TL;DR
CoW DAO introduces CoW AMM, an automated market maker, to protect liquidity providers in DeFi.
The CoW AMM captures and redistributes the Maximum Extractable Value (MEV) to avoid losses to arbitrage bots.
This initiative complements CoW DAO’s efforts in user protection and improves efficiency in cryptocurrency exchange.
In the world of decentralized finance (DeFi), protecting liquidity providers is a growing concern.
CoW DAO, an organization dedicated to safeguarding the interests of users in this space, has taken a significant step in this regard.
Recently, they announced the launch of CoW AMM, an automated exchange designed to address the Maximum Extractable Value (MEV) issue and protect liquidity providers from potential losses.
The dirty secret of AMMs is that many of their pools are leaking.
In fact, liquidity providers lose 5-7% of their profits to MEV every year, making *most liquidity pools* unprofitable.
That’s why CoW DAO is building the first MEV-capturing AMM.
We call it CoW AMM. pic.twitter.com/hLIAyIzwDK
— CoW DAO | MEV Blocker & CoW Swap (@CoWSwap) February 14, 2024
MEV has been a persistent challenge in automated cryptocurrency exchanges (AMMs), where liquidity providers often suffer losses due to constant rebalancing of liquidity pools by arbitrage bots.
According to CoW DAO, liquidity providers can lose 5% to 7% of their profits each year due to MEV, making many liquidity pools unprofitable.
The CoW AMM addresses this problem by capturing the MEV that would otherwise be lost and redistributing it among liquidity providers.
This innovation not only protects liquidity providers from potential losses but also improves the efficiency and profitability of their DeFi investments.
Additionally, CoW AMM complements the existing CoW DAO offering, which includes products such as CoW Swap, a decentralized exchange aggregator.
CoW AMM Integration with CoW Swap Allows Users Better Liquidity and Smoother Experience
The launch of CoW AMM marks an important milestone in the evolution of DeFi by addressing one of its most pressing challenges: protecting liquidity providers against MEV.
By capturing and redistributing MEV, CoW AMM not only promises to protect liquidity providers but also strengthen trust in the DeFi ecosystem at large.
CoW DAO is leading the way to a more secure and profitable DeFi with the launch of CoW AMM.
This initiative reflects the organization’s commitment to protecting users and continuously improving the blockchain ecosystem for all participants.