What Is CoW Protocol?
CoW Protocol is a revolutionary, fully permissionless trading protocol that leverages Batch Auctions to find prices. It allows maximum liquidity through the Coincidence of Wants (CoWs) and can tap into all on-chain liquidity when required.
Background
Anna George and GnosisDAO founded Cow Protocol in 2021.
How It Works
CoW Protocol introduces a novel concept of Coincidence of Wants (CoWs), which are settlements that share liquidity across all orders with matching limit prices. Batch auctions facilitate CoWs, leading to better prices for traders and offering savings through gas fee optimization and liquidity provider fees. The protocol provides unprecedented MEV protection levels, and the first trading interface built on top of it is CoW Swap.
CoW Protocol operates via a party known as a solver, who is responsible for providing the settlement solution to the batch auctions. Solvers compete to submit the best batch settlement solution and are rewarded with tokens for successful submissions. Becoming a solver requires staking tokens and having the technical know-how to create appropriate batch settlement solutions. The protocol offers many benefits, including introducing a new way of trading and acting as a Meta DEX aggregator, offering the best price across aggregators or AMMs depending on the most liquid venue for the trades within a batch.
Key Takeaways
- CoW Protocol is a trading protocol that uses Batch Auctions for price discovery and leverages Coincidence of Wants (CoWs) for optimizing liquidity.
- Founded by Anna George and GnosisDAO in 2021, the protocol is an innovation in decentralized finance.
- CoW Protocol offers significant savings in gas fee optimization and liquidity provider fees.
- The protocol operates through a party known as a solver, who submits the best batch settlement solution and is rewarded with tokens.
- CoW Protocol acts as a Meta DEX aggregator, offering the best price across aggregators or AMMs depending on the most liquid venue for the trades within a batch.
