   $1,000 USDC  
> _Total value: $2,000_  
>    
> **New LP Position:**  
> 0.5 ETH   $2,000 USDC  
> _Total value: $4,000_

That’s great! …until we look at what we could have made if we had just  _held_  our 1 ETH and $1,000 USDC without ever putting them in a liquidity pool in the first place.

If we had held, our 1 ETH would be worth $4,000, which in addition to our original $1,000 USDC would leave us with $5,000 net. That’s $1,000 more than what we end up with through the liquidity pool!

> **Original LP Position:**   
> 1 ETH   $1,000 USDC  
> _Total value: $2,000_     
> 
> **New LP Position:**  
> 0.5 ETH   $2,000 USDC  
> _Total value: $4,000_   
>   
> **Holding Position:**   
> 1 ETH   $1,000 USDC  
> _Total value: $5,000_

This difference is known as “divergence loss,” or, more colloquially, “impermanent loss.”

It’s “impermanent” because if the price of the assets were to return to their original value ($1,000 per ETH in our example) the loss would be reversed and the value of our LP position (excluding yield earned) would be equal to the value of a portfolio where we had just held. So impermanent loss can also be conceptualized as “loss-versus-holding.”

If we begin thinking about counterfactual scenarios where rather than LPing, we had taken some other course of action with our money, a world of possibilities opens up. The first, “loss-versus-holding,” we just covered. The second, “loss-versus-rebalancing,” is the topic at hand that we now turn to.

## Loss-Versus-Rebalancing (LVR)

In the case of impermanent loss, if an asset begins and ends a time period at the same price, there is no loss incurred by the LPs. However, it turns out that there is a portfolio scenario which would have made money even in the case of an asset beginning at and returning to the same price. This would be a “rebalancing” portfolio.

Rather than leaving your money in an AMM or simply holding, in a rebalancing portfolio you trade your way up the price curve when it’s going up and trade down when it’s going down, effectively “rebalancing” your portfolio in real time.

**“Loss-versus-rebalancing” is the difference in value between an LP portfolio and a rebalancing portfolio.**

Let’s look at another example.

### LVR in numbers

Say we start with an LP position of 1 ETH and $1,000 USDC.

Over time, the price of ETH jumps from $1,000 to $2,000. Using the  _x=√(__p1ETH∗p2ETH__)_  formula, we can calculate that our new LP holdings would consist of 0.71 ETH and $1,414 USDC, meaning we sold 0.29 ETH for $414 during the AMM recalculation. This gives us a total portfolio value of $2,828 and a loss-versus-holding value of $172.

After some more time, the price of ETH goes back down to $1,000 where it started. Here, the values of both our LP portfolio (minus fees) and our holding portfolio are equal at $2,000, with a loss-versus-holding of $0.

> **Original LP Position:**   
> 1 ETH   $1,000 USDC  
> _Total value: $2,000_  
>  
> **LP Position After Price Move**:  
> 0.71 ETH   $1,414 USDC  
> _Total value: $2,828_  
>   
> **LP Position After Price Reversion:**   
> 1 ETH   $1,000 USDC  
> _Total value: $2,000_
>      
> **Holding Position:** 
> 1 ETH    $1,000 USDC  
> _Total value: $2,000_

But what about the loss-versus-rebalancing?

![2-what-is-lvr.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_what_is_lvr_3902628499.webp)

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

When compared to a rebalancing portfolio executed on a liquid exchange such as Binance, our LP and holding portfolios underperform — even in the case where prices return to their original value.

The rebalancing portfolio starts at the same 1 ETH and 1,000 USDC. When the price of ETH goes to $2,000,  we copy the LP trade (selling 0.29 ETH), but we do so at the current market price of $2,000 through a liquid non-AMM exchange, earning $580 for the trade instead of the $414 we got on the AMM, for a net LVR of $166. Copying the same trade on the way down, we buy back our 0.29 ETH for $290, instead of the $414 we would have to pay through the AMM, netting another $124 in LVR.

> **Original Rebalancing Portfolio Position:**   
> 1 ETH   $1,000 USDC  
> _Total value: $2,000_  
>  
> **Rebalancing Portfolio Position After Price Move**:  
> 0.71 ETH   $1,580 USDC  
> _Total value: $3,160_  
>  
> **Rebalancing Portfolio Position After Price Reversion:**   
> 1 ETH   $1,290 USDC  
> _Total value: $2,290_

So the performance of our three portfolios (ignoring LP fees) looks like this:

![3-what-is-lvr.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_what_is_lvr_cb9ed4cb9e.webp)

### The LVR math

For any given price movement, LVR can be calculated using the formula “[_a(p-q)_](https://a16zcrypto.com/posts/article/lvr-quantifying-the-cost-of-providing-liquidity-to-automated-market-makers/)” where  _a_  is the quantity of the asset being sold,  _p_ is the “real” market price, and _q_ is the “stale” AMM price.  (_Note: “a” is a positive number when selling and a negative number when buying.)_

Unlike impermanent loss, LVR  **depends on price trajectory and volatility**. This intuitively makes sense… the more price moves there are, the more opportunities for arbitrage. The volatility of a given market can be derived using the famous “[Black-Scholes](https://www.investopedia.com/terms/b/blackscholes.asp)” options-pricing model, and is represented by  _σ_  — a lowercase sigma.

For CF-AMMs,  [instantaneous LVR can be calculated as](https://a16zcrypto.com/posts/article/lvr-quantifying-the-cost-of-providing-liquidity-to-automated-market-makers/) [_σ²/8_](https://a16zcrypto.com/posts/article/lvr-quantifying-the-cost-of-providing-liquidity-to-automated-market-makers/). There are also more complex LVR formulas which sum instantaneous LVR to find the overall LVR of any given AMM. Find these formulas, along with a technical explanation of how the numbers were derived, in  [this video](https://www.youtube.com/watch?v=XmHBiFApDXA&ab_channel=CMUCylabCryptoSeminarSponsoredbyAlgorand)  and  [this blog post](https://anthonyleezhang.substack.com/p/automated-market-making-and-loss)  by Anthony Lee Zhang, a co-author of the original LVR paper.

## LP Returns in Practice

So far, we have the concept of LVR but we’ve ignored one very important factor: LP fees. After all, LPs don’t deposit money into AMMs out of charity, they do it to earn yield.

Now that we have a reliable formula for calculating loss-versus-rebalancing, we can look at historical data to answer the question “How often do LP returns exceed LVR losses?”

Using the LVR formula, the authors of the original paper  [concluded](https://arxiv.org/abs/2208.06046)  that, in an environment of 5% asset volatility,  **a Uniswap pool would need to turnover 10% of its entire volume each day in order for LP fees of 30 basis points to offset LVR losses.**

However, we can get even more specific by retroactively looking at historical data. DeFi researcher Atis Elsts, wrote up a  [retrospective of 2023 LP returns](https://atise.medium.com/uniswap-v2-still-a-good-deal-for-liquidity-providers-a-retrospective-of-2023-11475e9d8610)  that shows real data on loss-versus-holding and loss-versus-rebalancing for ETH throughout the year.

### 2023 Loss-Versus-Holding

ETH began the year at around $1,200 and closed around $2,300. LPs outperformed a holding portfolio of 50/50 ETH/USDC by an aggregate 1–2% after fees.

![4-what-is-lvr.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_what_is_lvr_f07c7346db.webp)

![5-what-is-lvr.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/5_what_is_lvr_ca2c29b635.webp)

_Images: 2023 LP versus holding strategies &  2023 LP PnL over holding strategy_

### 2023 Loss-Versus-Rebalancing

Mapped alongside volatility, we can see that, as expected, loss-versus-rebalancing is highly correlated.

![6-what-is-lvr.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/6_what_is_lvr_b227cef436.webp)

Elsts mapped LVR (red line) versus expected fees on WETH/USDC Uniswap v2 positions and WETH/USDC v3 positions across three fee tiers. We can see that  v3 LP positions closely tracked LVR, while v2 positions largely outperformed it.

![7-what-is-lvr.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/7_what_is_lvr_f5972b65fd.webp)

According to Elsts, the reason for the large discrepancy between v3 and v2 positions is that v2 sees primarily “core” (non-arbitrage) trading volume while a majority of v3 trading volume is arbitrage.

![8-what-is-lvr.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/8_what_is_lvr_a4f9fb874d.webp)

![9-what-is-lvr.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/9_what_is_lvr_3d859d861e.webp)

_Images: Uniswap v2 volume makeup & Uniswap v3 volume makeup_

So here we finally get to the $500 million question: How can LPs protect themselves from LVR?

## Solutions to LVR

There are multiple proposed solutions to the LVR problem, each with its own set of tradeoffs.

**Oracle designs**: One of the most popular suggestions for solving the LVR problem involves using price oracles to feed AMMs the most up-to-date prices for assets. The oracle model is well-tested in DeFi, but an oracle-informed AMM would require significant design changes to current AMM models and introduce new problems around ensuring that the oracle always provides the most current price data.

**Decreasing block times**: Some proposals argue that  [increasing trade frequency](https://atise.medium.com/liquidity-provider-strategies-for-uniswap-v3-loss-versus-rebalancing-lvr-ee0ffdf1f937#:~:text=mitigating%20lvr)  by decreasing block times will result in even more granular arbitrage opportunities. This would theoretically increase the number of trades that arbitrageurs have to make, with the larger LP returns hopefully outpacing LVR.

**Batch auction designs**: While decreasing block times might mitigate the price lag AMMs experience, going in the opposite direction sounds even more promising. First proposed 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/abs/2307.02074v4#5.2),” a new category of “Function-Maximizing” AMMs forces traders to trade against AMMs in batches, creating a competition between arbitrageurs which eliminates LVR.

## CoW AMM

The  [CoW AMM](https://cow.fi/cow-amm)  is the first production-ready implementation of an FM-AMM and it’s designed to capture LVR on behalf of LPs.

[Backtesting research](https://arxiv.org/pdf/2307.02074v3.pdf)  conducted for a 6 month period during 2023 shows that CoW AMM returns would have equaled or outperformed CF-AMM returns for 10 of the 11 most liquid, non-stablecoin pairs.

![10-what-is-lvr.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/10_what_is_lvr_f4853d5593.webp)

The CoW AMM works by having  [solvers](https://docs.cow.fi/cow-protocol/concepts/introduction/solvers)  compete with each other for the right to trade against the AMM.

Whenever there is an arbitrage opportunity solvers bid to rebalance the CoW AMM pools. The winning solver is the one that moves the AMM curve higher.

![11-what-is-lvr.gif](https://celebrated-gift-f83e5c9419.media.strapiapp.com/11_what_is_lvr_2618a64372.gif)

[Learn more about the CoW AMM here](https://cow.fi/cow-amm), and  [contact us](https://cowprotocol.typeform.com/cow-amm-lpers?utm_content=widget-page-footerCTA-read-docs&utm_medium=web&utm_source=LVRarticle)  if you are interested in setting up a liquidity pool.

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Liquidity providers lose more than $500 million to LVR every year, but what exactly is it?


What is Loss-Versus-Rebalancing (LVR)?

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

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  **January**, CoW Protocol handled a total volume of  **$1.9B**  and generated a surplus of  **$16.1M**
-   In terms of Governance, CoW DAO executed CIPS  [34](https://snapshot.org/#/cow.eth/proposal/0xe358941aa3f3aeaf94d40e6904c9bb530c98f88e363c2f309d9898b0ffb16c1f)  and  [35](https://snapshot.org/#/cow.eth/proposal/0x1ce26799df80625cb8de5e985920b5f50e890290da03776bdd934e8bd03d9014)  and received an important proposal regarding increasing liquidity for the COW token via a programmatic order and an FM-AMM
-   In exciting news, CoW Protocol began officially  [charging fees on out-of-market limit orders](https://x.com/CoWSwap/status/1749858622027301159?s=20), published a  [2023 year in review](https://x.com/CoWSwap/status/1745859971617882529?s=20), and released a brand new  [set of docs](https://x.com/CoWSwap/status/1746916877677596936?s=20)

## Protocol Stats

This month, CoW Protocol settled a total of  **$1.92B.**

![1-january-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_january_2024_highlights_a7ae839d24.webp)

The top batches worth highlighting are the following:

**Batch with the highest % of CoW trades (**[**Transaction details**](https://explorer.cow.fi/tx/0x72eb3893cbb060ac052b851a013a5b41838f868207ffdc9cb879af0a53e4a28b?tab=graph)**):**  The total batch volume was  **$1,264,508**, and it was created by two traders who were CoWed for  **$1,099,213, (86.3%)**  of the total batch volume. One trader was buying  **$1.2M of PEPE**  and the other trader was selling  **$1M of PEPE.**

![2-january-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_january_2024_highlights_175d395b5e.webp)

**Batch containing the highest volume (**[**Transaction details**](https://explorer.cow.fi/tx/0xb5f4ca700520d35f8384adcfd895afa33b42d0676d5d210160c4855ebbbb5f7e?tab=orders&vis=transfers)**):**  The total batch volume was  **$10,186,406** and it was created by two traders who were swapping  **USDC**  to  **GEL** and  **sfrxETH**  to  **ETH**.

![3-january-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_january_2024_highlights_da4efaf710.webp)

**Batch with the highest amount of surplus (**[**Transaction details**](https://explorer.cow.fi/tx/0xf77330676a021051edec058ba6ee36d199182aea5510f40d26309d00351e524d/?tab=graph&vis=transfers)**):**  The total batch volume was  **$118,905** and it was created by a single trader who was swapping  **ETH**  **to**  **stETH**. This trader achieved the largest surplus for the month of  **January** by getting  **48 stETH**  extra, which at the time of trade was roughly **$107K (2% surplus)**.

![4-january-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_january_2024_highlights_e2c454bff4.webp)

During the month of  **January**, the top 10 traders traded a total of  **$197M.**

![5-january-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/5_january_2024_highlights_ddd8c83163.webp)

In the table below you can see the total volume for this month’s biggest trades. The most active trader executed a whopping $**168M**  in trades with CoW Protocol this month.

![6-january-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/6_january_2024_highlights_5ed4c8dd69.webp)

## Solvers

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

![7-january-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/7_january_2024_highlights_e6d6600d39.webp)

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

![8-january-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/8_january_2024_highlights_29f171bf7e.webp)

## Governance

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

![9-january-2024-highlights.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/9_january_2024_highlights_0859dafbe7.webp)

## Executed Proposals

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

-   [CIP-34: Testing Fee Models for CoW Protocol](https://snapshot.org/#/cow.eth/proposal/0xe358941aa3f3aeaf94d40e6904c9bb530c98f88e363c2f309d9898b0ffb16c1f)
-   [CIP-35: Renewing the CoW Grants Program](https://snapshot.org/#/cow.eth/proposal/0x1ce26799df80625cb8de5e985920b5f50e890290da03776bdd934e8bd03d9014)

## Draft Proposals

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

-   [CIP draft: Increasing liquidity for COW token via a programmatic order and an FM-AMM](https://forum.cow.fi/t/cip-draft-increasing-liquidity-for-cow-token-via-a-programmatic-order-and-an-fm-amm/2203)

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

## CoWmunity News

-   [Per CIP-34, CoW Protocol is now charging fees on out-of-market limit orders](https://x.com/CoWSwap/status/1749858622027301159?s=20)
-   CoW DAO had a phenomenal 2023. To commemorate it, the team published a  [product recap](https://x.com/CoWSwap/status/1745859971617882529?s=20)  as well as a  [data review](https://x.com/CoWSwap/status/1750199071535718557?s=20)  of all of the year’s important milestones
-   The CoW Protocol documentation received a  [much-welcome facelift](https://x.com/CoWSwap/status/1746916877677596936?s=20)  including a new website ([learn.cow.fi](https://learn.cow.fi/)) that helps anyone play around with CoW Protocol
-   The CoW Swap widget launched [color customization](https://x.com/CoWSwap/status/1742947998894792816?s=20)
-   [Teased the potential launch of CoW AMM](https://x.com/CoWSwap/status/1745500079677694377?s=20), a new MEV capturing AMM that prevents LVR and increases LP returns
-   [Launched a campaign to attract developers to help the CoW Protocol team fix Github PRs](https://x.com/CoWSwap/status/1752370895350538336?s=20)
-   Launched a campaign to help CoW Swap users understand key concepts of the protocol, kicking off with “[Coincidence of Wants](https://x.com/CoWSwap/status/1752686684406436204?s=20)”
-   The CoW team was featured on two podcasts:  [wen building by Antalpha labs](https://x.com/Antalpha_Labs/status/1742159634386071774?s=20)  and  [Steady Lads podcast by Jess Eckel](https://x.com/Jesseeckel/status/1748343775892504816?s=20)
-   Did you know that  [your lending protocol can perform MEV-protected liquidations via CoW Protocol](https://x.com/CoWSwap/status/1742053152978038957?s=20)?
-   One of the solvers participating in the CoW Protocol competition performed a study showing how  [Coincidence of Wants could potentially save Ethereum traders nearly $1.5M a day](https://x.com/CoWSwap/status/1750578345878639090?s=20)
-   The team published the following articles to the blog:  
    –  [Understanding MEV Protection](/learn/understanding-mev-protection)  
    –  [Understanding Batch Auctions](/learn/understanding-batch-auctions)  
    –  [EIP-1271 Explained](/learn/eip-1271-explained)

## Product Updates

**Backend**

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

-   Completed the Sepolia testnet deployment for all backend services
-   Finished protocol fee implementation for limit orders
-   Worked on getting all the backend docs over the finish line
-   Investigated several issues related to the Composable CoW WatchTower
-   Worked on several preparations allowing external contributions to contribute to Github issues
-   Testing efforts for first phase of protocol fee initiative
-   Fixed several PRs for the rollout of verified quotes
-   Worked on indexing simplifications which should allow us to report order fees right after trades
-   Prepared a new interface for the Quasilabs solver

**Frontend**

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

-   Removed the Christmas theme
-   Improved the new  [learn.cow.fi](https://learn.cow.fi/)  website by polishing the interface (changed colors, logo, etc.) and adding a control to connect a wallet
-   Worked on a redesign for the confirmation screen to make displaying fee values more clear
-   Worked on several CoW Swap fixes including:
-   Removing time limits (deadlines) for TWAP orders, adding an option to set max deadline for limit order (6 months), showing price impact warning for Safe App when bundling, and relying on safeInfo and iframe detection to identify Safe wallets
-   Completed the Sepolia testnet deployment for all frontend services
-   Worked on several explorer improvement such as reduced page size (optimized images), cleaned up the codebase and migrated to monorepo
-   Released improvement for the widget with the possibility to add custom token lists

## Open Job Positions

## Engineering

[Backend Engineer with Rust](https://boards.eu.greenhouse.io/cowswap/jobs/4272022101)

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CoW Protocol January 2024 Highlights

EIP-1271 (also known as ERC-1271) is an Ethereum improvement that enables smart contracts to validate signatures, allowing them to sign transactions just like traditional EOA wallets.

While at first EIP-1271 may seem like a niche technical bit of implementation, the standard unlocks a whole world of functionality for smart contracts that includes intent-based trading, advanced order types, and every other type of blockchain interaction that requires a wallet signature.

## What is EIP-1271

EIP-1271 serves as a “[standard signature validation method for contracts](https://eips.ethereum.org/EIPS/eip-1271),” which gives smart contracts the ability to verify whether a signature on behalf of a given contract is valid — a feature that Externally Owned Accounts (EOA) already have built-in.

Before EIP-1271, smart contracts could send transactions, but they could not sign messages like traditional wallets. EOA have private keys which they use for signatures, validating that the message came from that particular wallet. Smart contracts, on the other hand, do not have private keys, so EIP-1271 was introduced as a standard way for smart contracts to validate a signature, enabling them to also sign messages.

### EIP-1271 vs ERC-1271

“EIP-1271” and “ERC-1271” are sometimes used interchangeably as terms that refer to the same concept. Ethereum accepts ideas for changes to the Ethereum network through a proposal process, hence the name “Ethereum Improvement Proposal” (EIP). “ERC,” on the other hand, stands for “Ethereum Request for Comment” and gets assigned to additions to the Ethereum network which do not change the underlying protocol itself.

This means that “EIP-1271” is more accurately called “ERC-1271,” as the addition does not change protocol functionality. As mentioned earlier, however, the terms are often used interchangeably.

## Why is EIP-1271 so useful?

Over the last few years, Ethereum has seen a boom in specialized smart contracts leveraging ERC-1271 to sign messages. Signed messages are necessary for a variety of things including placing orders on decentralized exchanges using off-chain order books, verifying that a given wallet belongs to a user, and much more.

ERC-1271-enabled smart contracts, however, unlock a whole new set of use-cases. This is because the ERC-1271 “isValidSignature” method can take in any arbitrary order logic, turning smart contract wallets into autonomous agents that can automatically sign messages based on on-chain conditions.

Let’s take a look at the various use-cases that ERC-1271 makes possible for smart contracts.

### Off-Chain Order Books

One of the most common uses of ERC-1271 involves orders on decentralized exchanges (DEX’s). Some exchanges, like CoW Protocol and Matcha, use an off-chain order book to collect signed messages before they become orders, allowing for additional optimizations. In order for smart contracts to be able to trade using these systems, they need ERC-1271 to validate signatures.

Limit orders in particular are a common type of DEX order that relies on an off-chain order book, so smart contracts require ERC-1271 in order to place limit orders.

### Sign-to-Verify

Authentication is a necessity in web3.

Many web3 applications require users to sign a message proving that they control a connected wallet in order to use the application. NFT marketplaces such as OpenSea and Rarible, meanwhile, require users to sign a message to place bids, update profile images, and perform other gas-less transactions.

In both of these cases, smart contract wallets leverage ERC-1271 to sign verification messages.

### Intents for Smart Contracts

Recently, many DeFi solutions have begun relying on  [intents](https://docs.cow.fi/cow-protocol/concepts/introduction/intents)  as a mechanism for providing users with better prices, MEV protection, advanced order types, and a whole host of other benefits.

CoW Protocol is a meta DEX aggregator that pioneered many use-cases of intents, all of which rely on signed messages. Regular EOA orders are signed ahead of time, but thanks to ERC-1271, smart contract orders can hold off on the order signature until settlement time and check that conditions such as oracle prices, current balances, block times, and more are met before the trade goes through. This unlocks a number of unique trading strategies only available through smart contract wallets.

**Milkman for Safe Trading**

In collaboration with the  [CoW Grants program](https://grants.cow.fi/), the  [Yearn.fi](https://yearn.fi/)  team launched  [Milkman](https://medium.com/@cow-protocol/what-is-milkman-cow-swaps-solution-for-delayed-execution-trading-c0d647832d38)  to streamline DAO trades and protect them from MEV. The DAO governance process means that significant time passes between the time a trade is proposed and when the trade is actually executed. During this time, the market can move, invalidating the trade, or worse — an MEV searcher can lie in wait for the exact trade time and manipulate prices to exploit the trade.

Milkman provides a solution by allowing the DAO to specify a price feed which the smart contract checks at the moment of execution, making a trade based on the up-to-the-second price of the asset.

This means that DAOs no longer have to commit to an execution price ahead of time, but can leverage smart contracts and EIP-1271 to make a conditional order whose price is decided at the moment of execution.

**Advanced Order Types**

Smart contract signatures on CoW Protocol allow for a number of advanced order types. One notable example is CoW Protocol’s  [TWAP orders](https://blog.cow.fi/cow-swap-launches-twap-orders-d5583135b472), which use ERC-1271 smart contract signatures to autonomously place orders in even time intervals.

**The Programmatic Order Framework**

The  [Programmatic Order Framework](https://blog.cow.fi/introducing-the-programmatic-order-framework-from-cow-protocol-088a14cb0375)  from CoW Protocol takes full advantage of ERC-1271 by allowing anyone to code custom order logic for any type of order.

Programmatic orders execute indefinitely into the future based on on-chain conditions. These conditions can include any arbitrary logic including checking on-chain prices, smart contract wallet balances, block times, volumes, and more.

There are already a number of deployed use-cases for ERC-1271-enabled programmatic orders including:

-   Automated DAO operations including payroll, treasury diversification, and fee collection
-   Portfolio rebalancing based on the state of assets in a smart contract wallet
-   Special order types including stop-loss, good-after-time, and take-profit

### Any Application Requiring a Signature

We’ve covered a number of the use-cases that require signed messages, but ERC-1271 enables a potentially limitless number of uses… Any time a smart contract wants to use an application that requires a wallet signature, they need ERC-1271.

Here are a few final examples requiring signatures:

-   **Gasless Trading**: Some decentralized exchanges leveraging intents have begun offering “gasless trading,” a feature which allows users to make trades without paying for gas in ETH. On CoW Protocol, for example, all trades take gas fees in the sell token, leveraging signed messages to specify the order details.
-   **Native Token Flow**: On CoW Protocol, users can trade ETH natively, without having to use the ERC-20 “WETH” wrapped version. This is once again enabled by signed messages which specify the order details while bonded third parties ([solvers](https://docs.cow.fi/cow-protocol/concepts/introduction/solvers)) handle the execution.
-   **Web3 Login**: Services such as  [Dynamic.xyz](https://www.dynamic.xyz/)  build account abstraction functionality which allows users to use decentralized apps with just a traditional web2 email address. When using smart contract wallets, these services heavily rely on ERC-1271 to provide full signing functionality.

## How EIP-1271 works

With the introduction of ERC-1271, smart contracts can now define an “isValidSignature” method which determines the conditions necessary for the smart contract to verify a signature and execute a transaction.

This implementation gives smart contracts a leg up over EOAs when it comes to signing transactions. This is because the “isValidSignature” method can include any arbitrary logic, allowing each smart contract to define its own parameters for generating a valid signature.

Some example criteria for returning a valid “isValidSignature” include:

-   Signatures from a set of hard-coded EOA addresses (used in Safe’s multi-signature model)
-   On-chain conditions like time passing between orders or reaching a given oracle price

If the owners of the smart contract would like to delegate the order placement to someone else, they can code the necessary conditions for validating a signature in the “isValidSignature.” Whenever anyone calls the smart contract, it will check these conditions and only execute when they are met.

![1-eip-1271-explained.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_eip_1271_explained_120c3a7916.webp)

ERC-1271’s “isValidSignature” method

The method takes a “bytes32 hash” representing an order hash and an arbitrary byte array which is where the conditions for the signature go. This array can be any number of things — an EOA signature from an owner or delegate of the smart contract, the smart contract checking an oracle or an on-chain state to determine if the order should execute, or any other arbitrary logic.

Finally, the “isValidSignature” method returns a response that determines whether the order should execute.

In essence, the entire signature verification process looks like this:

![2-eip-1271-explained.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/2_eip_1271_explained_1ec1facfc7.webp)

An order that needs to be signed is created

![3-eip-1271-explained.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/3_eip_1271_explained_f916ef6bed.webp)

The order generates an order hash

![4-eip-1271-explained.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/4_eip_1271_explained_b692a01062.webp)

The smart contract’s “isValidSignature” method is called with the hash and signature passed in as parameters

## EIP-1271: Enabling the future of smart contract trading

As Ethereum adoption grows, the needs of traders become more complex, eclipsing the built-in functionality of traditional EOAs. ERC-1271 opens the door to a new set of primitives for trading using smart contracts which can create autonomous, conditional orders that provide much greater trading power for users.

CoW Protocol is at the forefront of innovations relying on ERC-1271, and you can already take advantage of new order types today by swapping on  [CoW Swap](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=EIP-1271-article)  or by developing custom solutions through the  [Programmatic Order Framework](https://hackmd.io/pmZX_qT2Q1yw59KiiT6TPQ)  (also known as ComposableCoW).

As always, happy trading!

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EIP-1271 is an important upgrade to the Ethereum network that’s stirred up quite a buzz, but what exactly is it?


EIP-1271 Explained

As we bid farewell to another eventful year, we’re taking some time to reflect on CoW DAO’s milestones in 2023.

CoW DAO develops two main products:

-   **CoW Protocol & the CoW Swap Interface**: A decentralized exchange providing users with the best prices and cutting-edge MEV protection for swaps
-   **MEV Blocker**: An RPC endpoint designed to protect user transactions from suffering MEV attacks. MEV Blocker leverages an order flow auction among searchers and builders to offer users a rebate (backrun) for their trades

2023 has been marked by a number of noteworthy developments that have expanded protocol functionality, enhanced the user experience, and solidified CoW DAO’s position at the forefront of DeFi.

## CoW Protocol 2023 Product Launches

### Milkman — February

<blockquote class="twitter-tweet"><p lang="en" dir="ltr">Timing trades has been a challenge for DAOs, but that&#39;s all changing thanks to Milkman. 🥛😎<br><br>Instead of a fixed trade amount, Milkman lets you use a price checker (i.e. <a href="https://twitter.com/chainlink?ref_src=twsrc%5Etfw">@chainlink</a>) to ensure a fair market price at execution, even far into the future!<a href="https://t.co/xH7fyqka0J">https://t.co/xH7fyqka0J</a> 👉</p>&mdash; CoW DAO | MEV Blocker &amp; CoW Swap (@CoWSwap) <a href="https://twitter.com/CoWSwap/status/1727326002202935304?ref_src=twsrc%5Etfw">November 22, 2023</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>

The challenging task of timing trades for DAOs has finally found its solution in Milkman. Developed through the  [CoW Grants Program](https://grants.cow.fi/)  in collaboration with  [Yearn.fi](https://yearn.fi/), Milkman enables smart contracts to specify an on-chain data source, like an oracle, as a reference for the otherwise static “min_out” function. This is a game-changer for deferred trade execution, as it gives DAOs a dynamic price backstop that guarantees up-to-date pricing despite governance-related delays.

Born of the spirit of collaboration, Milkman has already made its mark by facilitating large trades from major DAOs. In 2023,  [Aave used Milkman to swap $4 million directly into a Balancer LP](/learn/aave-trade-breakdown),  [Nexus Mutual used it to trade over 14.4K ETH for rETH](/learn/nexus-mutual-trade-breakdown), and  [ENS traded 10K ETH for USDC](/learn/ens-trade-breakdown). To date, Milkman has already handled over $20 million in trading volume!

Learn more about Milkman: “[What is Milkman? CoW Swap’s Solution for Delayed Execution Trading](/learn/what-is-milkman-cow-swaps-solution-for-delayed-execution-trading)”

### Partially Fillable Limit Orders — April

<blockquote class="twitter-tweet"><p lang="en" dir="ltr">Say hello to *partially fillable limit orders* from CoW Swap.<br><br>Now enabled by default, partial fills bring faster trade settlement to limit orders – even in moments of low liquidity. 🏃💨<br><br>Learn more here: <a href="https://t.co/lJ0b4qON9y">https://t.co/lJ0b4qON9y</a> <a href="https://t.co/iqxyI86l6Z">pic.twitter.com/iqxyI86l6Z</a></p>&mdash; CoW DAO | MEV Blocker &amp; CoW Swap (@CoWSwap) <a href="https://twitter.com/CoWSwap/status/1647962756400701443?ref_src=twsrc%5Etfw">April 17, 2023</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>

The introduction of partially fillable limit orders in April unlocked a faster limit order experience that also reduces price impact for large orders.

Unlike traditional “fill or kill” limit orders, partially fillable limit orders execute gradually as liquidity becomes available. For users, this means that their limit orders will complete earlier, as they can gather liquidity over time rather than having to wait for it to become available all at once.

What’s more, partially fillable limit orders are “surplus capturing,” meaning that users can receive surplus on top of their limit price. If the solvers execute a limit order for better than the limit price, the positive price difference (known as “surplus”) will be passed along to the user.

Learn more about Partially Fillable Limit Orders: “[CoW Swap Improves the Limit Order Experience with Partially Fillable Limit Orders](/learn/cow-swap-improves-the-limit-order-experience-with-partially-fillable-limit-orders)”

### CoW Hooks — July

<blockquote class="twitter-tweet"><p lang="en" dir="ltr">Today, CoW Swap is ushering in a new era in intents-based DeFi.<br><br>Introducing CoW Hooks!<br><br>With CoW Hooks you can take multiple DeFi actions: swapping, bridging, staking, depositing, borrowing, and more — &amp; group them all together into one single intent!<br><br>📖 <a href="https://t.co/RZxQQYue5k">https://t.co/RZxQQYue5k</a> <a href="https://t.co/CMNIUXFtGK">pic.twitter.com/CMNIUXFtGK</a></p>&mdash; CoW DAO | MEV Blocker &amp; CoW Swap (@CoWSwap) <a href="https://twitter.com/CoWSwap/status/1678766456719433729?ref_src=twsrc%5Etfw">July 11, 2023</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>

The launch of CoW Hooks transformed CoW Protocol from a swap-intent-matching engine into a generalized intent execution machine. Thanks to CoW Hooks, users can now specify pre and post-trade interactions for solvers to execute alongside their trades.

CoW Hooks interactions can be any DeFi actions: bridging, staking, depositing, or anything else a user would like to do before or after their trade. The best part? Solvers execute the entire sequence of pre and post interactions as a single transaction. True to the CoW Protocol model, users pay gas fees in their sell token, and they only pay if the transaction succeeds.

Learn more about CoW Hooks: “[CoW Hooks: You are in control!](/learn/cow-hooks-you-are-in-control)”

### TWAP (Time Weighted Average Price) Orders — August

<blockquote class="twitter-tweet"><p lang="en" dir="ltr">🚨🚨<br><br>TWAP orders are now available on CoW Swap! (Call us CoW Twap!)<br><br>TWAP orders let users split their trades over time while benefiting from CoW’s signature MEV protection &amp; best prices.<br><br>Available for <a href="https://twitter.com/safe?ref_src=twsrc%5Etfw">@safe</a> wallets today.<br><br>Learn more: <a href="https://t.co/A4l5P7G696">https://t.co/A4l5P7G696</a> <a href="https://t.co/ssj2xtDr8Z">pic.twitter.com/ssj2xtDr8Z</a></p>&mdash; CoW DAO | MEV Blocker &amp; CoW Swap (@CoWSwap) <a href="https://twitter.com/CoWSwap/status/1692152855694803112?ref_src=twsrc%5Etfw">August 17, 2023</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>

In August, CoW Protocol launched the first implementation of TWAP orders on a decentralized exchange to date. TWAP allows users to split large trades into smaller, discrete orders which execute over a specified time period. This lessens price impact, ensures entry at a “average” market price, and enhances MEV protection.

Learn more about TWAP orders: “[CoW Swap Launches TWAP Orders](/learn/cow-swap-launches-twap-orders)”

### Gasless Approvals — October

<blockquote class="twitter-tweet"><p lang="en" dir="ltr">Cows can sometimes get a bad rap for their gas emissions...<br><br>But CoW Swap is committed to reducing gas as much as possible.<br><br>That&#39;s why we&#39;re pleased to announce that gasless approvals are now live on <a href="https://twitter.com/CoWSwap?ref_src=twsrc%5Etfw">@CoWSwap</a>. <a href="https://t.co/NOQeeVtacr">pic.twitter.com/NOQeeVtacr</a></p>&mdash; CoW DAO | MEV Blocker &amp; CoW Swap (@CoWSwap) <a href="https://twitter.com/CoWSwap/status/1714633297408696409?ref_src=twsrc%5Etfw">October 18, 2023</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>

CoW Swap has offered gasless swaps since the start, but in October we made the entire experience — approvals + swaps — entirely gasless for over 100 tokens. With gasless approvals, the intents that users sign to place an order now give solvers the permission to execute both the swap AND the approval transaction on behalf of the user.

Thanks to this, brand new wallets can use CoW Swap without holding any ETH, as all fees get deducted in the sell token.

Learn more about gasless approvals: “[Announcing Gasless Approvals on CoW Swap](/learn/announcing-gasless-approvals-on-cow-swap)”

### Programmatic Order Framework — November

<blockquote class="twitter-tweet"><p lang="en" dir="ltr">CoW Swap is excited to announce the launch of an entirely new class of orders. We call them Programmatic Orders. ✨<br><br>Programmatic Orders execute automatically, in perpetuity, according to the conditional parameters you set.<br><br>Let&#39;s dive in. 🤿 <a href="https://t.co/sOXKCMsYLu">pic.twitter.com/sOXKCMsYLu</a></p>&mdash; CoW DAO | MEV Blocker &amp; CoW Swap (@CoWSwap) <a href="https://twitter.com/CoWSwap/status/1722735351972983030?ref_src=twsrc%5Etfw">November 9, 2023</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>

The Programmatic Order Framework pioneered a new era of “programmatic orders,” which are automated orders that execute based on on-chain conditions.

Programmatic orders are created with just one signature, and they execute when certain on-chain conditions (prices, volumes, balances, times, etc.) are met. These orders can stretch indefinitely into the future, automating everything from complex trading strategies to advanced order types, portfolio management, DAO operations, and more.

The Programmatic Order Framework itself is used to create programmatic orders 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.

Learn more about the Programmatic Order Framework: “[Introducing the Programmatic Order Framework, from CoW Protocol](/learn/introducing-the-programmatic-order-framework-from-cow-protocol)”

### Widget — November

<blockquote class="twitter-tweet"><p lang="en" dir="ltr">Merhaba. Hello.<br><br>The CoW Swap widget is live. If you&#39;ve ever thought &quot;damn, I wish my users could do MEV-protected swaps/limits/TWAPs, capture surplus, and not spend gas on their trades&quot; this widget is for you.<br><br>Learn more at <a href="https://t.co/jHxQRC2ri9">https://t.co/jHxQRC2ri9</a> or reach out to chat live.<br><br>📣 <a href="https://t.co/wuhKJkJD9m">pic.twitter.com/wuhKJkJD9m</a></p>&mdash; CoW DAO | MEV Blocker &amp; CoW Swap (@CoWSwap) <a href="https://twitter.com/CoWSwap/status/1724037068610056354?ref_src=twsrc%5Etfw">November 13, 2023</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>

Launched with the goal of bringing the lush pastures to a wider audience, the widget embeds a CoW Swap trading module on any website or web3 dApp. Projects can now bring CoW Swap’s famous MEV protection and best prices to their users and even collect fees from swaps made through the widget.

Learn more about the widget  [on our website](https://cow.fi/widget).

## Improvements Throughout The Year

-   **Surplus Notifications →** Users now see exactly how much they received in surplus after every trade! Wallets connected to CoW Swap can also view their total historical surplus using the account tab 💸
-   **Fortune Cookies →**  Besides being the best place to trade, CoW Swap is also the most fun! This year, we added fortune cookies to the UI, welcoming you with a new message each day to inspire you along your trading journey 🥠
-   **Custom Recipient Addresses →**  It’s now possible to make a trade with funds from one wallet that sends proceeds to a different wallet. Save on gas fees and expedite your trades with custom recipient addresses 🔀
-   **Token Page Release →**  The  [token page](https://swap.cow.fi/#/account/tokens)  lists the tradeable tokens on CoW Swap. Users can use the page to sign the approval transactions necessary for trading new tokens in advance — useful if you’re trying to time the market ⏳
-   **The Limit Orders Stop Light →**  Limit orders received a useful UI upgrade that shows how close your orders are to completing. The limit order “stop light” lights up in different colors depending on how close the market price is to what it needs to be for your limit orders to execute 🚦
-   **A World of Notifications →**  Staying informed is key in the world of DeFi. To this end, CoW Swap enabled notifications through Discord, Telegram, and email to help users stay up to date with new announcements 🔔

## The CoW Protocol Revolution: A Year of Collaboration

The shipping hasn’t only been us, though. We’re proud to have encouraged innovation in DeFi even outside of the CoW DAO ecosystem. Below is a list of projects that are integrated with or built on top of CoW Protocol.

### 1. Dump Services

CoW DAO introduced  [dump.services](https://dump.services/), a dApp that allows users to swap (“dump”) multiple tokens from their wallet all at once by trading them for a single asset. This streamlines portfolio management, especially for small token balances.

### 2. CoW Swap Safe App Batch Transactions

The  [CoW Swap Safe App](https://app.safe.global/share/safe-app?appUrl=https%3A%2F%2Fswap.cow.fi&chain=eth)  introduced a game-changing feature — the ability to bundle multiple transactions into a single batch. Thanks to the Safe batching feature, users can merge approving, wrapping, and trading into a single, cost-effective transaction.

### 3. The Tally Recipe for CoW Swap

Tally, a prominent DAO tooling platform, launched  [a Recipe for CoW Swap](/learn/tally-recipe-for-cow-swaps). The Tally CoW Swap Recipe leverages Milkman to let DAOs attach a swap to a governance proposal, turning a multi-step process into only a few clicks.

### 4. Stackly DCA

[Stackly](https://stackly.eth.limo/)  is a new dApp that brings Dollar-Cost Averaging (DCA) swaps to DeFi users on Ethereum and Gnosis chain. Under the hood, Stackly leverages  [CoW Protocol ERC-1271 smart orders](/learn/tutorial-creating-smart-orders-with-cow-protocol)  for the trades.

### 5. Coinshift Apps

Treasury management platform  [Coinshift](https://coinshift.xyz/)  integrated CoW Swap as a part of its suite of apps, bringing the safety and reliability of CoW Swap to the DAOs using Coinshift for their treasury operations.

### 6. Stader Swap Feature

The liquid staking service  [Stader Labs](https://www.staderlabs.com/eth/)  added a “Swap” function powered by CoW Swap which directs users to trade tokens on CoW Swap dApp.

### 7. Lido Swap Feature

Staking service  [Lido](https://lido.fi/)  also added CoW Swap as one of their “withdrawal” options for users looking to convert stETH to ETH right on the platform.

## New Products: MEV Blocker

<blockquote class="twitter-tweet"><p lang="en" dir="ltr">CoW Swap, in collaboration with <a href="https://twitter.com/beaverbuild?ref_src=twsrc%5Etfw">@beaverbuild</a> and Agnostic Relayer, is proud to announce MEV Blocker. <a href="https://t.co/WIhaaGtP0e">https://t.co/WIhaaGtP0e</a> ⛱️<br><br>MEV Blocker is a free RPC endpoint that *pays users* to protect themselves from MEV across a wide variety of use cases in DeFi, NFTs, and dApps. <a href="https://t.co/Fa6cRNjrxf">pic.twitter.com/Fa6cRNjrxf</a></p>&mdash; CoW DAO | MEV Blocker &amp; CoW Swap (@CoWSwap) <a href="https://twitter.com/CoWSwap/status/1643614395002499073?ref_src=twsrc%5Etfw">April 5, 2023</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>

While the lush pastures of CoW DAO saw a lot of shipping in 2023, there was one flagship launch that stood above the rest:  [MEV Blocker](https://mevblocker.io/).

CoW DAO, in collaboration with  [Beaver Build](https://beaverbuild.org/)  and  [Agnostic Relay](https://agnostic-relay.net/), introduced MEV Blocker to protect Ethereum transactions from frontrunning and sandwich attacks. The free RPC endpoint routes transactions through a permissionless network of searchers who cannot frontrun or sandwich user transactions. Instead, searchers capture value through backrunning, sending 90% of all profits back to the users as rebates.

MEV Blocker addresses the multi-billion dollar MEV problem, enabling users to trade, buy NFTs, provide liquidity, and more without worrying about harmful price exploitation.

## Reflecting on our Udderly amazing Journey, and cheers to a CoW-tastic 2024!

2023 has been the most exciting year so far for CoW DAO. We’re already diving headfirst into 2024 with a renewed commitment to more products built for both novice and experienced users. Here’s to another thrilling year at the forefront of DeFi!

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365 Days of Udderly Fantastic CoWventures!


CoW DAO: 2023 in Review!

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

## TL;DR

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

## Protocol Stats

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

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

The top 3 batches worth highlighting are the following:

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

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

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

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

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

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

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

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

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

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

## Solvers

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

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

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

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

## Governance

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

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

## Executed Proposals

The DAO did not execute any proposals.

## Draft Proposals

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

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

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

## CoWmunity News

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

## Product Updates

**Backend**

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

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

**Frontend**

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

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

## Open Job Positions

The CoW Protocol team is currently not hiring

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CoW Protocol December 2023 Highlights

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

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

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

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

## What is MEV protection?

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

### What exactly are you protecting against?

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

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

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

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

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

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

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

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

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

## Slippage tolerance and MEV protection

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

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

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

## RPC endpoint tools for MEV protection

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

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

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

### MEV Blocker

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

As the name suggests, MEV Blocker provides protection against MEV across all of Ethereum. The RPC works by managing a permissionless network of searchers and hiding transactions from the public mempool. These searchers cannot frontrun or sandwich user transactions. Instead, they capture value through  [backrunning](/learn/what-is-backrunning-mev-attacks-explained).

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

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

## Decentralized applications and MEV protection

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

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

### Native MEV protection on CoW Protocol

CoW Protocol is a meta DEX aggregator that finds the best prices for trades and provides comprehensive MEV protection. The protocol uses a unique trading mechanism that relies on batch auctions and  [intents](/learn/cow-protocol-glossary#:~:text=Intent%20to%20Trade)  to achieve the best outcomes for users.

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

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

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

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

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

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

## CoW DAO protects you from MEV

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

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

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

Safe trading!

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


Understanding MEV Protection

_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

## TL;DR

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

## Protocol Stats

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

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

The top 3 batches worth highlighting are the following:

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

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

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

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

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

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

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

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

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

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

## Solvers

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

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

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

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

## Governance

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

### Executed Proposals

This month the DAO executed one important proposals:

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

### Draft Proposals

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

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

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

## CoWmunity News

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

## Product Updates

**Backend**

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

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

**Frontend**

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

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

## Open Job Positions

The CoW Protocol team is currently not hiring

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

CoW Protocol November 2023 Highlights

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

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

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

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

## What is MEV?

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

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

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

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

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

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

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

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

**Frontrunning attacks**

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

**Backrunning attacks**

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

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

**Sandwich attacks**

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

Let’s take a deeper look into sandwich attacks.

## Sandwich attacks on the blockchain

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

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

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

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

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

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

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

## MEV Attacks in Practice

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

## Transparency Initiatives

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

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

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

## MEV Blocker

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

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

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

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

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

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

## Dedicated dApps

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

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

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

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

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

## Conclusion

There are many challenges in combating MEV.

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

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


## About CoW DAO

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

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


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

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

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

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

A DappCon Talk by Olga Fetisova of CoW DAO


MEV Transparency: Ensuring Fairness In DeFi Markets

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!


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