CoW Protocol matches trades by executing batch auctions between a variety of on-chain liquidity sources. Trades can be settled with on-chain AMMs directly or with DEX aggregators, depending on which path offers the best price. It is thus, essentially, an aggregator of the DEX aggregators.
In addition to finding the best prices at any point in time, CoW Protocol can improve prices over what is available elsewhere in the market -- firstly by finding Coincidences of Wants between traders, and secondly by protecting users from having their slippage exploited by MEV bots.
The CoW Protocol leverages the gas efficiency of Balancer V2 multi-hop swaps to give users the best price and execution possible along with MEV protection.
The Balancer CoW Protocol is a trade interface that uses CoW Solvers tightly integrated with the Balancer Vault to execute trades in batches. Using CoW Solvers, traders submit their swaps by simply signing a message to send a gasless trade. The solvers then prioritize matching the various trades to take advantage of any possible Coincidence of Wants) before settling the remaining trades using on-chain liquidity, which allows the solvers to protect traders for Maximal Extractable Value (MEV).
“The collaboration with Balancer is a natural fit, the native integration of Balancer’s V2 architecture allows us to achieve even better prices for the end-users and provide a smooth UX across the two platforms. It’s an important milestone towards our mission to build an infrastructure layer that protects traders.”
Martin KöppelmannGnosis CEO & Co-Founder