CoW DAO, which runs 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 other CoW DAO products already secure traders from MEV, CoW AMM is the first product from the project to protect liquidity providers.
CoW DAO has rolled out a solution that – unlike other AMMs – will protect liquidity providers against what is described as a type of MEV called loss versus rebalancing. LVR refers to the losses incurred by liquidity providers on AMM-based decentralized exchanges due to arbitrage bots constantly rebalancing liquidity pools.
An automated market maker is a decentralized exchange that facilitates trading between cryptocurrency tokens. Instead of relying on traditional order books where buyers and sellers match orders directly, AMMs use liquidity pools to automate pricing and trading.
The developers explained that Cow AMM will capture MEV that would otherwise be lost to arbitrageurs – or MEV bots – and share it back with LPs. “Liquidity providers are protected from toxic flow and know that whoever rebalances will always send them the surplus,” a CoW DAO spokesperson said.
The project's main offering so far is CoW Swap – an intent-based decentralized exchange pool. Its AMM issuance will complement the pool, allowing existing users to benefit from better liquidity.
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