CoW DAO, which operates user protection protocols such as CoW Swap and MEV Blocker, is launching an automated market maker solution aimed at protecting liquidity providers from maximum extractable value.
While CoW DAO's other products already protect traders from MEV, CoW AMM is the project's first product to protect liquidity providers.
CoW DAO, unlike other AMMs, has deployed a solution that protects liquidity providers from what is known as loss versus rebalancing, a type of MEV. LVR refers to the losses suffered by liquidity providers in AMM-based decentralized exchanges due to arbitrage bots constantly rebalancing the liquidity pool.
Automated Market Maker is a decentralized exchange that facilitates trading between crypto tokens. Instead of relying on traditional order books where buyers and sellers match orders directly, AMM uses liquidity pools to automate pricing and trading.
Cow AMM captures MEV that would otherwise be lost to arbitrageurs (i.e. MEV bots) and shares it back with LPs, the developers explained. “Liquidity providers are protected from harmful flows and know that those who rebalance will always transfer surplus funds,” a CoW DAO spokesperson said.
The project's flagship product to date is CoW Swap, an intent-based decentralized exchange aggregator. Its AMM release complements aggregators and allows existing users to take advantage of greater liquidity.
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