CoW DAO Prepares MEV Capture AMM for Liquidity Providers

CoW DAO, the decentralized autonomous organization behind CoW Swap, introduced a new solution for liquidity providers (LPs) called automated market maker Contract of Work (AMM), which aims to capture Miner Extractable Value ( MEV ).

The AMM Contract of Work addresses the 'loss versus rebalancing' (LVR) dilemma faced by LPs. Traditional AMMs often rely on external exchange data to determine asset prices, creating discrepancies between AMM and exchange prices. Opportunistic traders exploit these differences causing LPs to incur losses through arbitrage activity. Therefore, LVR refers to the losses LPs suffer due to rebalancing of liquidity pools with arbitrage bots.

Andrea Canidio, senior research analyst at CoW Swap, highlighted LVR as an important factor contributing to centralization in the block building market. Research shows that LPs for major token pairs earn minimal profits due to LVR, with arbitrage causing losses of around $500 million annually, hindering the provision of liquidity in decentralized finance.

CoW AMM aims to turn this competition into a profitable arbitrage liquidity pool for LPs. Unlike Constant Function AMMs, where arbitrageurs rebalance the pool at LP costs, CoW AMMs encourage competition among problem solvers to offer increasingly better LP prices.

Once LPs deposit tokens into the CoW AMM liquidity pool, these funds can be accessed by CoW Swap traders. Solvers compete to execute trades on CoW Swap and bid on opportunities to rebalance the AMM pool during arbitrage scenarios. The solver offering the most surplus will win the bid, protecting LPs from MEV bots.

CoW DAO has allocated 6 million COW and 139 WETH to bootstrap COW/WETH market liquidity, allowing anyone to deploy liquidity into CoW AMM via programmed orders.

Fernando Martinelli, CEO of Balancer Labs, views MEV/LVR as an important barrier hindering LP participation in AMMs. He expressed his excitement in exploring custom AMM designs such as the CoW AMM to address these challenges.

How To Buy Crypto With Bittime

You can buy and sell crypto assets in an easy and safe way via Bittime . Bittime is one of the best crypto applications in Indonesia which is officially registered with Bappebti. 

To be able to buy crypto assets on Bittime, make sure you have registered and completed identity verification. Apart from that, also make sure that you have sufficient balance by depositing some funds into your wallet. For your information, the minimum purchase of assets on Bittime is IDR 10,000. After that, you can purchase crypto assets in the application. 

Learn How to Buy Crypto on Bittime.

Monitor price chart movements of Bitcoin (BTC), Ethereum (ETH), Solana (SOL) and other cryptos to find out today's crypto market trends in real-time on Bittime.

Also Read:

Vertex Protocol: Innovation in Decentralized Trading on the Arbitrum Network

Get to know more about what Moloch DAO is

Exploring the Metaverse: A Complete Guide to Metaverse Investing

DISCLAIMER : This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.