Recently, 1inch has introduced a novel feature called Fusion. Fusion is a match engine that enables users to have better rates without paying network fees. While the user places the order and sets the maximum waiting time, the resolvers, who are professional market makers, will fill the order and pay applicable gas fees. During this process, resolvers profit from arbitrage trading.

However, this system is familiar with the CowSwap, aka coincidence of want. Therefore, in this article, I would like to introduce CowSwap briefly.

What is CowSwap

CowSwap offers a solution for decentralized trading which is the "coincidence of want" feature. The coW is defined as an "economic phenomenon where two parties each hold an item the other wants, and therefore exchange these items directly."

When a request for a swap is sent, the "solver" will try to match the order first, and when there is no coincidence, the trade will be sent to the on-chain AMM pool to aggregate the best rate just like 1inch.

The benefit of coincidence

The benefit of CowSwap comes from three aspects. Gas optimized, fees saving, and MEV protected.

• Gas optimized: CowSwap uses batch auction, which can compress serval trades in one transaction. In addition, as a user, one doesn't need to pay the gas fees after setting the approval of the token allowance.

• Fees saving & MEV protected: when there is a coincidence, the swap is happening between each party, which means it won't go through the AMM pools and save the LP fees. In fact, the match is happening off-chain, so there is no slippage and MEV attack.

CowSwap & $COW are currently available in both Ethereum and Gnosis Chain.

Problems

One of the main problems CowSwap faces is the "lack of coincidence". The coW system can only maximize its effort when the network is extensive enough. It aims to enable the P2P off-chain transaction, but it highly relies on professional arbitragers like 1inch.

Even though CowSwap doesn't look very competitive and charming in the current DeFi system. But I assume when gaming brings new users and the need for massive low-value but high-frequency trading, the system will show its ability.

Arthur: ccrunchen.eth

Publish: 2022/04/11

Last modified: 2023/01/18