#34 Defi #137 Global Ranking #17 Multichain

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About CowSwap

CowSwap offers the decentralized finance community a teaser of the capabilities of Gnosis Protocol v2. CowSwap is a fully permissionless DEX that protects them from MEV (Miner/Maximum Extractable Value) via batch auctions, offers off-chain gasless order placement & has access to all on-chain liquidity.

On CowSwap, orders are placed off-chain and are not immediately executed, but rather collected and aggregated to be settled in batches, which is the price finding mechanism the protocol uses to settle trades. It uses batch auctions with uniform clearing prices for all trades in the same batch, therefore there is no need for ordering the transactions within a single batch. Because everyone receives the same price across assets it’s not possible for any value to be extracted by placing transactions in a certain order. This prevents the primary strategy used in MEV. Batches are settled on-chain by an external, independent party (called “solvers”). Solvers are a person or entity who submits order settlement solutions that maximize trade surplus for a given batch.

CowSwap leverages Coincidence of Wants (CoW): “An economic phenomenon where two parties each hold an item the other wants, so they exchange these items directly.” If CoWs (Coincidence of Wants) orders exist in a batch, the “smaller” order is matched fully with the larger order. The excess of the larger order is settled with the best available base liquidity. The clearing price for both orders will be the price of the token with the excess amount on external liquidity sources to which the protocol is connected.

CowSwap can connect to all on-chain liquidity, when it does not have enough CoWs among the orders available for a batch, it taps other AMMs’ liquidity to be able to settle the traders’ orders. We really hope you like CowSwap. If you do, Milk it!

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