Cow Swap, a decentralized exchange aggregator, is set up to introduce the ability to increase the number of transactions that can be processed and provide more rewards to those who drive transactions.
This feature, known as combinatorial auction, allows solvers to work together for the first time when anyone routes aggregator trades to provide the best swap to the traders. Aggregator is a one-stop shop that searches multiple DEXs to provide the most cost-effective transactions.
Cow Dao’s senior research economist Andrea Canidio said to Coindesk that Cow Swap’s existing system is “hard because only a single solver can win each auction.” “Only one person can succeed and force them to wait for the next auction.”
Under the new system that passed the DAO vote on Thursday, if multiple solvers exist, we can propose a more efficient solution for pending orders.
“If a combined solution creates shared value for all parties, it wins. Otherwise, different solvers can independently fulfill different orders,” Kanisio said.
Cow Dao estimates that the movement could increase order throughput by around 33%. That’s important as the competition between Dex Aggregators heats up.
Over the past week, cattle exchanges and rival aggregators 1inch have been neck and neck with a trading volume of about $2 billion each, according to Defillama data. When new features in Cow Swap work as predicted and increase trading throughput, it helps to pull ahead.
Cow exchanges behave differently than most other distributed exchanges and aggregators. Instead of using liquidity pools to facilitate transactions like Uniswap, use a peer-to-peer system. Users submit third parties (solvers) to compete to efficiently match buyers with sellers in one transaction. The main advantage of this system is that it prevents traders from reducing the maximum extractable value, namely the negative form of MEV.
More rewards
According to COW Dao, the average reward you can earn should increase by around 25%, as more solvers can participate in COW swaps at the same time.
That’s great for the solver, but it’s not too cut and dried due to the protocol.
Cattle exchange solvers are compensated with the Cattle Token, the governance token of the protocol. For example, COW Swap pays more rewards without a reasonable amount of increased transaction increase will undermine the efficiency of the protocol.
Canidio said it hopes Cow Swap will benefit from higher transaction throughput along with “a non-preventive increase in Solver Rewards.”
Simply put, combination auctions should make cow exchanges more efficient.
According to Cow Swap, testing of the new system will begin around May 20th, with full launches of all chains expected around June 3rd.
Read more: Why One of Uniswap Dao’s most outspoken members left in frustration