Crypto Basics

News

Governance

Guides

Product Info

![MEV attacks.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/MEV_attacks_25da5820e4.png)
Maximal Extractable Value (MEV) attacks have become a significant concern for crypto traders. Whether you’re a beginner or an experienced trader, understanding MEV attacks is essential to protecting your transactions and ensuring fair trading practices.

In this article, we explain what MEV attacks are, how they work, and the best strategies for safeguarding yourself against them.

## MEV Attacks Go Beyond Standard Transaction Fees

Crypto traders are familiar with structural fees, such as:

-   Exchange fees – Charges applied by centralized or decentralized exchanges.
    
-   Execution fees – Costs associated with executing trades.
    
-   Gas fees – Payments made to blockchain miners or validators for processing transactions.
    

However, MEV attacks differ from these standard fees. Rather than being inherent costs of using the blockchain, MEV attacks exploit vulnerabilities in the transaction processing model to extract additional value at the expense of traders.

## “Inevitable” MEV vs MEV Attacks

### What is MEV?

MEV refers to the value that can be extracted from a blockchain transaction beyond standard fees. This extraction is done by reordering, inserting, or censoring transactions before they are confirmed on-chain.

MEV is a hidden tax on all types of Ethereum transactions. That means any time you want to transact in DeFi: from buying or selling an NFT, lending tokens to a liquidity pool, or swapping one token for another, a group of opportunistic users known as “searchers” have the opportunity to see your trade, and manipulate the criteria surrounding your trade to ensure they make profit, at your expense.

  

There are lots of different ways MEV can take place on Ethereum, which we’ll explore further down in the article. But for now, it’s important to understand the mechanics of MEV, and their presence on many chains like Ethereum.

### The MEV Debate: Good or Bad?

Some argue that MEV is a natural incentive mechanism compensating searchers and validators for optimizing transaction sequencing. Others see it as an unfair exploitation that degrades user experience and creates hidden costs.

Want to read more about this debate? [We have an article that explores the pros and cons in more detail.](https://cow.fi/learn/is-mev-good-or-bad)

MEV makes money for searchers, block builders, and Ethereum validators at the expense of regular users, especially beginners who don’t know how to protect themselves. As of the time of writing, sandwich attacks on AMMs and aggregators alike generate [almost $1 million in profit for searchers each week](https://eigenphi.io/mev/ethereum/sandwich).

  

Over time, persistent MEV erodes market confidence as traders realize they are at a constant disadvantage to more sophisticated actors. Ultimately, MEV may pose an existential threat to blockchain ecosystems like Ethereum, so it’s imperative for solutions to emerge that protect everyday traders from price exploitation.

  

The reality is, there is little appetite to change the design of chains like Ethereum, meaning MEV is here to stay. While it does help prices remain consistent across different liquidity pools, it creates a hierarchy between sophisticated actors looking for arbitrage and regular users unaware that their transactions could be exploited.

## What is an MEV Attack?

An MEV attack is a deliberate manipulation of transaction ordering in a way that unfairly profits a searcher at the expense of traders. MEV attacks actively exploit transaction sequencing vulnerabilities.

## Overview: How Searchers Implement an MEV Attack

MEV attacks exploit the mempool, a public waiting area where transactions reside before being confirmed. Here’s how searchers implement an MEV attack:

1.  Transactions enter the mempool before being included in a block.
    
2.  MEV searchers monitor the mempool for profitable opportunities.
    
3.  Searchers select, reorder, or delay transactions to maximize their gains.
    
4.  They execute transactions that benefit from market movement, often at the expense of regular traders.
    

### Example of an MEV Attack

Imagine a trader places a large buy order for a token. A searcher detects this order in the mempool and inserts their own buy order first. Once the trader’s transaction pushes the price up, the searcher sells the token at a higher price—pocketing the profit at the trader’s expense.

## Common Types of MEV Attacks

### Frontrunning Attacks

  

[Frontrunning](https://cow.fi/learn/what-is-frontrunning) is when a bot sees a profitable transaction in a public mempool, duplicates it, and places their own order in front of the victim transaction, extracting its value for themselves.

  

If you’re interested in understanding frontrunning more fully, check out our [frontrunning blog post](https://cow.fi/learn/what-is-frontrunning).

### Backrunning Attacks

  

These attacks are similar to frontrunning but in reverse. In [backrunning](https://cow.fi/learn/what-is-backrunning-mev-attacks-explained), the attacker places a transaction after the victim transaction to capitalize on any arbitrage left by the victim’s order. Frontrunning and backrunning transactions are not very common by themselves, but a combination of the two, known as a “sandwich attack,” accounts for most MEV.

  

If you’re interested in understanding backrunning more fully, check out our [backrunning blog post.](https://cow.fi/learn/what-is-backrunning-mev-attacks-explained?ref=learn_search)

### Sandwich Attacks

  

[Sandwich attacks](https://cow.fi/learn/what-is-a-sandwich-attack-and-how-can-you-protect-yourself) combine frontrunning and backrunning, placing a buy order before the victim transaction and a sell order directly after. This creates a “sandwich” of the victim transaction.

  

If you’re interested in understanding sandwich attacks more fully, check out our [sandwich attacks blog post.](https://cow.fi/learn/what-is-a-sandwich-attack-and-how-can-you-protect-yourself?ref=learn_search)

### Loss-Versus-Rebalancing (LVR)

LVR is a sophisticated strategy where MEV searchers exploit the difference between a DEX’s price and an external market price.

Targeting liquidity providers, LVR is a form of MEV responsible for more price exploitation than all other forms of MEV combined. Many liquidity providers haven’t even heard of LVR, but it costs them 5–7% of their liquidity, resulting in hundreds of millions lost each year. In fact, when accounting for LVR, many of the largest liquidity pools are not profitable for LPs at all.

If you’re interested in understanding LVR more fully, [check out our LVR blog post.](https://cow.fi/learn/what-is-loss-versus-rebalancing-lvr?ref=learn_search)

## How MEV Attacks Hurt Crypto Traders

Maximal Extractable Value (MEV) attacks pose serious risks to both individual traders and the broader decentralized finance (DeFi) ecosystem. These attacks allow validators, miners, or other privileged actors to manipulate transactions for their own gain, leading to inefficiencies, increased costs, and a loss of trust in DeFi markets.

The negative impacts of MEV can be categorized into four major areas: unexpected losses and slippage, compromised trade execution, distorted market conditions, and a general erosion of confidence in decentralized trading platforms.

We explore each of these in turn below.

### Unexpected Losses and Slippage

One of the most immediate consequences of MEV attacks is that traders often experience worse-than-expected execution prices. This occurs due to front-running and sandwich attacks, two common forms of MEV exploitation.

-   **Front-running:** A validator or miner sees a pending trade and inserts their own transaction ahead of it, profiting from price changes before the original trade is executed. This forces the original trader to buy at a higher price or sell at a lower price than anticipated.
    
-   **Sandwich attacks:** This occurs when an attacker places one trade before and another trade after a target transaction. By manipulating prices through these additional transactions, the attacker forces the victim to complete their trade at a disadvantageous rate, profiting from the resulting price changes.
    

Both types of attacks create additional transaction costs, leading to unnecessary losses for unsuspecting traders. Even small-scale traders who frequently engage in swaps and liquidity provision can suffer from repeated losses over time, making DeFi trading less attractive.

### Compromised Trade Execution and Price Distortion

MEV attacks undermine the integrity of decentralized markets by interfering with the natural process of price discovery. Price discovery refers to the process by which market prices are determined based on supply and demand dynamics. However, when MEV bots and validators manipulate transactions, the resulting prices are no longer purely organic.

For example, large MEV attacks can lead to artificial price swings that do not reflect actual market sentiment. Traders making decisions based on manipulated prices may enter trades under false assumptions, increasing their risk of losses. Additionally, compromised trade execution makes it harder for traders to place orders with confidence, as they cannot be certain their transactions will be processed fairly.

### Skewed Markets and Artificial Inefficiencies

MEV-driven market manipulation can introduce significant inefficiencies that distort normal trading activity. Instead of functioning as a free and competitive environment, DeFi markets become skewed in favor of those who have privileged access to transaction data.

As a result, the markets may experience:

-   Reduced liquidity, as traders hesitate to provide liquidity, knowing they may be exploited.
    
-   Increased volatility, due to sudden and unpredictable price swings caused by MEV bots.
    
-   Barriers to entry for new traders who cannot compete with sophisticated MEV strategies.
    

These inefficiencies hinder DeFi’s ability to serve as a viable alternative to traditional finance.

### Erosion of Trust in DeFi

Finally, MEV attacks contribute to growing distrust in decentralized finance. When traders repeatedly experience unexplained losses, poor execution, and unfair market conditions, they begin to question whether DeFi is truly decentralized and transparent.

If MEV exploitation continues unchecked, DeFi platforms risk losing users, stalling adoption, and facing increased regulatory scrutiny. Therefore, addressing MEV challenges is crucial to ensuring a fair and sustainable DeFi ecosystem.

## Protect Yourself Against MEV Attacks

### MEV Blockers

MEV blockers reduce vulnerability to attacks by protecting transactions from manipulation. They work by preventing transactions from being publicly visible in the mempool, making it harder for searchers to exploit them. Read more about MEV blockers here.

### How CoW Swap Mitigates MEV Attacks

CoW Swap gives traders the tools they need to protect themselves from MEV, so when you’re trading through [https://swap.cow.fi/](https://swap.cow.fi/) you’re protected from the majority of opportunistic searchers, regardless of the size or type of trade.

  

CoW Swap relies on 3 main features to keep you safe from MEV:

1.  Delegated Trade Execution
    
2.  Coincidence of Wants
    
3.  Uniform Clearing Prices
    

  

Let’s dive in!

### Delegated Trade Execution

  

On CoW Swap, all transactions are routed through a decentralized network of “solvers” — independent algorithms that are responsible for finding the best execution price for your trades.

  

When you submit a trade on CoW Swap, rather than initiating a blockchain transaction like you would on a platform like Uniswap, you instead submit a signed “intent to trade” message. This means that CoW Swap can perform optimizations on your trade that would not be possible if you submitted the transaction directly to the blockchain.

  

These optimizations include finding Coincidences of Wants, adjusting the slippage tolerance dynamically, and completing your trade at an optimal price during the time of execution.

  

Since it is the solvers who execute your trade on your behalf, you are never directly exposed to the public mempool, meaning that you are protected from MEV at all times.

  

Whatever price solvers quote you at the time you place your order is actually the worst price that your order will be executed at (it may complete at a better price if solvers find a better execution path). All risk of MEV is taken on by the solver itself.

### Coincidence of Wants

  

CoW Swap’s delegated trade execution mechanism has another major advantage — it can match your orders off-chain.

  

Any time you submit a trade on CoW Swap, solvers start looking for the best way to execute it. Before checking on-chain liquidity, solvers check other incoming orders on CoW Swap’s current batch auction to see if your trades can be matched peer-to-peer.

  

Here’s how it works:

  

Let’s say you’re looking to trade ETH for USDC. You submit your order and solvers see that someone else in that batch is actually looking to trade USDC for ETH — the opposite of your trade — at the same time. These two trades will be matched with each other in a “Coincidence of Wants” (CoW) which allows traders to swap their assets with each other directly (one to one or many to many), thereby saving on gas fees, liquidity provider fees, price impact, and also bypassing MEV risks.

  

CoW Swap’s founders were inspired by the potential for Coincidence of Wants to provide lower prices for everyday Ethereum users (it’s in the name!). This mechanism is one of the cheapest and most secure ways to make a DeFi trade, and since you’re not using on-chain liquidity pools, your Coincidence of Wants trade cannot be subject to MEV attacks.

### Uniform Clearing Prices

As a third line of defense against MEV, CoW Swap ensures all orders complete under a “Uniform Clearing Price” (UCP).

  

Upon submitting your trade, your order gets included in a batch auction alongside other pending orders in the queue. All of the orders within a batch trade for the same price on the blockchain, a phenomenon referred to as “Uniform Clearing Price” (UCP).

  

To understand how UCP works on CoW Swap, we first have to consider how DeFi trading works on traditional DEXs. On a normal decentralized exchange, if 8 people want to trade ETH for USDC, each of their trades clears at a slightly different price since DEXs process trades in a sequential manner even though they might be happening concurrently (within the same Ethereum block).

  

This leaves room for MEV because the order in which transactions are processed heavily impacts the prices that users get. Searchers are constantly monitoring DEX trades, looking for opportunities like these where they can reorder transactions to their advantage.

  

On CoW Swap, if the same 8 people are making that trade, as long as they are in the same batch auction, each order will be settled for the same clearing price when it goes on-chain. This leaves no room for MEV attacks since all prices are the same, meaning that transaction ordering becomes irrelevant.

[Learn how CoW Swap solves the MEV problem.](https://cow.fi/learn/dex-aggregator-how-to-choose)

## Final Thoughts

MEV attacks exploit transaction sequencing for profit, often at the expense of everyday traders. While some MEV activities may be considered an unavoidable part of DeFi, MEV attacks actively harm market fairness.

Understanding these attacks and using tools like MEV blockers and fair trading platforms can help protect your transactions and ensure a more equitable DeFi ecosystem.

Interested in learning about MEV and what measures you can deploy to help keep yourself protected? Check out the below.

-   [Understanding MEV Protection](http://cow.fi/learn/understanding-mev-protection)
    
-   [How to avoid MEV bots](http://cow.fi/learn/how-to-avoid-mev-bots)
    
-   [MEV Bots: switch from searcher to solver](http://cow.fi/learn/mev-bots-switch-from-searcher-to-solver)

large_MEV attacks.png

medium_MEV attacks.png

small_MEV attacks.png

thumbnail_MEV attacks.png

MEV attacks.png

An introduction to MEV attacks, including specific strategies: frontrunning, backrunning, loss-versus-rebalancing, and sandwich attacks. 

Understanding MEV attacks

In cryptocurrency markets, certain participants wield disproportionate influence due to their substantial holdings and sophisticated trading strategies. These market participants, known as "crypto whales," represent some of the most successful investors in the space—and their movements can provide valuable insights for newcomers to digital assets.

## What are crypto whales?

Crypto whales are individuals or institutions that hold substantial cryptocurrency positions—typically large enough to influence market prices through their trading activity. What distinguishes whales from ordinary large holders is their sophisticated approach to investing and their demonstrated ability to identify opportunities before they become mainstream.

It's important to understand that not all large holders qualify as influential whales. Many large addresses belong to cryptocurrency exchanges or custodial services that hold assets on behalf of multiple customers. The whales worth tracking are those with proven track records of profitable trading—what analytics platforms like Nansen classify as "Smart Money" addresses.

These Smart Money wallets have consistently demonstrated superior market timing and project selection, making their activities particularly instructive for other investors seeking to improve their cryptocurrency investment strategies.

## The strategic value of whale tracking

Monitoring whale activity offers several compelling advantages for cryptocurrency investors:

**Early Opportunity Recognition**: Sophisticated whales often identify promising projects months before they gain widespread attention. By observing their accumulation patterns, you can discover emerging opportunities while they remain relatively unknown.

**Market Sentiment Intelligence**: When multiple whales simultaneously accumulate or divest from specific tokens, these coordinated movements often signal significant shifts in market sentiment that precede price movements.

**Enhanced Risk Assessment**: Large-scale whale distributions can serve as early warning signals for potential market corrections, helping you make more informed decisions about position sizing and timing.

**Strategic Pattern Recognition**: Analyzing whale trading behaviors over time reveals sophisticated strategies that you can adapt for your own investment approach.

## Identifying whales through market analysis

### Locating NFT market leaders

For those interested in digital collectibles, examining NFT trading leaderboards provides insight into the most successful collectors and traders. These rankings identify wallets that have consistently generated profits across multiple collections and timeframes.

The most valuable NFT whales are those who demonstrate consistent performance over extended periods rather than single large wins. Look for addresses that have maintained profitability across at least 10 transactions spanning three or more collections—this indicates genuine expertise rather than fortunate timing.

### Token distribution analysis

To identify influential holders of specific cryptocurrencies, examine token distribution data to find the largest holders. More importantly, look for holders that carry "Smart Money" designations, indicating their historical profitability and sophisticated trading patterns.

This approach reveals which respected investors have chosen to allocate significant capital to particular projects, often indicating high confidence in the token's future prospects.

### Smart Money aggregation

The most efficient approach involves analyzing aggregated data from historically successful wallets. This method allows you to identify tokens that multiple sophisticated investors are accumulating simultaneously—a strong signal of emerging opportunities.

For example, when multiple Smart Money addresses begin accumulating a relatively unknown token, it often precedes significant price appreciation. Historical data shows this pattern has successfully identified opportunities before they became widely recognized.

## Comprehensive wallet analysis

Once you've identified notable whale addresses, conduct thorough analysis of their activities:

**Portfolio Composition**: Examine their current holdings across different tokens and asset classes to understand their investment thesis and risk allocation.

**Transaction Patterns**: Study their buying and selling behaviors, including timing, position sizing, and frequency of trades.

**Performance Metrics**: Review their realized gains and losses to assess their track record and identify their most successful investment themes.

**Strategic Positioning**: Analyze what percentage of their positions they maintain versus distribute, which can indicate their long-term conviction levels.

## Implementing real-time monitoring

To capitalize on whale insights, establish systematic monitoring of their activities:

Create customized alerts for specific wallet addresses based on transaction types, amounts, or particular tokens. This ensures you receive immediate notification when significant movements occur.

For instance, you might set alerts for when a particular whale purchases more than a specified dollar amount of any token, or when they increase their position in specific projects you're monitoring.

## Advanced tracking methodologies

### Custom segment creation

Develop sophisticated tracking systems by creating dynamic segments based on specific criteria. For example, you might create a segment tracking "Wallets that have purchased at least three different DeFi tokens in the past month" to identify thematic investment trends.

These segments automatically update as new wallets meet your criteria, providing ongoing intelligence about emerging market themes.

### Cross-chain activity analysis

Modern whale tracking requires monitoring activity across multiple blockchain networks. Sophisticated investors often diversify their activities across Ethereum, Solana, Arbitrum, and other chains.

By tracking whale movements across all relevant networks, you can identify broader strategic shifts, such as whales moving assets from Ethereum to alternative chains in anticipation of new opportunities.

## Practical application: Multi-whale consensus analysis

Consider this scenario: You observe several Smart Money wallets beginning to accumulate a token called ABC. Rather than acting immediately, conduct comprehensive analysis:

1. **Verify the Pattern**: Confirm that multiple independent whale addresses are making similar moves
2. **Assess Timing**: Examine whether these accumulations are occurring over days or weeks, which often indicates stronger conviction
3. **Cross-Reference Activity**: Check whether these same whales are active on other chains and making related moves
4. **Monitor Development**: Set up alerts for continued activity from these addresses

This methodical approach helps distinguish between coincidental individual decisions and coordinated recognition of genuine opportunities.

## Interpreting whale signals effectively

Successful whale tracking requires nuanced interpretation:

**Consensus Strength**: Individual whale movements may reflect personal circumstances, but when multiple sophisticated investors make similar moves, it typically indicates they've identified a significant opportunity or risk.

**Transaction Significance**: Consider both the absolute size of transactions and their size relative to the whale's total portfolio. A modest purchase that represents a new position may be more significant than a large purchase that merely adds to an existing holding.

**Historical Context**: Prioritize signals from whales with long-term track records of success rather than those who may have achieved recent gains through fortunate timing.

**Market Environment**: Interpret whale movements within the context of broader market conditions and fundamental developments in the cryptocurrency space.

## Building your whale tracking strategy

Effective whale tracking requires systematic approach and appropriate tools. Professional analytics platforms provide the infrastructure necessary to identify, monitor, and analyze whale activities across multiple blockchain networks.

Start by identifying a manageable number of consistently profitable wallets to track. As you become more comfortable with interpreting their movements, gradually expand your monitoring to include emerging whale addresses and thematic segments.

Remember that whale tracking should complement, not replace, your fundamental analysis of cryptocurrency projects. The most effective approach combines whale intelligence with thorough understanding of project fundamentals, market conditions, and technical analysis.

## Conclusion

Whale tracking represents a sophisticated approach to cryptocurrency investing that leverages the collective intelligence of the market's most successful participants. By systematically monitoring Smart Money movements, you gain access to insights that would otherwise remain hidden until opportunities become widely recognized.

The cryptocurrency market's transparent nature makes this level of analysis possible, providing newcomers with unprecedented visibility into the strategies of successful investors. While whale movements shouldn't dictate your investment decisions, they offer valuable intelligence that can inform your broader cryptocurrency investment strategy.

As you develop proficiency in whale tracking, you'll find it becomes an invaluable component of your market analysis toolkit, helping you navigate the dynamic and often unpredictable world of cryptocurrency investing with greater confidence and sophistication.
## Frequently asked questions
### What are the top crypto whales buying? How to track and find them?

Crypto whales are typically buying established tokens and promising new projects before they gain mainstream attention. To track and find whale purchases, you can use specialized tools like Nansen that offer several methods: check the Smart Money dashboard to see which tokens have high Smart Money holdings, analyze Token Distribution to identify large holders of specific tokens, and set up Smart Alerts for real-time notifications of significant whale movements. The most valuable whales to track are those categorized as "Smart Money"—addresses with proven track records of profitable trading.

### What is an 'NFT whale'?

An NFT whale is an individual or entity that holds substantial amounts of valuable NFTs and has significant influence in the NFT market through their trading activities. These collectors often have large portfolios across multiple collections and can influence floor prices through their buying and selling decisions. A notable example is Pranksy, who once held over 1,200 Bored Ape Yacht Club NFTs and has generated significant profits through strategic trading.

### How to find NFT whales?

You can find NFT whales by using Nansen's NFT Paradise dashboard, specifically the Profit Leaderboard which ranks the most profitable NFT traders. The process involves reviewing this leaderboard, filtering by timeframe (7 days, 30 days, all-time) to identify consistent performers, and noting that all-time rankings only include wallets with at least 10 sales across 3+ collections. This method helps identify sophisticated NFT traders with proven track records.

### How to track whales' movements in crypto?

To track whale movements in crypto, you can use Nansen's Wallet Profiler for comprehensive insights once you've identified whales worth following. This tool allows you to analyze their holdings across tokens and NFTs, examine transaction history, check realized gains, and understand their collection exposure. For real-time monitoring, set up customized alerts through Nansen's Smart Alerts feature, which notifies you when specific wallets make significant transactions based on your predefined conditions.

### How to track whales in crypto?

Tracking whales in crypto involves several approaches: using the Smart Money dashboard to see what historically profitable wallets are trading, analyzing token distribution to identify large holders of specific tokens, and setting up alerts for real-time notifications. For advanced tracking, create custom whale segments based on specific criteria using features like Smart Segments. Additionally, monitor cross-chain activity to get a complete picture of whale movements across different blockchains.

### How do you track whale activity?

Whale activity can be tracked by monitoring their transaction history, current holdings, buying and selling patterns, and cross-chain movements. Set up customized alerts for specific wallet addresses based on transaction types, amounts, or tokens. When interpreting whale movements, look for consensus among multiple whales, pay attention to the size and timing of transactions, focus on whales with consistent long-term profitability, and consider the broader market context alongside their activities.

### How to find out what coins whales will pump?

While it's impossible to predict with certainty which coins whales will pump, you can look for early signals by monitoring Smart Money accumulation patterns. When multiple sophisticated whale wallets begin accumulating the same token, especially if it's relatively unknown, it may signal an upcoming price movement. For example, Smart Money wallets accumulating OLAS preceded its price increase from $2.39 to $8.47. Focus on consistent patterns rather than isolated transactions, and look for consensus among different whale wallets.

### How to spot whale accumulation?

Spotting whale accumulation involves watching for several key indicators: multiple Smart Money wallets buying the same token over a short period, large transactions or gradual accumulations by known profitable traders, increased holdings of a specific token in the Smart Money dashboard, and unusual transaction volumes for lesser-known tokens. Use Token Distribution analysis to identify when the percentage of tokens held by sophisticated investors is increasing, and set up alerts to notify you when whales are adding significant positions to particular tokens.

Learn to track crypto whales and Smart Money movements to identify early investment opportunities in cryptocurrency markets. Discover whale analysis tools, monitoring strategies, and how to interpret sophisticated investor signals for better trading decis

How to track whale movements with Nansen

Exchange outflows represent one of the most revealing indicators in cryptocurrency analysis. When digital assets move from centralized exchanges to external wallets, these transfers provide valuable insights into investor behavior and market sentiment.

Understanding exchange outflows is crucial because they reflect the fundamental supply and demand dynamics that drive cryptocurrency prices. When investors withdraw assets from exchanges, they're making a deliberate decision about how they intend to use those funds—whether for long-term storage, DeFi activities, or other strategic purposes.

### Why exchange outflows matter

Exchange outflows serve as a window into market psychology for several key reasons:

**Long-term accumulation signals**: Large-scale withdrawals to cold storage wallets typically indicate investors are positioning for extended holding periods. This behavior suggests confidence in an asset's long-term value proposition.

**Supply dynamics**: Cryptocurrencies held in personal wallets cannot be immediately sold, effectively reducing the circulating supply available for trading. This reduction in readily available supply can create upward pressure on prices, particularly during periods of sustained demand.

**Institutional activity**: Significant outflows often reflect movements by sophisticated investors—hedge funds, family offices, or high-net-worth individuals—who have conducted thorough due diligence before making substantial commitments.

**Market confidence indicators**: During market downturns, continued outflows suggest investors view current prices as attractive entry points rather than reasons to exit positions entirely.

**Risk management signals**: Sudden, large-scale outflows may indicate concerns about exchange security, regulatory issues, or operational problems—providing early warning signs for other market participants.

## Nansen's comprehensive exchange monitoring platform

Nansen has established itself as the premier platform for tracking cryptocurrency movements across blockchain networks. The platform's strength lies in its extensive database of over 300 million labeled addresses, enabling users to understand not just what is moving, but who is moving it and why.

### Core capabilities for exchange analysis

**Exchange flow dashboard**: Nansen's centralized dashboard provides real-time visibility into token movements across major exchanges. The interface displays net flows, historical trends, and token-specific breakdowns, allowing users to quickly identify significant changes in exchange activity.

**Smart money intelligence**: The platform tracks over 10,000 wallets belonging to successful traders and investors, providing insights into how sophisticated market participants are positioning themselves. When Smart Money wallets begin withdrawing assets from exchanges, it often signals important shifts in market sentiment.

**Multi-chain coverage**: Unlike many analytics platforms that focus solely on Ethereum, Nansen monitors exchange flows across 12+ blockchain networks, including Polygon, BNB Chain, Arbitrum, and others. This comprehensive coverage is essential as cryptocurrency trading increasingly occurs across multiple ecosystems.

**Customizable alert system**: Users can configure notifications for specific exchange flow patterns, ensuring they receive timely updates when predetermined conditions are met.

**Granular token analysis**: The platform enables detailed monitoring of individual assets, allowing users to track exchange movements for specific cryptocurrencies in their portfolios or watchlists.

## Implementing exchange outflow monitoring

### Accessing exchange flow data

Begin your analysis by navigating to Nansen's Exchange Flow dashboard, which serves as your primary interface for monitoring cryptocurrency movements. The dashboard presents a comprehensive overview of exchange activity, including:

- Net flow calculations (inflows minus outflows)
- Aggregate outflow volumes
- Historical trend analysis
- Token-specific movement patterns

This high-level view enables you to quickly identify unusual activity patterns that warrant deeper investigation.

### Configuring intelligent alerts

Nansen's Smart Alerts feature transforms passive monitoring into active intelligence gathering. To set up effective exchange outflow monitoring:

1. Navigate to the Smart Alerts section and select "Exchange Flows"
2. Specify "Outflow" as your monitoring direction
3. Establish threshold parameters based on your analysis objectives:
   - Minimum outflow value (consider starting with $1,000,000 for major tokens)
   - Monitoring timeframe (1-hour windows capture immediate activity)
   - Specific tokens or exchanges (optional filtering)
4. Choose your preferred notification method (Telegram, Discord, or Slack)

### Practical alert configuration

Consider this example configuration for monitoring Bitcoin accumulation patterns:

- **Alert type**: Exchange Flows
- **Direction**: Outflow
- **Minimum value**: $25,000,000
- **Time period**: 4 hours
- **Token**: Bitcoin (BTC)
- **Exchanges**: Binance, Coinbase, Kraken
- **Notification**: Telegram

This configuration would alert you when more than $25 million worth of Bitcoin exits major exchanges within a 4-hour period—a pattern that historically correlates with significant accumulation by institutional investors.

## Interpreting exchange outflow data

Effective analysis requires understanding both the quantitative aspects of outflows and their qualitative context.

### Volume pattern recognition

Establish baseline metrics for normal exchange activity. For example, if Ethereum typically experiences $200 million in daily outflows, a sudden increase to $800 million represents a 300% deviation that warrants investigation.

Monitor these patterns across different time horizons:
- **Short-term spikes** (hours): Often indicate reactions to news or market events
- **Medium-term trends** (days to weeks): Suggest shifting investor sentiment
- **Long-term patterns** (months): Reflect fundamental changes in market structure

### Destination address analysis

Nansen's address labeling system provides crucial context for understanding outflow destinations:

**Smart money wallets**: When experienced investors withdraw assets, it often signals informed accumulation. These wallets have demonstrated consistent profitability and their movements carry significant weight.

**DeFi protocol addresses**: Outflows to decentralized finance platforms may indicate investors seeking yield opportunities rather than simple accumulation.

**Fresh wallet addresses**: New addresses receiving substantial amounts often represent institutions or high-net-worth individuals establishing positions.

**Cold storage addresses**: Transfers to known cold storage solutions typically indicate long-term holding intentions.

### Market context integration

Always evaluate outflows within broader market conditions:

**Price correlation analysis**: Do outflows increase during price declines? This pattern suggests "buying the dip" behavior by sophisticated investors.

**Temporal patterns**: Do significant outflows precede price movements? Establishing these correlations can provide predictive value for future analysis.

**Cross-asset analysis**: Are outflows concentrated in specific tokens or distributed across multiple assets? Concentrated outflows may indicate asset-specific catalysts.

## Case study: Ethereum outflows during network transitions

Consider monitoring Ethereum outflows during major network upgrades—periods when sophisticated investors often position themselves for potential price movements.

### Analysis framework

**Pre-event monitoring**: Establish baseline outflow patterns 30 days before the anticipated upgrade. Create alerts for ETH outflows exceeding $10 million per 6-hour period.

**Address behavior analysis**: When alerts trigger, examine:
- Whether receiving addresses have historical patterns of successful accumulation
- If Smart Money wallets are participating in the outflows
- The rate of outflow acceleration as the upgrade approaches

**Historical comparison**: Use Nansen's historical data to compare current patterns with previous Ethereum upgrades, identifying similarities or differences that might indicate market sentiment.

### Practical example

During the lead-up to Ethereum's transition to Proof of Stake, monitoring revealed:
- Smart Money wallets withdrew 75,000 ETH from exchanges in the 72 hours before the upgrade
- 60% of these withdrawals went to addresses that had previously accumulated ETH before price increases
- Outflow rates increased by 400% compared to the previous month's average

This pattern suggested informed investors were positioning for potential price appreciation following the successful upgrade.

## Advanced monitoring strategies

### Multi-signal analysis

Combine exchange outflows with complementary on-chain metrics for comprehensive market intelligence:

**DEX activity correlation**: Compare exchange outflows with decentralized exchange volumes. If outflows coincide with increased DEX activity, assets may be moving for active trading rather than accumulation.

**Staking behavior**: For proof-of-stake networks, monitor whether outflows correlate with increased staking activity, indicating long-term commitment to network security.

**Whale wallet tracking**: Identify if large individual holders are contributing to outflow patterns through Nansen's whale tracking capabilities.

### Comprehensive alert architecture

Develop a layered alert system that captures different types of market activity:

**Tier 1 alerts**: Basic volume thresholds (e.g., 150% of average daily outflows)
**Tier 2 alerts**: Smart Money specific movements (e.g., when 10+ Smart Money wallets withdraw simultaneously)
**Tier 3 alerts**: Cross-chain patterns (e.g., similar outflow patterns across multiple blockchains)

This tiered approach ensures you receive appropriate notifications without alert fatigue.

## Understanding limitations and context

### Analytical considerations

**Internal exchange operations**: Not all withdrawals represent customer activity. Exchanges regularly move funds between wallets for operational reasons, security updates, or liquidity management.

**Timing delays**: Large outflows may not immediately impact prices. Market effects often emerge over days or weeks as the reduced supply interacts with ongoing demand.

**Regulatory factors**: Outflows may reflect regulatory concerns in specific jurisdictions rather than broad market sentiment.

**Exchange-specific factors**: Individual exchanges may experience outflows due to platform-specific issues unrelated to broader market conditions.

### Best practices for analysis

**Multiple confirmation points**: Use outflow data as one component of a broader analytical framework rather than a standalone indicator.

**Regular baseline updates**: Adjust your normal activity baselines as market conditions evolve and trading volumes change.

**Geographic considerations**: Be aware that outflows may reflect regional trading patterns or regulatory developments in specific countries.

## Building long-term analytical capabilities

### Developing market intelligence

Successful exchange outflow analysis requires building institutional knowledge over time:

**Pattern recognition**: Document significant outflow events and their subsequent market effects to build predictive models.

**Network effects**: Understand how outflows in one cryptocurrency might signal broader market movements or rotation between assets.

**Institutional behavior**: Learn to recognize the withdrawal patterns of different types of investors—retail traders, hedge funds, family offices, and corporations often exhibit distinct behaviors.

### Integration with investment strategy

**Portfolio rebalancing**: Use outflow data to inform allocation decisions. Significant outflows by Smart Money wallets might signal attractive entry points for long-term positions.

**Risk management**: Large outflows from exchanges you use may indicate security or operational concerns, prompting review of your custody strategies.

**Opportunity identification**: Unusual outflow patterns often precede significant price movements, providing early indicators for potential trading opportunities.

## Conclusion

Exchange outflow monitoring represents a sophisticated approach to cryptocurrency market analysis that goes beyond simple price tracking. By understanding the movement of assets between exchanges and external wallets, investors gain insight into the intentions and strategies of market participants.

Nansen's comprehensive platform provides the tools necessary to implement professional-grade exchange monitoring, from real-time dashboards to customizable alert systems. The platform's extensive address labeling and multi-chain coverage ensure users have access to the most complete picture of market activity available.

Success in cryptocurrency investing increasingly depends on understanding market dynamics before they become apparent in price movements. Exchange outflow analysis provides this forward-looking perspective, enabling investors to position themselves alongside sophisticated market participants rather than reacting to their actions after the fact.

The strategies outlined in this guide provide a foundation for developing your own exchange monitoring capabilities. As you gain experience with these tools, you'll develop the pattern recognition skills necessary to interpret complex market signals and make more informed investment decisions.

Remember that exchange outflow analysis is most powerful when integrated with other analytical approaches and market intelligence sources. By combining quantitative outflow data with qualitative market understanding, you'll be well-positioned to navigate the complexities of cryptocurrency markets with greater confidence and insight.

## Frequently asked questions
### What are inflows and outflows on crypto exchanges?

Inflows refer to cryptocurrency being deposited onto centralized exchanges, while outflows occur when cryptocurrency is withdrawn from exchanges to external wallets. Exchange outflows are particularly significant as they can signal various market conditions including accumulation patterns, reduced selling pressure, institutional movements, market confidence, or occasionally security concerns with a particular exchange. When assets leave exchanges in large quantities, it often indicates investors are moving to long-term holding positions, as assets not on exchanges cannot be immediately sold.

### How to use signals with an example?

You can use exchange outflow signals by setting up specific monitoring parameters. For example, if you wanted to track large Bitcoin outflows from major exchanges, you could configure an alert with these parameters: Direction (Outflow), Minimum Value ($10,000,000), Time Period (6 hours), Token (BTC), and specific exchanges like Binance, Coinbase, and FTX. This alert would notify you whenever more than $10 million worth of Bitcoin leaves these exchanges within a 6-hour period, potentially signaling significant accumulation by large players. You could then correlate this data with price movements or compare against historical outflow patterns.

### What is the importance of the Exchange Flows feature?

Exchange Flows are crucial for cryptocurrency market analysis because they provide direct insight into investor behavior and sentiment. By monitoring these flows, traders and investors can identify potential accumulation phases, reduced selling pressure, institutional movements, and changes in market confidence. The feature is particularly important during periods of market uncertainty - as demonstrated during the FTX collapse, where unusual outflow patterns provided early warning signs before public liquidity issues were announced. Exchange flow analysis helps users make more informed decisions based on actual asset movements rather than just price action or speculation.

### How to track onchain activity in real-time across all supported chains?

To track onchain activity across multiple blockchains, you can use platforms that offer multi-chain analysis capabilities. These tools allow you to monitor exchange flows across numerous networks simultaneously (including Ethereum, Polygon, BNB Chain, Arbitrum, and others). The process typically involves accessing a consolidated dashboard that displays real-time and historical data on tokens entering and exiting exchanges across all supported chains. You can view metrics like net flow (inflow minus outflow), total outflow volume, historical trends, and token-specific breakdowns. For comprehensive tracking, set up smart alerts to receive notifications when specific patterns emerge across any of the monitored blockchains.

### How to monitor Exchange Flows?

To monitor Exchange Flows, begin by accessing an Exchange Flow dashboard that provides an overview of all exchange-related token movements. The dashboard will display metrics like net flow (inflow minus outflow), total outflow volume, historical trends, and token-specific breakdowns. For more targeted monitoring, configure smart alerts by selecting "Exchange Flows" as your alert type, choosing "Outflow" or "Inflow" as the direction, and setting threshold parameters including minimum value, time period, specific tokens, and exchanges. You can receive notifications through various channels when your specified conditions are met. For effective analysis, compare current flows against historical averages and examine destination addresses to understand the nature of the movements.

### How to navigate the crypto tides with fresh wallet activity?

To navigate crypto markets using fresh wallet activity, focus on monitoring exchange outflows to newly created wallets. This can indicate new market participants entering the space or existing players establishing new positions. Start by setting up alerts that specifically track when assets move from exchanges to addresses that were recently created. Pay attention to the volume of assets flowing to these fresh wallets and which specific cryptocurrencies are being accumulated. For deeper insight, analyze if these new wallets are associated with known entities (like institutional investors) or if they follow patterns typical of retail investors. Combine this data with other signals like Smart Money movements to determine if the fresh wallet activity represents educated investments or potentially uninformed speculation.

### How to identify key exchange wallets and set up monitoring alerts?

To identify key exchange wallets, leverage platforms that maintain extensive databases of labeled addresses, with some services tracking over 300 million labeled addresses across multiple blockchains. These labeled addresses help identify which wallets belong to major exchanges like Binance, Coinbase, or FTX. Once you've identified these exchange wallets, set up monitoring alerts by configuring parameters including the specific exchanges you want to track, minimum transaction values that trigger notifications, specific cryptocurrencies of interest, and your preferred time window for monitoring. You can receive alerts through various channels when significant movements occur. For comprehensive monitoring, set up different alert types for different scenarios, such as large sudden outflows (potential security concerns) versus steady outflows (possible accumulation).

Discover how exchange outflows reveal investor behavior and market sentiment in crypto markets. Learn to track cryptocurrency movements from exchanges to wallets using advanced monitoring tools and analytics for better investment decisions.

How to monitor exchange outflows with Nansen


![Dex-aggregator.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Dex_aggregator_599a3c5b01.png)
There are more than [130 decentralized exchanges](https://www.alchemy.com/dapps/best/decentralized-exchanges-dexs) (DEXes) currently in operation. That’s a lot of choices when it comes to picking where to trade in DeFi. To cope with the explosion of DEXes, a new industry emerged: DEX aggregators. These unique projects search lots of decentralized exchanges on your behalf to find the best prices for your trades.

  

This has been a game changer for people looking to find the best prices for their trades. But with the proliferation of DEX aggregators comes a conundrum: how to choose the right one for you?

  

There are lots of different factors to consider before choosing to trade with a specific aggregator. That’s why in this article we’re going to walk you through the key features of DEX aggregators, and how to decide which one is right for you.

### The DEX aggregator advantage over traditional DEXs

  

A DEX aggregator is a platform that searches multiple decentralized exchanges to find the best prices for your trades. In the world of crypto, the price of an asset will vary depending on where, when and what medium you use to make a trade.

  

But finding the best price manually can be time-consuming. This is where a DEX aggregator comes in. They provide a single platform where multiple options for buying and selling can be seen on one page. They search platforms such as Balancer, Uniswap, and others for the best price for your trade, and you can complete a trade without having to visit those sites yourself. Typical examples include, 1inch, Matcha, or ParaSwap.

  

DEX aggregators offer a number of advantages over just using DEXs:

-   **Liquidity access:** Because  aggregators pull liquidity from multiple DEXs, they are better able to find the deepest liquidity for your trade. That means less slippage, and a higher trade success rate.
    
-   **Cost efficiency:** Aggregators pick the best route for your trade, which means you can find the best price for your trade with the lowest fees.
    
-   **Convenience:** A DEX aggregator does the hard work for you of searching multiple exchanges to find the best  route for your trade, all within one interface.
    
-   **Advanced features**: DEX aggregators often layer unique features on top of the DEXs they aggregate. Things like MEV protection, batch auctions, and gas optimizations are all options you can utilise.
    

## Evaluating a DEX aggregator

Before picking the DEX aggregator for you, there’s a few things you need to consider:

  

Defining your trading needs: are you a whale or a minnow? Do you only trade popular tokens or are you looking to up your meme coin game? Are you looking for the next big project or looking to make marginal gains on more established ones? These questions can help you work out the best DEX for you. That’s because each DEX, and each DEX aggregator has strengths, but also weaknesses, depending on what you’re looking to trade.

  

How simple are they to use? If you’re a pro and used to navigating the intricacies of DeFi, you’ll be happy to get into the weeds of creating advanced order types and parameters. But if you’re a newbie who just wants to do simple swaps, some platforms may not be suitable.

  

Where do they source their trades from? Each DEX aggregator will have a preference for where and how it finds the best route for your trade. While some will only source from the larger DEXes, others will focus on less well known channels, while some will be able to look into private liquidity pools for the best ways to execute your trade. We’ll explain more about that one later.

## What to consider when choosing a DEX aggregator

Below we’ll explore what you need to consider before choosing the DEX aggregator that works for you.

### Your specific goals and needs

What tokens do you trade across what blockchains? Some DEX aggregators specialise in certain trading pairs or networks, so make sure to check to see if that particular aggregator suits your specific need. Another point to consider: are you looking for specific tools or customisation features for your trades? Some DEX aggregators are more technical than others.

### Transaction fees and cost efficiency

Analyze the aggregator’s fee structure. Each DEX and DEX aggregator will have their own way of charging for their services. Some will charge gas fees, while others may charge platform fees, or a percentage of the trade.

  

Then there are other features such as gasless trading, where users can pay fees in the tokens they are trading instead of having to hold ETH to pay for gas.

  

Then there are other costs such as MEV. Looking for a DEX aggregator with MEV protection can help you avoid losing a percentage of your profits to MEV bots.

### Advanced features and tools

Do you need advanced trading features to help you manage your portfolio? DEX aggregators have different feature sets to suit different types of traders. For example, at CoW Swap there are lots of different order types, including [Market orders](https://docs.cow.fi/cow-protocol/concepts/order-types/market-orders), [Limit orders](https://docs.cow.fi/cow-protocol/tutorials/cow-swap/limit), [TWAP orders](https://cow.fi/learn/getting-to-grips-with-time-weighted-average-price-twap-orders), [Programmatic orders](https://docs.cow.fi/cow-protocol/concepts/order-types/programmatic-orders#:~:text=CoW%20Protocol's%20Programmatic%20Order%20Framework,elapsed%2C%20and%20much%20more), [Milkman orders](https://cow.fi/learn/what-is-milkman-cow-swaps-solution-for-delayed-execution-trading), and [CoW Hooks](https://docs.cow.fi/cow-protocol/concepts/order-types/cow-hooks), giving users the freedom to trade their way.

### Security and support

  

While the world of DeFi is non-custodial, there are still security issues to consider. Doing your research on whether a DEX aggregator regularly has its smart contracts audited is vital. DEX aggregators [can and do get hacked](https://www.bleepingcomputer.com/news/security/okx-suspends-dex-aggregator-after-lazarus-hackers-try-to-launder-funds/) so checking what security assurances they offer is an important step when considering who to trade with.

  

Other protections to consider are whether the DEX aggregator protects you from MEV exploits like front-running and sandwich attacks. These exploits take hundreds of millions from traders every year, but there are DEX aggregators that do offer protection, like CoW Swap. While some DEX aggregators don’t.

### Research and reviews

Any crypto citizen knows the importance of DYOR. Taking your time to read user testimonials and reviews can help you decide which DEX aggregators are better than the rest. But there are a number of other areas you should look out for too. The first is customer support. Whether its places like GitHub or Discord, checking out how well projects handle complaints or bugs can help increase your trust in a project.

  

Then there are things like roadmap activity, security updates and features. If a project is consistently upgrading, refining and releasing features, it’s a sign of a healthy ecosystem. If things have gone quiet? Tread with caution.

## Popular DEX aggregators to consider

While there are lots of DEX aggregators out there, below are four of the biggest when it comes to trading volume.

  

**[1inch](https://1inch.io/)**
    

-   Multiple chain support
    
-   Advanced features for sophisticated traders
    
-   Gasless swaps
    

**[Paraswap](https://www.paraswap.xyz/)**
    

-   Support for both ERC-20 and BEP-20 token standards.
    
-   Integration with popular wallets including MetaMask and Ledger.
    
-   Built in private market maker liquidity pools
    

**Kyberswap**
    

-   Split trade feature to allow multiple sources to complete one order for optimal prices.
    
-   Real time access to multiple trading paths.
    
-   Tiered liquidity pools allow LPs to concentrate liquidity in certain trading pairs.
    

**[CoW Swap](https://cow.fi/cow-swap)**
    

-   Best-in-class MEV protection.
    
-   Profit optimization via batch auctions and fee savings.
    
-   Transparent and secure token handling.
    
-   Intent-based trading ensures best prices (more on that below)
    

## The vulnerabilities of DEXes and DEX aggregators

While DEX aggregators have helped people navigate the dizzying world of DeFi, there are some areas where they still struggle to deliver the best prices possible. Below are a few areas where DEX aggregators are vulnerable to poor performance

-   **MEV:** Maximum Extractable Value is where [malicious actors manipulate transactions](https://cow.fi/learn/what-is-mev) to extract profits. MEV costs traders hundreds of millions of dollars every year. This increases the cost of trading.
    
-   **Liquidity fragmentation:** With more than 130 DEXes currently trading, liquidity has become increasingly fragmented meaning traders increasingly suffer from failed transactions and higher slippage costs.
    
-   **Security:** DeFi, like many parts of the crypto space has its challenges when it comes to security. From coding errors, to unaudited smart contracts, DEX aggregators have been exploited in the past for gaps in their security.
    
-   **Centralization:** While you might think DeFi doesn’t suffer from centralization, there are certain areas where it does. One of those is oracles. These are price feeds that help exchanges determine what price they should charge for certain assets. These oracles can be prone to vulnerabilities and attack. Most famously in 2023 when a price feed used by QuickSwap, a DEX was hacked and used to manipulate the price of tokens leading to losses of $188,000.
    

## Intent-based DEX aggregators minimize the risk

Intent-based aggregators operate differently from other DEX aggregators. That’s because instead of placing orders by signing a raw transaction that executes directly on-chain (i.e. as happens on Uniswap or SushiSwap), CoW Swap users place orders by signing an "intent to trade" message that specifies parameters like the assets and amounts they would like to trade. The intent is a signed message which allows the solvers to execute a trade on behalf of the user using their specified assets and amounts.

Let’s take an example. When you use Uniswap and you want to make a trade, once you’ve chosen the tokens you want to trade with and hit ‘swap’ that order is submitted to the ‘mempool’ a public list of transactions awaiting validation. This is [where MEV creeps in](https://cow.fi/learn/a-guide-to-mev-on-ethereum-explained-cow-dao?ref=learn_search). Because the mempool is public, anyone can see your trade waiting and manipulate conditions around it to their benefit.

With an intent-based DEX however, your intent to trade is not made public, but remains private inside a pool of selected individuals who attempt to find the best trade on your behalf. That lowers the risk of your trade being manipulated.

  

There are other security benefits, too:

-   **Less smart contract risk:** Because solvers take on the risk of interacting with smart contracts and AMMs, you as a trader don’t have to worry.
    
-   **Increased gas efficiency:** All trades are credited directly to user accounts without withdrawals or deposits into an exchange contract. That means less is spent on executing your trade.
    
-   **Better security:** Funds can only be transferred if a trader has approved the contract and signed an order to sell the given token for another.
    
-   **Order expiry dates:** Signed orders have an expiry date and they can be cancelled on-chain, preventing exploits where orders can be re-executed by relying on old approvals.
    

### Intent-based DEX vs traditional aggregators

Intent-based DEXes have a number of important distinctions over traditional aggregators. Below we explain some of the key differences.

  

-   Execution model:
    

**Traditional:** Trades are often routed through predefined on-chain paths, meaning you might not be getting the best price for your trade.
    
**Intent-Based:** Solvers organically go and search for the most efficient execution strategy for your trade.
    

-   Liquidity access:
    

**Traditional:** Relies solely on on-chain DEX liquidity. Many DEX aggregators solely rely on liquidity they can find on-chain.
    
**Intent-Based:** Intent-based aggregators can and do search both on-chain liquidity and off-chain sources. They can also explore peer-to-peer matching, too. More on that below.
    

-   MEV protection:
    

**Traditional:** Your intent to trade goes into the mempool, meaning searchers are able to identify ways of making a profit from your trade through a number of different [MEV attacks.](https://cow.fi/learn/a-guide-to-mev-on-ethereum-explained-cow-dao?ref=learn_search)
    
**Intent-Based:** Your intent to trade is hidden, and is only committed to the blockchain once the order has been filled. This means no one can prey on your trades to make an easy profit.
    

## Beyond liquidity aggregation: the CoW Swap approach

  

CoW Swap is not built like other aggregators. That’s because it relies on third parties known as "[solvers](https://docs.cow.fi/cow-protocol/concepts/introduction/solvers)" to find the best execution paths for trade intents — signed messages that specify conditions for executing transactions on Ethereum and EVM-compatible chains. Let’s explain this a bit more.

  

When a trader signals their intent to trade, the CoW Protocol, the execution layer beneath CoW Swap, groups that intent to trade along with other intents into what’s called a [batch](https://docs.cow.fi/cow-protocol/concepts/introduction/batch-auctions). That batch is then turned into an auction where solvers compete to find the best price for the trades in the batch.

  

One method they do is by trying to find what’s called a [Coincidence of Wants (CoW)](https://docs.cow.fi/cow-protocol/concepts/how-it-works/coincidence-of-wants). This is when two traders want to make the same trade but from opposite sides. So a user with USDC wants to swap to ETH and another user with ETH that wants to swap it to USDC can be paired together in a Coincidence of Wants, or CoWs. CoWs allow users to bypass liquidity provider (LP) fees and also reduce gas fees since orders only interact with CoW Protocol's smart contracts.

  

If those solvers can’t find a CoW in the batch, they search all available on-chain and off-chain liquidity to find the best price for a set of trade intents within a batch.

Liquidity sources include:

-   AMMs (e.g. Uniswap, Sushiswap, Balancer, Curve, etc.)
    
-   DEX Aggregators (e.g. 1inch, Paraswap, Matcha, etc.)
    
-   Private Market Makers - yes, our solvers can access private liquidity to help execute your trade.
    

  

Because your intent to trade is not published into the mempool, trading on CoW Swap also ensures you’re [protected from MEV](https://cow.fi/learn/a-guide-to-mev-on-ethereum-explained-cow-dao?ref=learn_search): a hidden tax on all types of Ethereum transactions. That means any time you want to transact in DeFi: from buying or selling an NFT, lending tokens to a liquidity pool, or swapping one token for another, a group of opportunistic users known as “searchers” have the opportunity to see your trade, and manipulate the criteria surrounding your trade to ensure they make profit, at your expense. Not with CoW Swap.

  

Another feature found in a meta DEX like CoW Swap is different order types. Most DEXes have some order type functionality, CoW Swap goes further. Below is a list of the different types of orders you can do with CoW Swap.

-   [Market orders](https://docs.cow.fi/cow-protocol/concepts/order-types/market-orders) - buy or sell tokens as soon as possible at the current market rate.
    
-   [Limit orders](https://docs.cow.fi/cow-protocol/tutorials/cow-swap/limit) - set your own parameters for how much you are willing to buy and sell.
    
-   [TWAP orders](https://cow.fi/learn/getting-to-grips-with-time-weighted-average-price-twap-orders) - allows traders to spread their trade over a specified period of time.
    
-   [Programmatic orders](https://docs.cow.fi/cow-protocol/concepts/order-types/programmatic-orders#:~:text=CoW%20Protocol's%20Programmatic%20Order%20Framework,elapsed%2C%20and%20much%20more).) - create conditional orders that execute when certain on-chain conditions are met (such as asset prices, wallet balances, time elapsed, and much more)
    
-   [Milkman orders](https://cow.fi/learn/what-is-milkman-cow-swaps-solution-for-delayed-execution-trading)- delayed execution trading: set and forget your trades for optimum conditions.
    
-   [CoW Hooks](https://docs.cow.fi/cow-protocol/concepts/order-types/cow-hooks)- allow users to pair any Ethereum action (or set of actions) with an order on CoW Protocol, leveraging the [solvers](https://docs.cow.fi/cow-protocol/concepts/introduction/solvers) to execute the actions together in the sequence.
    

  

In summary, CoW Swap brings you class-leading MEV protection, liquidity access and custom order types to let you do more with less worry.

### Next steps

As you can see, CoW Swap takes a very different approach to helping find the best route for your trade.

  

Another element that sets it apart from all the rest is its use of a [Coincidence of Wants](https://docs.cow.fi/cow-protocol/concepts/how-it-works/coincidence-of-wants) as one way to execute a trade.

  

This term, which comes from economics, involves two parties - each holding the asset that the other needs - exchanging assets directly in an equivalent barter. Let’s break this down a bit further.

  

Any time you submit a trade on CoW Swap, solvers start looking for the best way to execute it. Before checking on-chain liquidity, solvers check other incoming orders on CoW Swap’s current batch auction to see if your trades can be matched peer-to-peer.

  

If someone wants to do a trade in the opposite direction to what you want, you are paired together, and the whole thing is executed gas free!

  

Want to know more? Check out our explainer on [Coincidence of Wants.](https://cow.fi/learn/what-are-cows-on-cow-swap)

large_Dex-aggregator.png

medium_Dex-aggregator.png

small_Dex-aggregator.png

thumbnail_Dex-aggregator.png

Dex-aggregator.png

Discover how to choose the best DEX aggregator – minimize vulnerabilities, maximize profitability, and avoid MEV exploitation

How to choose a DEX aggregator

![MEV-arbitrage.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/MEV_arbitrage_b49adb9ce0.png)
Arbitrage at its simplest, is a strategy where an investor or entity buys and sells an asset in different markets, taking advantage of the difference in price between those two markets.

  

Popular in the world of TradFi, it’s a big part of the crypto ecosystem, too. But this isn’t the only form of exploitation of market inefficiencies.

  

MEV, or maximal extractable value, is a hidden tax on all types of Ethereum transactions.

  

That means any time you want to transact in DeFi: from buying or selling an NFT, lending tokens to a liquidity pool, or swapping one token for another, a group of opportunistic users known as “searchers” have the opportunity to see your trade, and manipulate the criteria surrounding your trade to ensure they make profit, at your expense.

  

In DeFi, MEV and arbitrage go hand in hand: they take advantage of price differences. In this post, we’ll explain the relationship between arbitrage and MEV, how traders are made vulnerable to them, and how you can keep yourself protected.

## Arbitrage basics for the crypto market

Diving a bit deeper into the definition of arbitrage: the price of an asset varies depending on which exchange you are buying or selling it from. With more than 250 crypto exchanges, that means there’s a lot of opportunity for traders to make a profit from finding assets with different prices.

  

Why are prices higher or lower on different exchanges? The simple reason is demand. If one exchange has many buyers and not many sellers, the price will go up. While on another exchange, if there are lots of sellers but not many buyers, prices will fall.

  

But there are other reasons for price discrepancies.

  

Liquidity: Exchanges with higher trading volumes tend to have more stable prices, while lower-volume exchanges can experience more pronounced price swings.

  

Geography: Demand for specific cryptocurrencies can vary across regions, leading to price differences. So a typical example: USDC on an exchange based in Asia will have a fractionally different price on a European exchange.

  

Fiat Currency Differences: The use of different fiat currencies on different exchanges can also contribute to price discrepancies. Explaining this further, exchange rates for fiat currencies as well as where the buyer is in the world, create added variation in the price of an asset.

  

Market Fragmentation: As we touched on earlier, there are a lot of crypto exchanges, meaning there are more opportunities for arbitrage.

  

Let’s take a look at how arbitrage can take place using Ethereum as an asset.

### Ethereum arbitrage

Ethereum is one of, if not, the most available crypto assets to buy. That means there are lots of opportunities to find price differences.

  
Below you can [see a screenshot of the price of Ethereum across different exchanges.](https://coinranking.com/coin/razxDUgYGNAdQ+ethereum-eth/exchanges)
![Screenshot 2025-03-14 at 15.11.59.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Screenshot_2025_03_14_at_15_11_59_bb42303236.png)


Using the above example, a buyer looking to buy cheap and sell high would buy from Coinbase, where the price of Ethereum is $1,920.16, and then sell on DigiFinex, where the price is $1,934.41.

  

If the buyer bought 1 whole ETH, they would have made around $14 just by exploiting this difference in price - minus fees of course.

  

But this is just one type of arbitrage. In the next section we’ll look at other ways of exploiting price differences.

## Common types of arbitrage in crypto

There are lots of different ways of exploiting arbitrage across crypto markets. Here are the most common:

  

-   **Triangular arbitrage:** price differences between three currencies on an exchange. This sounds complicated but in reality, it’s targeting three currencies that allow you to make a profit based on price differences between them. So for example, you hold USDC, and you use it to buy Bitcoin. You notice that a Bitcoin/Ethereum trading pair gives you more Ethereum than simply trading USDC/ETH, so you swap your Bitcoin for ETH. Lastly you convert the ETH back to USDC at a higher rate pocketing the difference.
    
-   **Cross exchange:** buying on one exchange and selling on another at a higher price. So this is the example we explained above.
    
-   **Spatial:** exploiting price differences across different locations. So as we mentioned earlier, different locations globally will have different prices based on supply and demand.
    
-   **MEV:** A slightly different type of arbitrage, MEV creates an artificial arbitrage opportunity by increasing or decreasing a token price around a single trade. We’ll explain this in more detail in the next section.
    

  

There are lots of other types of arbitrage that can take place in crypto, but for now we’re going to turn our attention to MEV.

## How MEV exploits arbitrage opportunities

MEV or “maximal extractable value” is, as we explained earlier, a unique feature to the world of crypto. Whenever you make a trade, buy or sell an NFT, or lend tokens to a liquidity pool, people can see what you’re trading and take advantage.

  

To date, billions of dollars worth of value has been lost on Ethereum, making it problematic, particularly for new users. There are several key ways MEV can take place on Ethereum:

  

-   [Frontrunning](https://cow.fi/learn/what-is-frontrunning) - Frontrunning occurs when an MEV bot monitors the mempool for a trader’s pending transaction. Spotting a potential trade, the bot quickly duplicates the users transaction so that they can be the one to get the tokens or the opportunity that the user detected.
    
-   [Backrunning](https://cow.fi/learn/what-is-backrunning-mev-attacks-explained) - When a trader places a large trade that artificially inflates the price of an asset on an AMM, an MEV bot can backrun the trade and profit from the arbitrage.
    
-   [Sandwich attacks](https://cow.fi/learn/what-is-a-sandwich-attack-and-how-can-you-protect-yourself) - Sandwich attacks occur when a user’s transaction gets trapped, or “sandwiched,” between two hostile transactions — one before and one after. As a result, the original transaction executes at a much higher price than necessary, leading to an inflated price for the original trader and a profit for the malicious trader placing the two extra trades.
    

  

For all of these types of MEV, speed is vitally important. That’s because the length of time a pending transaction remains in the mempool can be seconds.

  

That means searchers often rely on bots to execute MEV attacks.

## Most DEXs are vulnerable to MEV arbitrage

MEV is possible because validators are free to order blockchain transactions as they see fit in order to maximize their profits. Proof-of-stake (PoS) blockchains such as Ethereum use parties known as “validators” in order to ensure that the consensus rules of the blockchain are followed by all participants.

  

Validators get randomly selected to add the next block to the blockchain. In this process, they determine what transactions are included in the block, and in what order.

  

When you submit a transaction on Ethereum, it does not immediately get added to the next block. Instead, it first goes into the “mempool” which is the collection of all pending transactions. Validators then pull transactions from the mempool and add them to the next block when it’s time for it to be built.

  

Here is where the opportunity to extract value through MEV comes in.

  

Validators are not required to add transactions to the block in the same order that they were submitted by users, so searchers can pay validators a fee to order transactions in a specific way. For example, they can pay to have their transactions come first if they want to frontrun someone else, or they can pay to have their transactions come right after a specific transaction if they want to perform a backrun — both are types of MEV.

  

But while MEV is common place, it’s not impossible to avoid.

Traders can protect themselves with [MEV blockers and defensive measures,](https://cow.fi/learn/understanding-mev-protection) but MEV is still a threat on most DEXs.

  

Let’s take a look at how it works.

### Frontrunning

  

Here’s a simplified look at how frontrunning works.

  

1. **Monitoring Pending Transactions:** A bot monitors the mempool looking for a pending transaction it can create an arbitrage opportunity. It finds one: User A intends to swap 2 ETH for $BOB tokens

  

2. **Selecting Profitable Transactions:** The bot identifies this amount of ETH would create a significant impact on token price. This means there’s an opportunity for arbitrage: exploiting the difference between the pre-trade and post-trade states of the token being traded.

  

3. **Placing A New Transaction:** The bot submits its own transaction paying higher gas fees to be positioned before user A’s transaction in the block. As a result, user A received fewer tokens than they were hoping for. Meanwhile the bot has sold the tokens at an elevated price, earning itself a healthy margin in the process.

  

If you’re interested in understanding frontrunning more fully, check out our [frontrunning blog post](https://cow.fi/learn/what-is-frontrunning).

## The bottom-line: consequences of MEV arbitrage

MEV is a controversial subject in the crypto space. While some argue it helps keep markets running more smoothly, CoW DAO takes the position that [MEV is a bad thing.](https://cow.fi/learn/is-mev-good-or-bad)

  

Sophisticated actors familiar with the mechanics of blockchains like Ethereum have developed numerous ways to exploit users with less knowledge.

  

MEV makes money for searchers, block builders, and Ethereum validators at the expense of regular users, especially beginners who don’t know how to protect themselves. As of the time of writing, sandwich attacks on AMMs and aggregators alike generate [almost $1 million in profit for searchers each week](https://eigenphi.io/mev/ethereum/sandwich).

  

Over time, persistent MEV erodes market confidence as traders realize they are at a constant disadvantage to more sophisticated actors.

  

While in many parts of DeFi, arbitrage opportunities can feel inevitable, there are a few spots where MEV arbitrage can’t hurt your trades.

## Meta-DEX aggregator solution to MEV exploitation

You’ll no doubt be familiar with a decentralized exchange, or DEX. These are the backbone of the DeFi world, acting as a bedrock underpinning all trades.

  

DEX aggregators meanwhile, bundle all the DEXes up into one platform to allow a user to search all the DEXes looking for the best price for their trade.

  

A Meta DEX Aggregator is different again. As the “meta” name implies, they aggregate DEX aggregators. This leads to better liquidity coverage across more venues, while still providing users with a single interface for their trades.

  

Why would you want to aggregate an aggregator? There are many reasons. The first is that DEX and DEX aggregators have strong points and weak points. Some are better for large trades, others for small trades, and some are better across certain trading pairs. There’s a good bit of research on the strengths and weaknesses of DEX aggregators [here](https://jumper.exchange/learn/dex-aggregator).

  

A meta DEX negates those weak points, by routing your trade to the DEX that is strong for the type of trade you’re trying to do. In essence, a Meta DEX takes the guesswork out of finding the right DEX for your trade.

  

Another key reason for a Meta DEX Aggregator is that it can integrate features not found on the DEXes themselves. Such as MEV protection: one of the baked in goodies found in CoW Swap.

  

We dive into that, and the other features of what makes CoW Swap so special.

### The CoW Swap approach

CoW Swap was built from the ground up with MEV protection in mind.

  

CoW Swap relies on 3 main features to keep you safe from MEV:

-   **Delegated Trade Execution** - On CoW Swap, all transactions are routed through a decentralized network of “solvers” — independent algorithms that are responsible for finding the best execution price for your trades. That means those MEV bots we spoke about earlier can’t see your trades, and therefore, can’t arbitrage your profits away.
    
-   **Coincidence of Wants** - Any time you submit a trade on CoW Swap, solvers start looking for the best way to execute it. Before checking on-chain liquidity, solvers check other incoming orders on CoW Swap’s current batch auction to see if your trades can be matched peer-to-peer. If someone wants to do a trade in the opposite direction to what you want, you are paired together, and the whole thing is executed gas free!
    
-   **Uniform Clearing Prices** - On other DEXes, whenever a lot of people want to trade the same token, each of those trades are treated individually, meaning each trade is executed at a slightly different price. This allows MEV to creep in, as trades can be slotted in between that queue of swaps to make the most money. On CoW Swap, if the same people are making the same trade, as long as they are in the same batch auction, each order will be settled for the same clearing price when it goes on-chain. This leaves no room for MEV attacks since all prices are the same, meaning that transaction ordering becomes irrelevant.
    

  

Want to understand CoW Swap’s unique feature set more fully? Check out this blogs:

-   [What is a Meta DEX - and why should you use it for your trades? - CoW DAO](https://cow.fi/learn/what-is-a-meta-dex-and-why-should-you-use-it-for-your-trades)
    
-   [MEV Bots: Switch From Searcher to Solver - CoW DAO](https://cow.fi/learn/mev-bots-switch-from-searcher-to-solver)

large_MEV-arbitrage.png

medium_MEV-arbitrage.png

small_MEV-arbitrage.png

thumbnail_MEV-arbitrage.png

MEV-arbitrage.png

Discover how MEV and arbitrage affect crypto trading, learn the risks of exploitation on DEXs, and find out how Meta-DEX aggregators can protect your trades.

MEV and arbitrage: predatory but avoidable

![gasless-swaps.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/gasless_swaps_d95cdec808.png)
Gas fees are an integral part of the blockchain ecosystem. At their simplest, they are the fees a user pays to validate transaction on a blockchain. That fee goes to either a miner or validator to help process transactions in a block.

  

The price of gas on networks can vary widely. In 2020, gas fees on Ethereum reached record highs due to network congestion. While prices have come down since, the volatility of prices can have a major impact on your trading.

  

That’s why in this article we’re going to explain that thanks to CoW Swap, you can perform gasless swaps on Ethereum in a few simple steps.

## The burden of gas fees in crypto trading

On Ethereum, gas is required for you to perform most actions. From the buying and selling of cryptocurrencies, to trading NFTs, to staking, most actions will typically require you to pay a gas fee.

  

However, because of the fluctuating nature of gas fees, for many traders, maintaining enough ethereum to pay gas fees on trades can sometimes mean you miss out on making trades at the optimal moment.

  

This is because if you do not have enough Ethereum to pay your gas fee, the transaction will not complete. Or, if your trading requires you to execute your trade quickly, during busy times you may have to pay considerably more to ensure your trade can complete in time. The below chart demonstrates the [fluctuating nature of gas fees](https://ycharts.com/indicators/ethereum_average_gas_price) over the last five years.
![Screenshot 2025-03-07 at 10.48.58.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Screenshot_2025_03_07_at_10_48_58_60623bcbf0.png)


The amount of gas you pay, especially during busy times, can add up. There are countless examples of the high gas fees users have paid to transact on Ethereum. Last year, one [user paid $700,000 for a single Ethereum transaction.](https://cointab.com/user-paid-700k-ethereum-transaction/) Other famous examples included a [$23.5 million fee to move just 100,000 in Tether](https://cryptonews.com/news/the-most-expensive-transaction-on-ethereum-cost-usd-23-million/), and another user paid [$108,000 paid for a single transaction](https://u.today/shockingly-big-fee-paid-for-single-ethereum-transaction-details) in late 2024. It’s not Ethereum traders feeling the gas fee pinch.

  

Over on Bitcoin, one user [paid $3.1 million in transaction fees](https://www.coindesk.com/business/2023/11/23/bitcoin-sender-struck-with-31m-transaction-fee-largest-in-history), demonstrating that trading during busy times can be prohibitively expensive. But there are ways you can avoid getting caught out by gas fees, as we’ll explore below.

## What are gasless approvals?

Gasless approvals, or meta transactions as they are sometimes referred to, means that a third-party, called a relayer, or on CoW Swap, a solver, can send another user’s transaction on their behalf, covering the cost of gas in the process.

  

In a normal transaction, when you want to trade, you sign a transaction that is then added to the upcoming block in what is called the mempool. To find out more about mempools, and some of the risks that come with it, check our [guide to MEV on Ethereum](https://cow.fi/learn/a-guide-to-mev-on-ethereum-explained-cow-dao).

  

Digging a bit deeper, a user ‘signs’ a message that contains an intent to trade, along with the details of the type of trade and what token they want to transact in.

  

The solver is then responsible for paying the gas fee. How does this all work? Gasless approvals rely on [ERC-2612: Permit Extension for EIP-20 Signed Approvals](https://eips.ethereum.org/EIPS/eip-2612). This upgrade to how Ethereum works creates a signature that can call approvals directly on behalf of the owner.

  

This allows a third party, such as a solver, to spend funds on behalf of the user.

Each Ethereum transaction has a minimum fixed transaction cost associated with it. When executing transactions individually, this cost is usually higher per action than if users bundle multiple transactions together. So, in addition to creating a better user experience for traders, gasless approvals also lower the overall cost of trading on CoW Swap.

  

With gasless approvals, CoW Swap now allows users to sign a message (gas free!) that gives [solvers](https://docs.cow.fi/solvers/solvers) permission to execute the approval transaction on their behalf. Solvers then bundle the approval transaction with the first swap, and users pay fees in the sell token.

  

The result? Users can now do an entire swap, even for a new token, without spending a gwei in ETH, or even holding any ETH in their wallet at all. That’s a smoooooother (and cheaper) user experience. Moo-gnificent!

  

All of this means that for end users, there are lower fees, a more streamlined process and better security. We go into more detail on the benefits in the next section.

## Why gasless swaps are a game changer for Ethereum

Gasless swaps on Ethereum means that traders can execute their trades without having to worry and factor in volatile gas prices. There are a range of other benefits, too.

  

-   Fully ETH-less swaps: New users and fresh wallets can complete swaps end-to-end without needing ETH — that’s especially nice for airdrop farmers and privacy seekers.
    
-   Faster trades: CoW Swap users don’t have to wait for an approval transaction to execute before the swap — traders can now swap right away, even with tokens they haven’t traded before.
    
-   Bundling efficiency: Approval transactions execute alongside orders, in the same block — shielded from fluctuating gas prices, for a more cost-efficient experience overall.
    
-   Enhanced security: Only an approved spender can execute transactions on behalf of a trader — users can trust that [CoW Swap](https://cow.fi/cow-swap) is as secure as ever.
    

  

Ready to execute your first gasless swap? We will tell you how in the next section.

## How to execute gasless swaps on Ethereum using CoW Swap
    

### Step 1: Connect your wallet

Navigate to the [swap.cow.fi](http://swap.cow.fi/). Once you’re there, you’ll need to connect your wallet to the swap interface.

  

In the top right hand corner of your screen, you’ll find a “connect wallet” button. Click that and an interface will pop up.
![Screenshot 2025-03-07 at 12.46.48.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Screenshot_2025_03_07_at_12_46_48_cdc4fed40c.png)
Select the wallet of your choice and follow the instructions from your wallet provider.
![Screenshot 2025-03-07 at 12.46.04.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Screenshot_2025_03_07_at_12_46_04_72946aa346.png)
### Step 2: Select your trading pair

Once you're all connected and ready to go, select the trading pair you would like to share. You can pick from the drop down menus on the right hand side, as you can see below.
![Screenshot 2025-03-07 at 12.44.45.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Screenshot_2025_03_07_at_12_44_45_6e3f714fbd.png)
Once you’ve picked the one you want, enter the amount you want to swap. Once selected CoW Swap does its magic, working out the best price available to you. 
![Screenshot 2025-03-07 at 12.54.15.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Screenshot_2025_03_07_at_12_54_15_296726bd6a.png)
### Initiate the Swap with gasless approval

CoW Swap has gasless trading on more than 150 token pairs. To find out if your token pair can be gasless, CoW Swap will highlight if it is, as it appears below.
![Capture d’écran 2025-03-07 à 14.52.20.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Capture_d_ecran_2025_03_07_a_14_52_20_4339a5b910.png)
### Step 4: Confirm and monitor your transaction

Ready to confirm? Hit the trade button and let CoW Swap’s solver network do the rest, via CoW Swap’s Order Flow Auctions. This is a process where solvers compete to fulfil trades. The aim is to ensure users capture as much value from each swap or trade, while also being protected from [Maximal Extractable Value (MEV).](https://cow.fi/learn/what-is-mev)

  

The key point to take away from OFA is that it’s a competitive bidding system where solvers compete over who can make the best offer, which is then selected by the protocol. This system not only simplifies the trading process but also ensures traders access the best available price without the need to manually search through multiple platforms.

  

So not only are you able to trade gaslessly, CoW Protocol’s solver network competes to give you the best deal possible.

## Next Steps

Curious about gasless swaps on Ethereum? We have plenty of resources you can use to understand the concept more fully. Here are a few more resources to get started:

-   [Announcing Gasless Approvals on CoW Swap](https://cow.fi/learn/announcing-gasless-approvals-on-cow-swap)
    
-   [EIP-1271 explained](https://cow.fi/learn/eip-1271-explained)
    
-   [CoW Swap launches TWAP Orders - a guide to how special order types on CoW Swap use gasless swaps on Ethereum.](https://cow.fi/learn/cow-swap-launches-twap-orders)
    

  

Ready to trade without paying gas? Head to [CoW Swap](https://cow.fi/cow-swap) to start trading.

large_gasless-swaps.png

medium_gasless-swaps.png

small_gasless-swaps.png

thumbnail_gasless-swaps.png

gasless-swaps.png

In this article we’re going to explain that thanks to CoW Swap, you can perform gasless swaps on Ethereum in a few simple steps. 


How to: Gasless swaps on Ethereum

George Hristov

## Update as of 08/02/2023

The barter solver who got hacked already [refunded the losses it caused.](https://etherscan.io/tx/0x61a5196468b276bcedc3aab2f2fe255c2d54ca1c655523f4b25c99b1a224e715?source=post_page-----2faa9f918e29--------------------------------)

Next steps for CoW DAO are to [decide on the slashing process and to judge whether the Barter Solver can be re-added to the solver competition.](https://forum.cow.fi/t/cip-draft-slashing-of-the-barter-solver-responsible-for-a-hack-causing-cow-dao-a-loss-of-1-week-fee-accrual/1440?source=post_page-----2faa9f918e29--------------------------------)

## TL;DR

On February 7th 2023, CoW Swap’s settlement contract suffered an exploit wherein a hacker was able to drain  [~$166K](https://dune.com/queries/1975506)  from the contract. Although still an exploit, it is important to highlight two crucial facts regarding this hack:

-   User funds  **WERE NEVER AT RISK**  and have  **NOT**  been  **COMPROMISED**.
-   The protocol  **WILL RECOVER**  the stolen funds through its solver bonding pool mechanism, which is intended to mitigate such incidents.

To recap: as a trader, there is  **NO**  reason to worry or revoke approvals. CoW Swap never takes custody of your funds, since all trades are purely atomic. In order to have your funds compromised through CoW Swap, a hacker would need to obtain a signature from your private keys or have direct access to them.

## Background information

CoW Swap engages in a so-called “solver competition”, where external parties develop an algorithm to compete against other solvers to find the best execution route for CoW Swap users. Each solver team is independent from each other, and is able to deploy the necessary measures for their algorithm to perform in the best possible way.

In the hunt for better prices, solvers are allowed to tap into the CoW Swap settlement contract’s funds (called the “buffers”) to replace certain AMM interactions and thus save on gas. The  [settlement contract](https://etherscan.io/address/0x9008D19f58AAbD9eD0D60971565AA8510560ab41)  holds the buffer funds and allows the solver teams to tap into them whenever needed. These buffers accrue from fees that users pay in their sell token and are periodically drained into the protocol’s reward Safe.

In order to prevent malicious behaviour on the part of solvers and to recover from any exploits, in  [CIP-7](https://snapshot.org/#/cow.eth/proposal/0x267edf7a0bd3c771cfca763322f011ee106d8d5158612c11da29183260d1dba7)  CoW Swap implemented a bonding pool mechanism by which each solver needs to deposit $500,000 worth of cUSDC and 1.5M COW tokens as collateral for these sorts of scenarios. In the event of malicious behaviour or a hack, solvers would then get slashed and part of their bond is removed to cover for such events.

## How did it all happen?

On January 27th, 2023 a new solver entered the competition: the  [Barter solver](https://etherscan.io/address/0x55a37a2e5e5973510ac9d9c723aec213fa161919). The process was typical: after some time in staging and the depositing of the bond in the pool, the solver was allowlisted and moved onto production. Shortly after being allowlisted, the Barter solver set an  [approval](https://etherscan.io/tx/0x92f906bce94bab417cccc87ae046448d7fb8c2c0350b7ed911545577acb3bfc1)  to a contract they developed, called SwapGuard.

The aim of the intermediary SwapGuard contract is to limit the amount of tokens that can be lost in a single transaction due to slippage The goal for the Barter solver when interacting with this contract was to prevent their settlements from being exploited by MEV when submitted on-chain.

In this  [batch settlement](https://etherscan.io/tx/0x92f906bce94bab417cccc87ae046448d7fb8c2c0350b7ed911545577acb3bfc1)  that the Barter solver won, we can see that they performed a series of swaps and a single approval when executing the batch settlement. This approval is the reason for the incident.

![1-how-did-it-all-happen.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_how_did_it_all_happen_6d61046a45.webp)
[https://phalcon.blocksec.com/tx/eth/0x92f906bce94bab417cccc87ae046448d7fb8c2c0350b7ed911545577acb3bfc1](https://phalcon.blocksec.com/tx/eth/0x92f906bce94bab417cccc87ae046448d7fb8c2c0350b7ed911545577acb3bfc1)

![1-1-how-did-it-all-happen.webp](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1_1_how_did_it_all_happen_e90af26bd7.webp)
[https://twitter.com/peckshield/status/1622801412727148544/photo/1](https://twitter.com/peckshield/status/1622801412727148544/photo/1)

The SwapGuard contract was previously approved to spend the settlement contract’s DAI as part of a settlement. Because of a security issue that allowed arbitrary call execution from the SwapGuard contract, the attacker was able to leverage the existing approval to transfer funds from the settlement contract to their account ([address 1](https://etherscan.io/address/0xc0e82c1ed4786f8b7f806d1b8a6335ec485266ff)  and  [address 2](https://etherscan.io/address/0x94b6F400df694D0de29F600B15BAeed83E95658C)). The  [Barter solver](https://etherscan.io/address/0x55a37a2e5e5973510ac9d9c723aec213fa161919)  made the mistake of approving a vulnerable contract with the maximum value of DAI to SwapGuard, which is the root cause of the attack. This meant that since the contract had an interface for an arbitrary call, any informed hacker could call upon this function to drain the token allowances with the correct permissions.

It appears that the hacker was aware of the CoW Swap solver process, as they waited until the last day of fee accrual before performing the attack. Fees are usually withdrawn once a week on Tuesdays.

Once the issue came to light, the Barter team and the CoW Swap team hit the ground running to mitigate any possible damage or side effects. After some debugging, the issue was discovered and mitigated. All approvals for the ‘bad contract’ have been revoked, and the Barter Solver has upgraded to a new  [contract](https://etherscan.io/address/0xCce534eE5eba0bC94ddBB2B831D264AD86a5FFf4#code)  which has no arbitrary execution code functionality built in.

## What are the next steps?

As mentioned before, all approvals for the bad contract have been revoked, and no more funds are at risk. As per the rules defined by  [CIP-7](https://snapshot.org/#/cow.eth/proposal/0x267edf7a0bd3c771cfca763322f011ee106d8d5158612c11da29183260d1dba7), CoW DAO will slash the barter solver to compensate for the losses and will denylist the solver until full repayment is done.


large_CoW-Swap-Solver-Exploit-Cover-Photo.webp

medium_CoW-Swap-Solver-Exploit-Cover-Photo.webp

small_CoW-Swap-Solver-Exploit-Cover-Photo.webp

thumbnail_CoW-Swap-Solver-Exploit-Cover-Photo.webp

CoW-Swap-Solver-Exploit-Cover-Photo.webp

CoW Swap Solver Exploit— Post mortem 07/02/2023

On February 9th, 2023, After a successful  [governance vote](https://www.tally.xyz/gov/ens/proposal/45461903078948131870051132081249892009497709518413744958551889217805827301425)  from ENS, CoW Swap processed a large trade for the ENS DAO using the exchange’s signature intent-based trading design and Milkman contract.

## Trade Details

[ENS DAO sold 10,000 ETH](https://twitter.com/CoWSwap/status/1623680760522612738)  in exchange for USDC in order to reduce its exposure to ETH.

-   **USD value of the trade**: $16,145,549.60
-   **Slippage tolerance:**  2%
-   **Actual slippage**: 0.5%
-   **Price surplus**: $80,992.87

## Why CoW Swap?

CoW Swap’s solver competition ensured that ENS received the best possible execution price, even after announcing trade details publicly in a governance proposal ahead of time.

CoW Swap provided several benefits for a trade of this size:

1.  Protection from attack vectors caused by the delayed execution
2.  Allowing ENS to create a governance proposal that includes the exact swap parameters and protects the trade with a price checker — guaranteeing that the trade receives some minimum amount determined at the moment of swap execution (not during the creation of the governance proposal)
3.  Use of the Milkman bot for protection against MEV, slippage, and re-entrancy risk

## Milkman

The CoW Grants Program-funded, and Yearn.fi-developed  [Milkman bot](https://github.com/cowprotocol/milkman-bot)  was critical to the ENS trade.

The Milkman bot ensures that trades execute for the real-time price or better by utilizing a price checker, such as a Uniswap v3 pool, Chainlink oracles, or a custom price checker. Instead of setting a slippage tolerance, DAOs can utilize Milkman to determine a maximum percentage deviation from the price checker, guaranteeing that their trade will finalize at a fair market price. Milkman also simplifies governance for trades as DAOs don’t have to define a fixed price re-vote if the market moves significantly.

For this swap, ENS DAO chose to use a Uniswap v3 ETH/USDC pool, with a maximum slippage of 2%, guaranteeing that they would receive no less than the minimum specified in the governance proposal.

## CoW Swap: The leader in DAO trading

The largest DAO trades take place on CoW Swap, and the exchange is single-handedly responsible for more than 30% of all DAO trades. Check out  [CoW Swap for DAOs](/learn/cow-swap-for-daos)  to learn why DAOs such as  [Aave](/learn/aave-trade-breakdown),  [Nexus Mutual](/learn/nexus-mutual-trade-breakdown), and more trust CoW Swap with their large trades.

If you’re a DAO looking to make a large trade on CoW Swap, get in touch with us on  [Twitter](https://twitter.com/CoWSwap)  or through our  [Discord](https://discord.com/invite/cowprotocol). You can check out CoW Swap for yourself  [here](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=ENS-trade).



large_ens-trade-breakdown-cover-photo.webp

medium_ens-trade-breakdown-cover-photo.webp

small_ens-trade-breakdown-cover-photo.webp

thumbnail_ens-trade-breakdown-cover-photo.webp

ens-trade-breakdown-cover-photo.webp

The smartest DAOs trust CoW Swap with their most-important trades


ENS Trade Breakdown

Don’t worry, trade happy! CoW Swap has been busy cooking up Conditional Orders, an architecture that allows developers (and their users) to create sophisticated orders of all kinds. At the core of this system is a flexible smart contract wallet that allows the protocol to implement its unique logic. What’s better than standing on the shoulders of giants in the ecosystem and within the Gnosis family  [Safe](https://safe.global/)?

Wait? Smart contract wallet?

That’s right: CoW Swap pioneered intents across the Ethereum space for EOAs (think MetaMask, Trezor, Trust Wallet, etc.), but what’s less well-known is that the protocol can actually work in a similar way for smart contracts by relying on a flexible intents system with the ERC-1271 integration. It sounds technical, but this standard is basically designed to allow smart contracts to “Sign” a message like any other EOAs. This is a familiar procedure for the seasoned CoWmunity, but Conditional Orders now allow anyone to define a set of conditions and have the smart contract wallet do the clicking for you.

Incubated through the  [CoW Grants Program](https://grants.cow.fi/), and supported by the Safe team throughout the testing/auditing process, the ExtensibleFallbackHandler is now live. Sounds complicated, we know! Put simply, this is a way to add extra powers to your Safe, while preserving the strong security guarantees that the Safe is well known for.

Upgrading your Safe’s fallback handler is a secure process, all you have to do is tick a box when placing an order, and your Safe upgrade will be batched with your order, making for a single-transaction order placement and upgrade. The contracts that implement this system have been audited both by an independent auditor, and an external auditor from Ackee Blockchain (You can read the final audit reports  [here](https://github.com/cowprotocol/composable-cow/tree/ab3addad9bc05acdbf5fb040eb5c336209b58e31/audits)).

The owl-eyed among you would be aware that smart contracts have always been able to use CoW Protocol, though this required both a transaction on chain to signal your intent, and that the orders be fixed (not conditional). Wave goodbye to these limitations!

With an ExtensibleFallbackHandler+ComposableCoW-enabled Safe you now benefit from all the CoW Swap features directly from your smart contract wallet: MEV protection, no failed swap transactions, at-execution path discovery, conditional orders, and batching if you need to do pesky things like approve or wrap ETH.

If you’re technically inclined, check out how you can  [start building with conditional orders using ComposableCoW](https://hackmd.io/@mfw78/HyuvoGt9h#), or drop into  [#tech-talk on our discord](https://discord.gg/cowprotocol)! While you’re busy reading up on how to write the latest and greatest conditional order, you could also be gradually buying up more of your favorite token using TWAP!

## What is a Safe fallback handler?

Long story short, Safe is designed to have strong security guarantees over basic operations (think executing transactions, spending your precious tokens, etc.), but there’s not enough time to program all functionality that a user may require. Therefore, the Safe can “forward” all function requests that it doesn’t recognize to another contract (the fallback handler).

**CRITICALLY**: Fallback handlers do  **NOT**  have the same authority as the Safe from which they were called. Due to the security architecture of Safe, it is not possible for the fallback handler to execute transactions on behalf of the Safe.

OK, the fallback handler can’t execute a transaction for you, so why should you care? Safe doesn’t by default (without a fallback handler) support ERC-1271 signatures. The standard deployment of a Safe deploys with CompatibilityFallbackHandler as the fallback handler, which has limited ERC-1271 support (meaning: it cannot read and thus, cannot be automated). CoW Swap intents super-charge this by allowing a Safe to also specify a smart contract that can sign messages for a particular application on its behalf.

This is where ComposableCoW takes over! 🐮🎶 You can think of ComposableCoW as an autonomous agent, signing orders that meet whatever conditions you have specified. After you create your first conditional order, the second transaction you see in the batch will enable ComposableCoW, which tells your Safe “I want ComposableCoW to be able to sign orders from CoW Protocol”. TWAP is just a conditional order type that works with ComposableCoW.

**CRITICALLY**: Due to the design of ERC-1271, all signature verification is  **read-only**  which means it is  **impossible**  for a ComposableCoW or any conditional order to directly access user funds (the movement of funds during a swap is initiated by the settlement contract  **ONLY**).

In summary, to make CoW Swap’s new TWAP order feature work:

-   Safe users need to upgrade their fallback handler(enables conditional signing)
-   Conditional orders are automatically placed in the CoW Protocol order book (now signed with the new handler)
-   Automated signing of orders means you may hear less of CoW’s trademark moo. Feel free to set  [this](https://github.com/cowprotocol/cowswap/blob/develop/apps/cowswap-frontend/public/audio/success.mp3)  as your phone’s notification tone if suffering withdrawal symptoms 🐄

CoW Swap takes security very seriously. The underlying Safe fallback handler code has been fully audited by both the Safe and CoW teams as well as by two independent external auditors, G0 and Ackee Blockchain. You can find all the audit final reports  [here](https://github.com/cowprotocol/composable-cow/tree/ab3addad9bc05acdbf5fb040eb5c336209b58e31/audits).

The solution presented follows Safe’s high security standards. What’s more, the fallback handler isn’t just about placing orders. It allows limitless and, as of yet, unknown functionality. Maybe you want to:

-   Define a custom method handler for any non-standard method (if you really want you can turn your Safe into an ERC-20 token)
-   Define a custom EIP-712 domain verifier, whereby a contract implementing ISafeSignatureVerifier can do your menial signing automatically (it is this interface that ComposableCoW implements to power the shiny new TWAP orders)
-   Define a set of methods (interfaceId) that your Safe supports, and report such using ERC-165

The architecture for the ExtensibleFallbackHandler can be viewed  [here](https://hackmd.io/@mfw78/HyuvoGt9h).

**NOTE**: Audits are not a guarantee that code is free from error. Use with caution.

We wish you much surplus and happy  [TWAP order trading](https://swap.cow.fi/swap?utm_source=medium&utm_campaign=fallback-handler)! Give  [TWAP orders a try](https://swap.cow.fi/swap?utm_source=medium&utm_campaign=fallback-handler)  today and let us know what you think by reaching out on  [Twitter](https://twitter.com/CoWSwap)  or  [Discord](https://discord.com/invite/cowprotocol)!



large_all-you-need-to-know-about-cow-swap-new-safe-fallback-handler-cover-photo.webp

medium_all-you-need-to-know-about-cow-swap-new-safe-fallback-handler-cover-photo.webp

small_all-you-need-to-know-about-cow-swap-new-safe-fallback-handler-cover-photo.webp

thumbnail_all-you-need-to-know-about-cow-swap-new-safe-fallback-handler-cover-photo.webp

all-you-need-to-know-about-cow-swap-new-safe-fallback-handler-cover-photo.webp

Don’t worry, trade happy! Upgrading your Safe fallback handler is a secure process. This Safe fallback handler extension has been developed by the CoW Swap team in collaboration with the Safe team, and has undergone a successful audit.

All you need to know about CoW Swap’s new Safe fallback handler

![MEV bot.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/MEV_bot_3057653da1.png)
Maximal Extracable Value is a hidden tax on all types of Ethereum transactions.

  

That means any time you want to transact in DeFi: from buying or selling an NFT, lending tokens to a liquidity pool, or swapping one token for another, a group of opportunistic users known as “searchers” have the opportunity to see your trade, and manipulate the criteria surrounding your trade to ensure they make profit, at your expense.

  

The workhorses of MEV are MEV bots, programs designed to look for certain types of transactions that can be exploited to make money.

  

In this article, we’re going to be exploring MEV Bots in more detail, looking at how they work and the different types.

  

First, let’s take a look at what MEV is first, before jumping into bots.

### What is MEV?

  

At its simplest, Maximal Extracable Value is a hidden tax on all types of Ethereum transactions. That means any time you want to transact in DeFi: from buying or selling an NFT, lending tokens to a liquidity pool, or swapping one token for another, a group of opportunistic users known as “searchers” have the opportunity to see your trade, and manipulate the criteria surrounding your trade to ensure they make profit, at your expense.

  

There are lots of different ways MEV can take place on Ethereum, which we’ll explore further down in the article. But for now, it’s important to understand the mechanics of MEV, and how Ethereum makes this all possible.

### What is a MEV Bot?

  

MEV bots are programs designed to maximize profits by exploiting opportunities within blockchain transactions.

  

They operate on Ethereum, but also on chains where transaction ordering and gas price bidding are a feature.

  

By analyzing mempool data (pending transactions) and executing precise strategies, MEV bots can extract significant value from transactions across the DeFi space.

### How Does a MEV Bot Work?

  

On Ethereum, validators, the entities responsible for verifying transactions, are allowed to re-arrange the order of transactions as they see fit. Validators typically do this if there are opportunities to improve the profit they receive from validating transactions.

  

Let’s take a closer look at this concept. When you submit a transaction on Ethereum, it does not immediately get added to the next block.

  

Instead, it first goes into the “mempool” which is the collection of all pending transactions. This pool is visible to anyone. You can see a screenshot of this below. And if you’re curious to see what it looks like, [here’s a live feed.](https://www.blockchain.com/explorer/mempool/eth)

  ![Screenshot 2025-02-21 at 10.25.29.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Screenshot_2025_02_21_at_10_25_29_7b8f7f2374.png)

Here is where MEV bots come in.

  

Because validators are not required to add transactions to the block in the same order that they were submitted by users, anyone can pay those validators to re-arrange transactions in a certain way.

  

This manipulation of the order of things allows MEV to happen. An MEV bot sometimes referred to as ‘searchers’ look for trades they can make money from.

  

In the next section we’ll look at what types of bots are there and what they are looking for.

### What are the different types of MEV Bots?

  

Now we understand what an MEV bot does, let’s take a look at the different types of MEV Bot.

  

-   **Frontrunning Bots** - Frontrunning bots place transactions ahead of others by outbidding them in gas fees. They look for high-value trades in the mempool with certain features inh high slippage or lo typically focus on high-value transactions where their execution priority can yield significant profits. [Learn more about frontrunning](https://cow.fi/learn/what-is-frontrunning).
    

-   **Backrunning Bots** - Backrunning is a specific type of MEV (Maximal Extractable Value) which causes some traders to miss out on potential profit opportunities from their trades. In practice, backrunning involves strategically executing a transaction immediately after another, high-value transaction. By doing this, the backrunning transaction capitalizes on the arbitrage opportunity left over from the [price impact](https://cow.fi/learn/cow-protocol-glossary#:~:text=Price%20impact) of the initial transaction. [Learn more about backrunning.](https://cow.fi/learn/what-is-backrunning-mev-attacks-explained)
    
-   **Sandwich Bots** - Sandwich attacks occur when a user’s transaction gets trapped, or “sandwiched,” between two hostile transactions — one before and one after. As a result, the original transaction executes at a much higher price than necessary, leading to an inflated price for the original trader and a profit for the malicious trader placing the two extra trades (known as a “searcher”). [Learn more about sandwich attacks.](https://cow.fi/learn/what-is-a-sandwich-attack-and-how-can-you-protect-yourself)
    
-   **Arbitrage/LVR Bots** - MEV arbitrage bots identify and exploit price differences for the same asset across different decentralized exchanges or DEXes. This is also known as loss versus rebalancing. These bots look for a token price to be higher or lower on different exchanges, and then exploit the price difference between the two. Many liquidity providers haven’t even heard of LVR, but it costs them 5–7% of their liquidity, resulting in hundreds of millions lost each year. In fact, when accounting for LVR, many of the largest liquidity pools are not profitable for LPs at all. [Learn more about LVR.](https://cow.fi/learn/what-is-loss-versus-rebalancing-lvr)
    
-   **Liquidation Bots** - Liquidation bots specialise in monitoring lending platforms looking for undercollateralized loans. If a borrower’s collateral falls below a required threshold, these bots execute liquidation transactions to claim rewards.
    
-   **Flash Loan Bots** - Technically not an MEV bot in the strictest sense, flash loan bots work to finance and facilitate MEV by utilizing flash loans. Flash loans are unsecured loans that must be repaid within a single transaction block. Flash Loan bots are often paired with bots above to facilitate the execution of MEV.
    

## The key features of MEV Bots

There are a number of crucial features that make up how an MEV bot operates. Below are

### Gas Fee Optimization

  

When bots are looking for potential trades to exploit, they also need to calculate how much gas is required to position its trade in a way that optimizes profits.

  

If the bot uses too much gas, it eats into potential profitability. Too little gas however, and it risks been gazumped by a rival bot. Bots are always trying to find a balance between profitability and efficiency.

### The ability to analyse smart contracts

  

As MEV bots have become more sophisticated they are able to not only look at single trades, but often multiple ones, too.

  

Advanced MEV bots leverage algorithms to dive into smart contracts looking for exploitable patterns or lucrative opportunities.

  

MEV bots now have the capability to assess different conditions around a potential trade. They can look at liquidity pools - and how easily they can facilitate the trade - the tokens inside the contracts, and the arbitrage possibilities within these contracts.

### Trading autonomy

  

For bots to be effective, they need to act quickly. Which is why MEV bots are designed to execute precise transactions just at the right time to maximise profits.

  

To do that, many MEV bots are trade on their own, looking for the right sort of trades and the right conditions and then executing on behalf of its owner.

### Mempool Monitoring

  

MEV bots are designed to constantly monitor the mempool, looking for transactions that it can make profits from.

  

Because transactions aren’t executed straight away, these bots have time to analyse vast amounts of transactions, identifying which ones can be exploited. Depending on the bot, it will look for trades it can either frontrun, backrun, sandwich, or liquidate, as we explored in an earlier section.

## How to beat MEV bots?

Beating MEV bots on your own can be tricky, but there are many avenues you can use to protect yourself from MEV Bots.

### Reduce Slippage on Ethereum

  

The most basic defense against MEV is setting a low slippage tolerance. Slippage tolerance is essentially how much variation in the final price you receive you are willing to accept.

  

Transactions with a lower slippage tolerance give MEV bots less room to exploit trades.

  

For users who aren’t utilizing any other MEV protection tools, setting a lower slippage tolerance can be a good first line of defense, however it’s by no means a complete solution.

  

Setting the slippage tolerance too low often results in failed transactions. Even with optimal slippage, MEV bots may still be able to extract value from your trades.

  

So sometimes we need to do more than adjust our slippage.

  

### Use a Custom RPC Endpoint on Ethereum

  

A better protection method is to install an MEV protection RPC endpoint. A Remote Procedure Call (RPC) endpoint is an intermediate layer that routes transactions from a user’s wallet to the blockchain itself.

  

One of the most popular specialized RPC endpoints is [MEV Blocker](https://cow.fi/mev-blocker). As the name suggests, MEV Blocker provides protection against MEV across all of Ethereum. The RPC works by managing a permissionless network of searchers and hiding transactions from the public mempool.

  

These searchers cannot frontrun or sandwich user transactions.

Instead, they capture value through backrunning. Anytime a searcher backruns a user’s transaction, the searcher keeps up to 10% of the value and sends the other 90% back to the user as a rebate.

  

[Install MEV Blocker.](https://cow.fi/mev-blocker)

  

### The best solution? Use an MEV-Protected DEX

  

[CoW Swap](https://swap.cow.fi/#/) is a meta DEX aggregator that finds the best prices for trades and provides comprehensive MEV protection. The protocol uses a unique trading mechanism that relies on batch auctions and intents to achieve the best outcomes for users.

  

Thanks to a powerful combination of delegated trade execution, batch auctions, and protected transaction flow through MEV Blocker, CoW Swap users benefit from thorough MEV protection on all trades.

  

[Try CoW Swap.](https://swap.cow.fi/#/)

### In summary

  

MEV bots are pieces of software that have become embedded into the fabric of the DeFi ecosystem.

  

While there is an argument that they can help make markets run more efficiently, more often than not, they create an unfair advantage, helping sophisticated actors exploit those with less knowledge and expertise.

  

But that doesn’t mean you have to just accept MEV’s role in DeFi. There are plenty of tools and services which can help you live free from MEV bots.

  

You just have to know where to look. 👀

large_MEV bot.png

medium_MEV bot.png

small_MEV bot.png

thumbnail_MEV bot.png

MEV bot.png

In this article, we’re going to be exploring MEV Bots in more detail, looking at how they work and the different types. 


What is an MEV Bot?

![guide to MEV.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/guide_to_MEV_c2b1a7eecf.png)
Ethereum is one, if not the largest blockchain ecosystem in the crypto space. There are [thousands of tokens](https://cryptoslate.com/blockchain/ethereum/), projects, DAOs, and communities all built on top of Ethereum thanks to its customizable token standards, and a host of other features.

  

But one of the lesser-known features of Ethereum is something called MEV, or “maximal extractable value”. In this article, we’re going to be exploring this idea in more detail, and how it impacts the buying and selling of tokens on Ethereum.

## What is MEV?

  

At its simplest, Maximal Extracable Value is a hidden tax on all types of Ethereum transactions. That means any time you want to transact in DeFi: from buying or selling an NFT, lending tokens to a liquidity pool, or swapping one token for another, a group of opportunistic users known as “searchers” have the opportunity to see your trade, and manipulate the criteria surrounding your trade to ensure they make profit, at your expense.

  

There are lots of different ways MEV can take place on Ethereum, which we’ll explore further down in the article. But for now, it’s important to understand the mechanics of MEV, and how Ethereum makes this all possible.

## How Does MEV Work?

  

On Ethereum, validators, the entities responsible for verifying transactions, are allowed to re-arrange the order of transactions as they see fit. Validators typically do this if there are opportunities to improve the profit they receive from validating transactions.

  

Let’s take a closer look at this concept. When you submit a transaction on Ethereum, it does not immediately get added to the next block.

  

Instead, it first goes into the “mempool” which is the collection of all pending transactions. This pool is visible to anyone. You can see a screenshot of this below. And if you’re curious to see what it looks like, [here’s a live feed.](https://www.blockchain.com/explorer/mempool/eth)
![Screenshot 2025-02-21 at 10.25.29.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Screenshot_2025_02_21_at_10_25_29_7b8f7f2374.png)

Here is where the opportunity to extract value through MEV comes in. Because validators are not required to add transactions to the block in the same order that they were submitted by users, anyone can pay those validators to re-arrange transactions in a certain way.

  

This manipulation of the order of things allows MEV to happen. A person and or entity, sometimes referred to as ‘searchers’ look for trades they can make money from.

  

In the next section we’ll look at the specific ways at how MEV can take place.

## The Different Types of MEV on Ethereum

  

There are broadly four types of MEV on Ethereum. They are:

-   **Frontrunning**
    
-   **Backrunning**
    
-   **Sandwich attacks**
    
-   **Loss versus rebalancing (LVR)**
    

  

We’ll look at each one of these in turn.

## Frontrunning on Ethereum

  

Frontrunning is a particular type of MEV that affects all forms of Ethereum transactions including trades, NFT mints, and more.

  

Frontrunning takes place when a user makes a transaction but gets “front run” by an MEV bot who makes the same transactions ahead of them.

  

This happens in three distinct steps:

1.  **A searcher goes looking for potential trades in the Ethereum mempool:** The first step involves monitoring the blockchain network’s mempool, a holding area for pending transactions. Here, frontrunners, who are often sophisticated bots, scan the mempool to identify transactions that can carry significant value that they want to snatch away or that could influence the price of a particular asset.
    
2.  **A searcher picks a transaction it can make profit from:** The frontrunner will analyze the potential market impact once such a transaction is identified. For instance, if a large buy order for a specific token is detected, the frontrunner knows that this transaction could increase the asset’s price once processed.
    
3.  **The searcher places a new transaction BEFORE the transaction in question:** The frontrunner will place their buy order for the same asset, intending to get their transaction processed before the initially detected transaction. They typically give the validators a higher “tip” to execute their transaction first in the block in comparison to the target transaction.
    

  

This feature on Ethereum costs users billions of dollars in lost value, benefitting more sophisticated actors working on Ethereum.

  

**We have a longer article on “[What is Frontrunning](https://cow.fi/learn/what-is-frontrunning)”.**

## Backrunning on Ethereum

Backrunning is another form of MEV that affects various Ethereum transactions, including trades, NFT mints, and more. Unlike frontrunning, backrunning takes advantage of transactions after they have been executed.

Backrunning occurs when a user makes a transaction that gets followed by an MEV bot executing a strategic transaction right after theirs in order to capture a price movement.

1.  **Monitoring Pending Transactions:** Like frontrunning, backrunning attacks begin with searchers monitoring the mempool for profitable opportunities. In particular, they are looking for transactions that cause a large price impact, as the backrunning attack involves capturing the arbitrage opportunity left behind after a large trade.
    
2.  **Finding a Transaction with a Large Price Impact:** Once a valuable transaction is identified, the searcher analyzes its impact. For instance, if a large sell order for a specific token is detected, the backrunner knows that this transaction could decrease the asset’s price once processed.
    
3.  **Capturing the Price Impact:** By placing a transaction directly after a previous, large transaction, the MEV bot can capture the price movement that the transaction causes on the AMM. The backrunner makes a transaction correcting this price impact and collecting the arbitrage in the process.
    

Backrunning is considered the least harmful type of MEV. While it still captures value, it does not do it at the expense of the trader. When done in isolation, it only captures leftover arbitrage after a large transaction moves an asset’s price.

  

We have a longer article on “[What is Backrunning](https://cow.fi/learn/what-is-backrunning-mev-attacks-explained)” if you’d like to know more.

## Sandwich Attacks on Ethereum

  

A sandwich attack combines both frontrunning and backrunning to extract the most value from a transaction.

  

This is when a transaction gets sandwiched between two hostile transactions,  one before and one after. As a result, the original transaction executes at a much higher price than necessary, leading to an inflated price for the original trader and a profit for the searcher placing the two extra trades.

  

This happens in four distinct stages.

  

1.  **A searcher looks through the public mempool:** Like all other types of MEV, sandwich attacks begin with searchers monitoring the mempool for profitable opportunities. What they are looking for is large trades where they can capture value before the transaction, and afterwards.
    
2.  **A searcher inserts a frontrunning transaction:** When a trade is identified, the searcher will duplicate it and place their own transaction right before the victim’s — in essence frontrunning. The searcher gauges the size of their transaction to cause just enough price impact to push the asset’s price up to the precise slippage tolerance the victim has set.
    
3.  **Re-order the transactions:** Since a sandwich attack is a 2-part process, the searcher orders transactions so that the victim’s transaction executes right after the seracher’s frontrunning transaction, but just before their backrunning transaction.
    
4.  **Complete the attack by inserting a backrunning transaction:** After the victim transaction executes, its price impact pushes the price of the asset even further (remember it was already raised as a result of the searcher’s frontrunning transaction). Once this takes place, the searcher executes a backrunning transaction, selling the asset and profiting from the arbitrage.
    

  

Sandwich attacks are the most common types of swap-related MEV, taking advantage of a user’s slippage tolerance to cause maximum pain for the trader and maximum profit for the searcher.

  

**If you’d like to know more, we have an article dedicated to understanding “[What is a Sandwich Attack](https://cow.fi/learn/what-is-a-sandwich-attack-and-how-can-you-protect-yourself)”.**

## Loss-Versus-Rebalancing (LVR) on Ethereum

  

The last form of MEV on Ethereum is loss-versus-rebalancing (LVR). This is a distinct type of MEV that affects liquidity providers (LPs) and accounts for more value loss than all other types of MEV combined. LPs typically lose 5-7% of the total liquidity per year to this phenomenon.

  

This is because liquidity providers - who facilitate trades in DeFi by providing liquidity to certain trading pairs - can be exploited when the price of an asset is not universal across all markets. Let’s take a closer look at how LVR.

  

LVR is a form of arbitrage that occurs whenever an AMM has an outdated (stale) price in comparison to some other trading venue.

  

Arbitrageurs exploit this price difference by trading from the AMM to the more liquid exchange (usually a centralized exchange like Binance), correcting the arbitrage and extracting value from LPs in the process.

  

It sounds complicated, but essentially it’s the buying and selling of assets done in a way that takes advantage of prices not being universal. Learn more about LVR in our article: “[What is Loss-Versus-Rebalancing (LVR)?](https://cow.fi/learn/what-is-loss-versus-rebalancing-lvr)”

## Is MEV on Ethereum a bad thing?

  

Like many things in crypto, the easiest answer is, “it’s complicated.” MEV is no different.

  

Some argue MEV is a natural part of the Ethereum market mechanism and it helps to find the most efficient prices. Others believe that MEV can be harmful, but only if it’s concentrated in the hands of a few validators — therefore they work to “democratize” MEV and allow anyone to extract value from on-chain transactions.

  

Whatever side of the fence you sit on, if you don’t want prying eyes spying on your trades, there are a number of strategies and tools you can use to prevent MEV from happening to you.

## How to Protect Yourself from MEV on Ethereum

  

There are multiple ways to avoid MEV. Some you can do yourself but others offer a more comprehensive form of defense that mean you can set and forget. Below are a list of the most effective tools you can start using today.

## Reduce Slippage on Ethereum

  

The most basic defense against MEV is setting a low slippage tolerance. Slippage tolerance is essentially how much variation in the final price you receive you are willing to accept.

Transactions with a lower slippage tolerance give searchers less room to exploit trades.

For users who aren’t utilizing any other MEV protection tools, setting a lower slippage tolerance can be a good first line of defense, however it’s by no means a complete solution.

  

Setting the slippage tolerance too low often results in failed transactions. Even with optimal slippage, MEV bots may still be able to extract value from your trades.

  

So sometimes we need to do more than adjust our slippage.

## Use a Custom RPC Endpoint on Ethereum

  

A better protection method is to install an MEV protection RPC endpoint. A Remote Procedure Call (RPC) endpoint is an intermediate layer that routes transactions from a user’s wallet to the blockchain itself.

  

One of the most popular specialized RPC endpoints is [MEV Blocker](https://cow.fi/mev-blocker). As the name suggests, MEV Blocker provides protection against MEV across all of Ethereum. The RPC works by managing a permissionless network of searchers and hiding transactions from the public mempool. These searchers cannot frontrun or sandwich user transactions.

  

Instead, they capture value through backrunning. Anytime a searcher backruns a user’s transaction, the searcher keeps up to 10% of the value and sends the other 90% back to the user as a rebate.

  

Install MEV Blocker here: [https://cow.fi/mev-blocker](https://cow.fi/mev-blocker)

## The best solution? Use an MEV-Protected DEX

  

[CoW Swap](https://swap.cow.fi/#/) is a meta DEX aggregator that finds the best prices for trades and provides comprehensive MEV protection. The protocol uses a unique trading mechanism that relies on batch auctions and intents to achieve the best outcomes for users.

  

Thanks to a powerful combination of delegated trade execution, batch auctions, and protected transaction flow through MEV Blocker, CoW Swap users benefit from thorough MEV protection on all trades.

  

Try CoW Swap here: [https://swap.cow.fi/#/](https://swap.cow.fi/#/)

## In summary

  

MEV is a critical problem for the Ethereum ecosystem because it undermines the fundamental principles of fairness and transparency that blockchain technology aims to uphold. The ability of sophisticated actors to extract value from everyday traders pushes users away and discourages the broad adoption of decentralized technologies.

  

Addressing — and eventually solving — MEV is essential to keeping Ethereum a robust, innovative, and user-friendly platform for all participants. To this end, CoW DAO is working hard to secure a decentralized future by creating products that ensure a fair and protective decentralized financial system.

  

Learn more about CoW DAO, its mission, and its various products here: [https://cow.fi/](https://cow.fi/).

large_guide to MEV.png

medium_guide to MEV.png

small_guide to MEV.png

thumbnail_guide to MEV.png

guide to MEV.png

One of the lesser-known features of Ethereum is something called MEV, or “maximal extractable value”. In this article, we’re going to be exploring this idea in more detail, and how it impacts the buying and selling of tokens on Ethereum. 

A guide to MEV on Ethereum

![Multisig.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Multisig_9f8fbbe062.png)
Large traders, which can often include DAOs and other types of organisations, typically require transactions to be signed by more than one wallet for security purposes. On many DEXes that can be a time-consuming experience. But not on CoW Swap!

  

In this article we explain why CoW Swap is the best choice for multisig wallets and explore some of the features that make it also great for regular users too.

## What are multisig wallets?

  

A multisig wallet, also known as a multi-signature wallet or shared wallet, is a cryptocurrency wallet that requires multiple signatures to send a transaction.

These wallets are most useful when cryptocurrency or other digital assets are owned by multiple individuals or are held in custody by a company or a DAO.

  

Typically multisig wallets require more technical know-how to set up and use than a traditional crypto wallet, which only needs one signature. However, the added security benefits make the additional technical requirements a benefit rather than a drawback for those with more complex security needs.

## Why would you use a multisig wallet?

There are many reasons why you would use a multi-sig wallet. The first and most obvious is there are more than one person required to sign a transaction.

  

If five users need to approve a transaction, it makes sense that five would need to sign it. Multisig wallets provide that flexibility. The second reason why you might use a multisig wallet is security. Many cryptocurrency wallets rely on a single public address and private key.

  

If each person uses their own software or hardware wallet to conduct a transaction, it requires five distinct transactions to enable the signing of the main key. This adds an extra layer of protection. In the example above, if we have five individuals, there will be five separate transactions required to enact the multisig wallet.

## Why is CoW Swap the best solution for multi-sig wallets?

  

Multi-sig wallet users face a number of challenges when it comes to efficiently signing and transacting on chain. Multi-sig wallets are commonly found in DAOs and other organisations, who use multi-sig wallets to do large transactions for things like payroll and other expenses.

  

Many DAOs mint their own governance tokens and are responsible for allocating treasury funds. But when it’s time to make trades with these funds, DAOs and other multi-sig wallet users face unique challenges not encountered by other types of traders.

  

These issues stem from a variety of factors:

-   Placing and executing trades takes time
    
-   For DAO, trade details can be public, and announced well in advance
    
-   Large trades create large price impact
    
-   Large trades sizes call for large slippage tolerances
    

  

CoW Swap’s unique design addresses each of these concerns, making DAO trades easier, safer, and cheaper.

  

Below we explore how CoW Swap can alleviate these issues.

## Using CoW Swap helps multi-sig wallets get the price they want

  

That’s because traders using CoW Swap get the price at the time of execution instead of at the time of submission. What does that mean?

  

Let’s say you have to gather the signatures of five different wallets to execute a trade. Meanwhile, prices are constantly moving. By the time you have gathered your signatures, the price might have changed significantly enough to either lead to a transaction failing, or it being exploited by MEV bots. Not on CoW Swap.

  

Because it uses a solver system, the price of the trade is only confirmed when the trade is completed, not when it is started. Because solvers are working on your behalf, the user experience means you’re less likely to experience a failed transaction because you’ve missed your price.

## CoW Swap can help mitigate the impacts of large trades

  

DAO trades are usually large transactions that move the market, leading to worse prices for the DAO overall. On CoW Swap, price impact is mitigated through several factors:

  

-   When CoW Swap finds a Coincidence of Wants opportunity, the order may be filled without accessing on-chain liquidity at all, and thus without creating a price impact
    
-   For trades that are not fully filled by a CoW, CoW Swap makes use of multiple on-chain liquidity sources and quotes from market makers to spread out the price impact
    
-   Special order types like partially fillable limit orders and TWAP orders spread trades out over time, further reducing price impact
    

  

The CoW Swap [solvers](https://docs.cow.fi/off-chain-services/solvers) automatically search for Coincidences of Wants and optimize the routing of each order to on-chain liquidity. All DAOs have to do is simply place their order. Special order types have to be selected in the CoW Swap UI, however, it just takes a few clicks to add them to a trade as well.

## Gasless approvals make multi-sig wallets more efficient

Gasless approvals allow traders to swap over 150 tokens completely gaslessly through CoW Swap.

  

CoW Swap now allows users to sign a message (gas free!) that gives [solvers](https://docs.cow.fi/solvers/solvers) permission to execute the approval transaction on their behalf. Solvers then bundle the approval transaction with the first swap, and users pay fees in the sell token.

  

The result? Users can now do an entire swap, even for a new token, without spending a gwei in ETH, or even holding any ETH in their wallet at all. That’s a smoooooother (and cheaper) user experience.

  

This brings a host of benefits to multisig wallets, including:

  

-   Fully ETH-less swaps: New users and fresh wallets can complete swaps end-to-end without needing ETH — that’s especially nice for airdrop farmers and privacy seekers
    
-   Faster trades: CoW Swap users don’t have to wait for an approval transaction to execute before the swap — traders can now swap right away, even with tokens they haven’t traded before
    
-   Bundling efficiency: Approval transactions execute alongside orders, in the same block — shielded from fluctuating gas prices, for a more cost-efficient experience overall
    
-   Enhanced security: Only an approved spender can execute transactions on behalf of a trader — users can trust that CoW Swap is as secure as ever
    

## CoW Swap helps multi-sig wallets get the best prices

  

DAO and other multi-sig managers have a duty to their stakeholders to execute trades at the best possible prices. According to [karpatkey](https://www.karpatkey.com/), who works with ENS, Balancer, Gnosis, Lido and CoW treasuries, fulfilling this obligation is easy on CoW Swap because all trades, whether large or small, almost always receive better prices than they would through individual liquidity pools or DEX aggregators.

  

On CoW Swap, the [solver](https://docs.cow.fi/off-chain-services/solvers) that provides the most value to the user wins the right to settle the trade; this is in contrast to the default Ethereum model where the searcher that provides the most MEV profits to the validator decides how transactions should be ordered.

## Milkman, CoW Swap’s secret UX sauce for multi-sig wallets

For traders looking to trade at some point in the future, on traditional DEXes that’s a challenge. That’s why CoW DAO built [Milkman](https://cow.fi/learn/what-is-milkman-cow-swaps-solution-for-delayed-execution-trading). Milkman is a specialized smart contract for advanced traders that lets them set their slippage tolerance for trades in the future.

  

Many smart contract wallet users, such as DAOs, frequently need to create these types of orders. Take the following examples:

  

-   DAOs that need trades to execute after passing a governance process
    
-   Groups that need hours to collect signatures to execute trades from a multisig wallet
    
-   Applications that process automated swaps years in the future (e.g. for payroll or treasury management).
    

  

Milkman is a smart contract that solves all of this. Let’s take a look at an example.

  

Let’s say you want to sell 1000 ETH for USDC, but you want to do it far in the future. To protect yourself from volatile price movements, you can ask Milkman to create the order and specify a minimum amount you’re willing to accept for the trade. Milkman tracks prices using oracles.

  

When the time comes to execute your trade, CoW Protocol will receive it and solvers will compete to improve the price on top of that, as they always do.

It’s why DAOs like [Aave](https://cow.fi/learn/aave-trade-breakdown) and [ENS](https://cow.fi/learn/ens-trade-breakdown), have already used Milkman to trade over $20M worth of tokens.

  

Beyond allowing these DAOs to count on reliable prices, Milkman lets them reduce their overall number of governance votes and gives them standard CoW Swap benefits like best price execution and [best-in-class](https://eigenphi.substack.com/p/sandwich-mevs-impact-on-cow-swap) MEV protection — critical for large trades.

## Programmatic Orders let’s multi-sig wallets set and forget

  

When trades are submitted directly to CoW Protocol, via CoW Swap, traders can take advantage of programmatic orders: or orders with certain conditions that have to be met before they are executed.

  

For example, if a trader wants to set and forget a trade like a stop loss or trailing stop, they can on CoW Swap. But there’s more.

  

Wallets of all sizes can automate recurring actions using programmatic orders. DAOs can automate payroll, diversify their treasuries, collect fees and more. Individuals, meanwhile, can automate portfolio rebalancing, yield farming, and hedge market positions.

  

Users can even bundle multiple actions together into one single order. For example, if a trader wanted to withdraw and swap a token for another in the future, it can do so using programmatic orders. No need to create multiple transactions, thanks to [Hooks](https://docs.cow.fi/cow-protocol/concepts/order-types/cow-hooks).

  

How does it work? They allow any user to to pair multiple steps together into a single transaction. Let’s say you want to unstake tokens to take advantage of a price movement, sell a token and swap it for another. With Hooks that can be created and executed in one single transaction. No more multiple transactions, no more multiple fees.

  

Find out more about how to [use Hooks here](https://docs.cow.fi/cow-protocol/concepts/order-types/cow-hooks).

## In summary: Why CoW Swap is great for multi-sig wallets.

  

When making large transactions in crypto, there are a number of things users need to be aware of. Whether it’s slippage, what order type you’re looking to execute, MEV attacks, to the user experience of different platforms.

  

CoW Swap is designed to do the hard work for you. It combines class-leading protection from MEV attacks, alongside its unique solver system which helps find you the best prices, and also gives you the chance to earn a surplus from every trade.

  

No wonder [GnosisDAO](https://twitter.com/GnosisDAO), [ENS DAO](https://twitter.com/ensdomains), [dxDao](https://twitter.com/DXdao_), [Yearn Finance](https://twitter.com/yearnfi), [Safe](https://twitter.com/safe), [Frax](https://frax.finance/), [Olympus DAO](https://twitter.com/OlympusDAO), [Synthetix](https://twitter.com/synthetix_io), [Balancer](https://twitter.com/Balancer), [Aura](https://twitter.com/AuraFinance), [Gnosis Guild](https://twitter.com/GnosisGuild), [Badger DAO](https://twitter.com/BadgerDAO), [Aave](https://twitter.com/AaveAave), [Tally DAO](https://twitter.com/tallyxyz) and [Karpatkey](https://twitter.com/karpatkey) all use CoW Swap to manage their multi-sig wallets.

  

Multi-sig wallet owners can count on CoW Swap to help them:

-   Trade in a way that takes the press out of coordinating key holders.
    
-   MEV-protected trades even when trade details are publicly announced.
    
-   Provide the best prices through slippage-capturing trade execution.
    
-   Allow special order types custom-tailored for DAOs
    

If you are a interested in learning more about how CoW Swap can optimize your trades, [join our Discord](https://discord.com/invite/cowprotocol) and give us a shout, or leave a comment in our [forum](https://forum.cow.fi/).

large_Multisig.png

medium_Multisig.png

small_Multisig.png

thumbnail_Multisig.png

Multisig.png

Large traders, which can often include DAOs and other types of organisations, typically require transactions to be signed by more than one wallet for security purposes. On many DEXes that can be a time-consuming experience. But not on CoW Swap! 


Why is CoW Swap the best choice for multisig wallets?

Ethereum currently operates with two distinct account types: Externally Owned Accounts (EOAs) controlled by private keys and smart contract accounts governed by code. This division creates limitations for users who want advanced wallet features without the complexity of managing smart contract accounts. Traditional EOAs cannot perform batch transactions, implement custom authorization schemes, or benefit from gas sponsorship mechanisms that smart contracts enable.

Previous account abstraction proposals faced significant hurdles. EIP-4337 required extensive infrastructure changes and higher gas costs. EIP-3074 introduced new opcodes but created centralized points of failure through invoker contracts. These solutions, while innovative, presented adoption barriers that limited their practical implementation.

## How EIP-7702 works

EIP-7702 introduces a new transaction type (0x04) called a "set code transaction" that includes an authorization list. This authorization list contains signed permissions from account owners, allowing their EOAs to temporarily execute code from specified smart contracts during transaction execution.

The process begins when an EOA owner signs an authorization specifying which smart contract code they want their account to execute. This authorization can be valid for a single blockchain or across multiple chains, depending on the chain ID specified. The authorization includes the target contract address and a nonce to prevent replay attacks.

When a transaction containing these authorizations is processed, the network temporarily sets the EOA's code to point to the specified smart contract. The account functions as a smart contract wallet for the duration of that transaction, then returns to its normal EOA state afterward. This temporary transformation enables advanced features without permanent changes to the account structure.

## Key features and benefits

### Flexibility and compatibility

EIP-7702 offers remarkable flexibility in its implementation. Users can authorize their accounts to use different smart contract implementations depending on their needs. For example, a user might authorize their EOA to use a multi-signature contract for high-value transactions while using a simple transaction batching contract for routine operations.

The proposal maintains full compatibility with EIP-4337 infrastructure, meaning existing paymasters, bundlers, and RPC endpoints continue to function without modification. This compatibility eliminates the need for widespread infrastructure overhauls that hindered previous proposals.

### Transaction bundling capabilities

One of the most practical benefits of EIP-7702 is transaction bundling. Consider a user who wants to approve a token spending limit and then immediately use those tokens in a decentralized exchange swap. Traditionally, this requires two separate transactions, each paying gas fees and waiting for confirmation.

With EIP-7702, the user can authorize their EOA to use a batching contract, then execute both the approval and swap in a single transaction. This reduces gas costs, eliminates the need for multiple confirmations, and provides a smoother user experience.

### Gas sponsorship and paymaster integration

EIP-7702 enables sophisticated gas sponsorship models through paymaster integration. A decentralized application could sponsor gas fees for new users by paying for their transactions through a paymaster contract. The user's EOA would be temporarily authorized to interact with the paymaster, enabling gasless transactions without requiring the user to hold ETH.

For example, a gaming application could sponsor all in-game transactions for players, allowing them to interact with the blockchain without understanding gas mechanics. The paymaster contract would handle gas payments while the user's EOA maintains its familiar interface.

### Custom authorization schemes

The proposal enables custom authorization schemes that enhance security without sacrificing usability. A user could authorize their EOA to use a time-locked contract that requires additional confirmations for large transactions or implements spending limits over specific time periods.

Consider a scenario where a user wants daily spending limits on their account. They could authorize their EOA to use a smart contract that tracks daily expenditures and requires additional authorization for transactions exceeding predetermined thresholds. This provides enhanced security while maintaining the simplicity of EOA management.

## Technical implementation details

### Authorization process

The authorization process involves cryptographic signatures that prove account ownership and consent. Each authorization specifies a chain ID (0 for all chains or a specific chain ID), the target contract address, and a nonce. The signature is generated using a specific format that includes these parameters, ensuring the authorization cannot be replayed or misused.

The network verifies each authorization by recovering the signing address and confirming it matches the account being authorized. Invalid authorizations are ignored, allowing transactions to proceed with only valid authorizations taking effect.

### Gas mechanics

EIP-7702 includes specific gas mechanics to ensure fair resource allocation. When an authorization successfully delegates code to an EOA, the transaction receives a gas refund to offset the computational costs. This design prevents the authorization process from being prohibitively expensive while maintaining network security.

The gas refund mechanism accounts for the difference between creating new accounts and modifying existing ones, ensuring that users are not penalized for utilizing the new functionality.

### State management

The temporary nature of code delegation is crucial to EIP-7702's design. After transaction execution, the EOA returns to its original state, but any storage modifications made during smart contract execution persist. This allows for sophisticated state management while maintaining account simplicity.

For instance, if an EOA uses a smart contract that implements a spending tracker, the tracking data remains stored in the EOA's storage even after the delegation expires. Subsequent transactions can access this data by authorizing the same smart contract.

## Practical applications

### Enhanced wallet security

EIP-7702 enables advanced security features that rival dedicated smart contract wallets. Users can implement multi-factor authentication, recovery mechanisms, and fraud detection without migrating to complex account structures.

A practical example involves social recovery systems where users designate trusted contacts who can help recover access to their accounts. The EOA could be authorized to use a recovery contract that requires signatures from multiple trusted parties to execute recovery procedures.

### DeFi protocol integration

Decentralized finance protocols can leverage EIP-7702 to create more sophisticated user experiences. A lending protocol could provide users with smart contracts that automatically manage collateral ratios, preventing liquidations through automated rebalancing.

Users would authorize their EOAs to use the protocol's management contract, enabling automated actions while maintaining control over their accounts. The system could monitor market conditions and execute protective measures without requiring constant user intervention.

### Cross-chain operations

The proposal's support for cross-chain authorizations opens possibilities for unified wallet experiences across multiple blockchains. Users could authorize their accounts to use bridge contracts that facilitate seamless asset transfers between different networks.

This capability could enable wallet interfaces that abstract away the complexity of multi-chain operations, allowing users to interact with applications across different blockchains through a single, familiar account interface.

## Comparison with alternative approaches

### Advantages over EIP-4337

While EIP-4337 provides comprehensive smart contract account functionality, it requires users to migrate from EOAs to entirely new account structures. EIP-7702 allows users to retain their existing EOAs while gaining smart contract capabilities when needed.

The gas efficiency of EIP-7702 is superior to EIP-4337 for simple operations, as it avoids the overhead of UserOperation processing and bundler coordination for basic transactions.

### Improvements over EIP-3074

EIP-3074's invoker model created potential centralization risks and required new opcodes. EIP-7702 eliminates these concerns by using temporary code delegation that requires explicit user authorization for each transaction.

The authorization model in EIP-7702 provides stronger security guarantees than EIP-3074's approach, as each authorization is transaction-specific and cannot be reused without explicit user consent.

## Security considerations

### Authorization validation

The security of EIP-7702 relies on robust authorization validation. Each authorization must be cryptographically verified to ensure it comes from the legitimate account owner. The nonce system prevents replay attacks, while the chain ID specification prevents cross-chain authorization abuse.

Smart contract developers must implement proper access controls in contracts intended for use with EIP-7702, as these contracts will execute with the full permissions of the authorizing EOA.

### Code delegation risks

While EIP-7702 provides powerful capabilities, users must carefully consider which contracts they authorize their accounts to use. Malicious or poorly designed contracts could misuse the temporary delegation to perform unauthorized actions.

The temporary nature of delegation provides some protection, as the authorization expires after transaction completion. However, users should only authorize contracts they trust and understand.

## Implementation challenges

### Wallet integration

Wallet providers must implement user interfaces that clearly communicate the implications of code authorization. Users need to understand which contracts they are authorizing and what permissions they are granting.

The challenge lies in presenting this information in an accessible way that does not overwhelm users with technical details while ensuring they make informed decisions about authorizations.

### Smart contract development

Developers creating contracts for use with EIP-7702 must consider the unique execution context where their code runs in the context of user EOAs. This requires careful attention to storage management, access controls, and interaction with external contracts.

The development paradigm differs from traditional smart contract development, as the contract code must be designed to work correctly when executed by arbitrary EOAs rather than at a fixed contract address.

## Future implications

### Evolution of account abstraction

EIP-7702 represents a stepping stone toward more comprehensive account abstraction solutions. Its compatibility with existing systems and minimal infrastructure requirements make it an ideal transitional technology that can evolve alongside Ethereum's development.

The proposal's design allows for future enhancements without breaking existing implementations, providing a stable foundation for continued innovation in account abstraction.

### Ecosystem development

The introduction of EIP-7702 will likely catalyze the development of specialized smart contracts designed for EOA delegation. This could create a new category of infrastructure providers focused on account enhancement services.

The ecosystem may see the emergence of contract libraries, security auditing services, and user interface tools specifically designed to support EIP-7702 implementations.

## Conclusion

EIP-7702 offers a pragmatic approach to bringing account abstraction capabilities to Ethereum's existing EOA infrastructure. By enabling temporary smart contract functionality without requiring permanent account migration, it provides a path for enhanced user experiences while maintaining system compatibility and security.

The proposal's flexibility, compatibility with existing infrastructure, and minimal implementation requirements position it as a significant step forward in Ethereum's evolution toward mainstream adoption. As the ecosystem develops tooling and best practices around EIP-7702, it has the potential to unlock new possibilities for wallet functionality and user experience that bridge the gap between today's limitations. 

The success of EIP-7702 will ultimately depend on community adoption, wallet integration, and the development of secure, user-friendly contracts designed for delegation. However, its technical foundation provides a solid basis for these developments to flourish, potentially revolutionizing how users interact with the Ethereum network.

## Frequently asked questions

### What is EIP-7702?

EIP-7702 is an Ethereum Improvement Proposal that introduces a new transaction type (0x04) called a "set code transaction" that enables Externally Owned Accounts (EOAs) to temporarily execute smart contract code. It allows EOA owners to sign authorizations that permit their accounts to use specified smart contract functionality during transaction execution, then return to normal EOA state afterward. This provides EOAs with advanced features like transaction batching, gas sponsorship, and custom authorization schemes without requiring permanent migration to smart contract accounts. The proposal maintains compatibility with existing infrastructure while offering enhanced wallet capabilities.

### What is the difference between EIP-3074 and EIP-7702?

EIP-3074 and EIP-7702 take fundamentally different approaches to account abstraction. EIP-3074 introduced new opcodes and used an invoker model that created potential centralization risks and single points of failure through invoker contracts. In contrast, EIP-7702 uses temporary code delegation that requires explicit user authorization for each transaction, providing stronger security guarantees. EIP-7702's authorization model is transaction-specific and cannot be reused without explicit user consent, while EIP-3074's approach was more permanent. Additionally, EIP-7702 eliminates the centralization concerns of EIP-3074 by avoiding the invoker contract dependency and provides better security through its nonce system and chain ID specifications that prevent replay attacks and cross-chain authorization abuse.

### What is the EIP-7702 update?

The EIP-7702 update introduces a revolutionary approach to account abstraction on Ethereum by allowing EOAs to temporarily gain smart contract capabilities without permanent structural changes. The update includes a new transaction type with an authorization list containing signed permissions from account owners. Key features include transaction bundling capabilities that reduce gas costs and confirmation times, integration with paymaster systems for gas sponsorship, support for custom authorization schemes like spending limits and multi-signature requirements, and cross-chain authorization support. The update maintains full compatibility with existing EIP-4337 infrastructure, requires minimal changes to current systems, and includes specific gas mechanics with refunds to ensure fair resource allocation. This creates a bridge between traditional EOAs and smart contract wallets, offering enhanced functionality while preserving the familiar EOA user experience.

EIP-7702 introduces a new transaction type (0x04) called a "set code transaction" that includes an authorization list.

About EIP-7702

![MEV-resistance.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/MEV_resistance_aa3fe37e0f.png)

MEV or “maximal extractable value” is a hidden tax on all types of Ethereum transactions. Any time you make a DeFi trade, buy or sell an NFT, or lend tokens to a liquidity pool, opportunistic users known as “searchers” may manipulate your trades, resulting in unfavorable prices, failed transactions, and missed opportunities.

  

But that doesn’t mean you just have to sit there and watch as people make off with your hard earned money.

  

MEV resistance is a response to this threat. There are many techniques and pieces of technology that can help you resist MEV attacks on your trade. In this article, we’ll take you through what they are, and the products CoW DAO has built to make resisting MEV simple.

## What is MEV?

Before we work out how to resist MEV, we need to understand what it is and the attack vectors - the places where your trades are vulnerable - people use to extract value.

  

MEV, or maximal extractable value, is a form of price exploitation that acts as a “hidden tax” on Ethereum transactions. MEV is responsible for billions of dollars in losses for everyday traders, especially beginners who often don’t know how to protect themselves.

  

To understand how it happens, we must first understand how Ethereum transactions are processed.

  

When a user places an order, it gets submitted to a holding area for pending Ethereum transactions known as the “mempool.” Transactions in the mempool are public, meaning that [MEV bots (known as “searchers”) can monitor them for exploitation opportunities](https://cow.fi/learn/mev-bots-switch-from-searcher-to-solver).

  

An MEV attack uses a feature of how Ethereum transactions are processed: validators can reorder transactions based on how much someone is willing to pay to prioritise their transaction over someone else’s. Let’s look at an example of a type of MEV called ‘sandwich’ attack.

  

-   A user places a transaction, and it’s added to the public mempool.
    
-   Bots called ‘searchers’ monitor transactions looking for trades that they could potentially exploit.
    
-   Once a profitable trade is identified, the searcher places a trade before and after your trade. The first trade pushes up the price, forcing the user to pay a higher price for their transaction. A subsequent trade after the users takes advantage of the higher price and sells. The result is a series of trades that leaves the original user out of pocket.
    

  

But sandwich attacks are just one type of MEV attack. There are frontrunning attacks and backrunning attacks.

  

To learn more about the different types of MEV, check out our articles on [sandwich attacks](https://cow.fi/learn/what-is-a-sandwich-attack-and-how-can-you-protect-yourself), [frontrunning](https://cow.fi/learn/what-is-frontrunning), and [backrunning](https://cow.fi/learn/what-is-backrunning-mev-attacks-explained).

  

The above example helps provide context for why MEV resistance is important: it helps protect your trades from prying eyes. In the next section we’ll explore ways of building in MEV resistance into your trades.

## How to create your own MEV resistance

  

The most basic defense against MEV is setting a low slippage tolerance.

Since [MEV relies on slippage for price manipulation](https://cow.fi/learn/what-is-slippage-in-crypto), transactions with a lower slippage tolerance give searchers less room to exploit trades.

  

For users who aren’t utilizing any other MEV protection tools, setting a lower slippage tolerance can be a good first line of defense, however it’s by no means a complete solution.

  

Setting the slippage tolerance too low often results in failed transactions. Even with optimal slippage, MEV bots may still be able to extract value from your trades. Let’s take a look at a more robust technique.

## Using an RPC endpoint to help protect against MEV

  

A better way to resist MEV is to install an MEV protection RPC endpoint.

A Remote Procedure Call (RPC) endpoint is an intermediate layer that routes transactions from a user’s wallet to the blockchain itself.

  

Transactions pass through RPC endpoints before getting to the mempool, so RPCs can provide additional functionality across any blockchain application or protocol.

  

Normally, RPCs are a boring piece of blockchain infrastructure. But more recently, specialized RPCs have begun incorporating extra security guarantees for transactions before they reach the blockchain. One of those is [MEV Blocker.](https://cow.fi/mev-blocker)

  

As the name suggests, [MEV Blocker provides protection against MEV across all of Ethereum](https://cow.fi/learn/mev-blockers-explained-how-they-protect-users). The RPC works by managing a permissionless network of searchers and hiding transactions from the public mempool. These searchers cannot frontrun or sandwich user transactions. Instead, they capture value through [backrunning](https://cow.fi/learn/what-is-backrunning-mev-attacks-explained).

  

Anytime a searcher backruns a user’s transaction, the searcher keeps up to 10% of the value and sends the other 90% back to the user as a rebate. So even when a transaction leaves money on the table, MEV Blocker puts it back into the pockets of users.

  

MEV Blocker provides protection for any type of Ethereum transaction (not just swaps), and it works with all Ethereum wallets. Install the MEV Blocker RPC endpoint by following the instructions [here](https://mevblocker.io/).

  

But if the thought of installing and MEV Blocker manually feels like too much hard work, there is another option.

## Baked in MEV Resistance

  

While RPC endpoints provide significant MEV protection, the most complete protection comes at the application layer.

  

As MEV has become more prevalent, decentralized applications (especially [decentralized exchanges — DEX’s](https://cow.fi/learn/how-cow-swap-solves-the-mev-problem)) have begun offering creative protection solutions to users. For example, many DEXs offer an “auto-slippage” feature which determines the optimal slippage for user trades, reducing the chances of price exploitation. But some go further than that.

  

CoW Protocol is a meta [DEX aggregator](https://cow.fi/learn/what-is-a-dex-aggregator) that finds the best prices for trades and provides comprehensive MEV protection. The protocol uses [a unique trading mechanism that relies on batch auctions](https://cow.fi/learn/understanding-batch-auctions) and [intents](https://cow.fi/learn/cow-protocol-glossary#:~:text=Intent%20to%20Trade) to achieve the best outcomes for users.

  

Starting at the application level, CoW Protocol provides end-to-end MEV protection through its unique protocol design:

  

-   **Delegated Trade Execution:** On CoW Protocol, [bonded third parties known as “solvers” execute transactions on behalf of users.](https://docs.cow.fi/cow-protocol/concepts/introduction/solvers) Solvers source liquidity across multiple DEX’s and even off chain liquidity sources to find the best prices for any given trade. Solvers also execute transactions on behalf of users, meaning they are never exposed to the blockchain directly.
    

  

-   **Coincidences of Wants (CoWs):** Thanks to CoW Protocol’s batching mechanism, trades may be matched using peer-to-peer liquidity in a [Coincidence of Wants (CoW)](https://cow.fi/learn/what-are-cows-on-cow-swap). This method of trading bypasses AMMs, reducing fees and preventing MEV.
    

  

-   **Uniform Clearing Prices:** Another benefit of batching is that [duplicate trade pairs within a given batch clear for the same price](https://cow.fi/learn/what-is-price-improvement-and-why-is-it-unique-to-cow-swap). For example, if multiple users are trading ETH and USDC in the same batch, the assets will execute for the same price across the various trades. This makes transaction reordering useless, removing the opportunity for price exploitation.
    

  

Thanks to a powerful combination of delegated trade execution, batch auctions, and protected transaction flow through MEV Blocker, CoW Protocol users benefit from thorough MEV protection on all trades.

## Want MEV protection on all your trades? Use CoW Swap

  

MEV is a billion dollar problem for the Ethereum ecosystem. CoW DAO builds products to protect users from negative outcomes for transactions of all types and sizes. Another one of those is [CoW Swap](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=understanding-mev-article).

  

CoW Swap takes the world of DEX aggregators and takes it to the next level. CoW Swap is not only the largest intent-based aggregator, it’s also one of the largest DEX aggregators. In November 2024, it [handled $6.2 billion in trading volume](https://x.com/CoWSwap/status/1869017209345130511), and is trusted by thousands of traders.

  

Whales and DAOs (as well as retail users) rely on CoW Swap as their aggregator of choice too because CoW Swap does more than just aggregate liquidity. It also provides comprehensive [MEV protection](https://cow.fi/learn/understanding-mev-protection) and enables price optimizations — such as [CoWs](https://cow.fi/learn/what-are-cows-on-cow-swap) — that traditional aggregators can’t. Thanks to its intent-based architecture, CoW Swap supports 22 solvers that compete with each other to find the best prices for each user trade, and even provide a price surplus on top.

  

While other aggregators claim to provide the best prices, CoW Swap’s architecture is built from the ground up to incentivize the best prices and the most surplus for trades, all in an easy-to-use, worry-free interface.

  

Give CoW Swap a try for yourself at [swap.cow.fi](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=dex-aggregator-article).

  

If you want to learn more about MEV, check out “[MEV Transparency: Ensuring Fairness In DeFi Markets](https://cow.fi/learn/mev-transparency-ensuring-fairness-in-defi-markets)” and “[How CoW Swap solves the MEV problem](https://cow.fi/learn/how-cow-swap-solves-the-mev-problem).”

large_MEV-resistance.png

medium_MEV-resistance.png

small_MEV-resistance.png

thumbnail_MEV-resistance.png

MEV-resistance.png

MEV resistance is a response to people exploiting your trades. In this article, we’ll take you through what they are, and the products CoW DAO has built to make resisting MEV simple.

What is MEV Resistance?

![levelling-up.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/levelling_up_e5e3db9c89.png)

Most of the time, the buying and selling crypto tokens happens in real time. A user heads to an exchange, finds the token they want to buy or sell, and then executes an order. But Limit Orders allow you to set and forget trades to execute into the future.

  

In this blog, we explain what Limit Orders are, and how [CoW Swap](https://cow.fi/cow-swap) takes them to the next level.

## What are limit orders?

Limit orders are orders to buy or sell tokens at a specified price within a specified time horizon. If the available price hits the target price within the time horizon, the order executes.

  

Another way of thinking of limit orders is you can set them and forget them. The orders will only execute if you get what you wanted. Didn’t get the price you wanted? No worries, you don’t incur any costs.

  

Limit orders can work for both buy orders and sell orders. One thing to note: the price you want is not guaranteed. So you can’t set unrealistic orders and expect them to be filled. Only orders that can be met or completed.

## How are limit orders different from other trades?

  

There are lots of different types of orders you can place in crypto. But as a general rule, there are broadly two types: ones you place now, and ones you can place in the future.

  

Limit orders are used to make trades in the future. If you’re looking to make a trade now, these are commonly referred to as Market Orders.

  

The main difference between a market order and a limit order is that a market order lets you immediately trade a token at its current value, whereas a limit order allows you to signal intent to trade a token in future, but only if certain conditions are met.

## Why should I use limit orders?

  

The first and perhaps most important reason for using limit orders is control. Crypto markets are volatile, meaning timing your trades can be tricky.

  

With limit orders you don’t need to wait around for the price to be right. You can set your orders, set how long you want them to be open for and then get on with your life.

## Why are Limit Orders on CoW Swap different from others?

  

Limit orders from [CoW Protocol](https://cow.fi/cow-protocol) differ from other limit orders products in DeFi because they are built on top of [CoW Protocol](https://cow.fi/cow-protocol)’s unique architecture.

  

We say that CoW Protocol limit orders are, in fact, UN-limited, because they offer:

-   **Unlimited order management:** traders can manage orders without paying fees, meaning they can set and cancel limit orders as much as they’d like without paying for gas. You would incur costs on other exchanges.
    
-   **Unlimited order placement:** traders can use the same crypto balance to place many orders at once that can stay active for up to a year; CoW Protocol fills orders as they hit their limit prices, and stops filling them once a wallet runs out of sell tokens. When that happens, traders can top up their wallets to keep the orders flowing.
    
-   **Unlimited order surplus:** traders get the price at execution time, so if a price falls below the trigger price, the upside belongs to them and not the order taker. Additionally, any price improvement generated by solvers finding more-optimal execution paths (i.e. finding a Coincidence of Wants) belongs to the trader
    

  

CoW Protocol offers the most-flexible limit order experience in DeFi. This experience is uniquely achievable thanks to CoW Protocol’s specific architecture, which leverages [batch auctions](https://docs.cow.fi/overview/batch-auctions) to deliver fair and efficient outcomes for traders.

  

When placing market orders with [CoW Protocol](https://cow.fi/cow-protocol), users sign trade intents rather than actual transactions on-chain. CoW Protocol collects these intents into batches, and settles them in the most-efficient way possible (by auctioning them via a decentralized network of solvers).

  

Limit orders leverage this same innovative architecture, and it is because users sign intents rather than transactions that we are able to offer such a flexible, gasless limit orders product.

  

Another benefit unique to limit orders on CoW Protocol is that they are surplus-capturing.

  

Surplus-capturing means that the protocol can improve prices above-and-beyond what users expect when they place their limit orders. CoW Protocol generates surplus on behalf of its users by matching [Coincidences of Wants](https://docs.cow.fi/overview/coincidence-of-wants) within batches, and by capturing favorable price movements between the time orders are sent and the time they are settled on-chain.

  

As an aside: this also means that if you accidentally place an order much below market price, CoW Protocol’s smart contract will protect you from your mistake and execute the order at the best available price it can find.

  

But we haven’t stopped there! CoW DAO has been busy working on an overhaul of Limit Orders to make them even s-moooo-ther to use.

  

Below is an overview

### Customize your input field orders

![Screenshot 2025-02-03 at 13.19.02.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Screenshot_2025_02_03_at_13_19_02_3966dbc8bc.png)

Trade your way. You can customize what inputs you use to calculate your order, giving you more flexibility to build orders that work for you.

### Auto-calculate limit price for your trades

![Screenshot 2025-02-03 at 13.19.40.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Screenshot_2025_02_03_at_13_19_40_cbada779a4.png)
The new look Limit Orders will now automatically calculate the limit price for your trades, giving you a better understanding of what you will receive once your limit order has been executed.

### Set limit prices in USD

![Screenshot 2025-02-03 at 13.19.58.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Screenshot_2025_02_03_at_13_19_58_bc55909d5d.png)

You can now toggle between limit prices in the native currency or in US Dollars. No more secondary calculations, it all happens inside the Limit Order interface.

### Preview estimated fill price before placing a trade

![Screenshot 2025-02-03 at 13.20.21.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Screenshot_2025_02_03_at_13_20_21_a62fe78c70.png)


Yep, Limit Orders on CoW Swap will now show the estimated fill price before you place a trade.

  

Because CoW Swap uses intents, when you place a limit order on CoW Swap, you don’t have the option to pay gas separately - this is because the gas price is already covered by the solver.

  

To cover the cost, the solver has to wait until the market price of your asset is slightly better than your set limit price, so when the solver executes the order they get just enough extra to cover the gas.

  

This means that CoW Swap limit orders don’t execute exactly when the limit price is reached. Especially for small trades, the difference between the limit price and the actual price where the order is able to fill can be significant.

  

With this update, we will start calculating & showing the estimated fill price while the user is setting up their order, so they can understand whether their limit price is realistic or not.

### Extended Order duration

![Screenshot 2025-02-03 at 13.21.38.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Screenshot_2025_02_03_at_13_21_38_b63105085d.png)

In this upgrade, traders have more choice when it comes to how long they want their orders to last. You can specify anywhere between 5 minutes up to 1 year, so you can set and forget your trades and let CoW Swap do the rest.

### More customization options than ever

![Screenshot 2025-02-03 at 13.21.58.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Screenshot_2025_02_03_at_13_21_58_93f0c29c4f.png)

Yep, there’s a lot more customization to come. Everything from partial executions, custom recipient features, to how Limit Orders display on your desktop.

  

[Try limit orders on CoW Swap](https://swap.cow.fi/#/1/limit-orders/WETH?tab=open&page=1) now.

  

We’ve written a [how-to guide](https://medium.com/@cow-protocol/how-to-user-cow-swaps-surplus-capturing-limit-orders-24324326dc9e) to guide you through the experience.

  

Moooooo 🐮

large_levelling-up.png

medium_levelling-up.png

small_levelling-up.png

thumbnail_levelling-up.png

levelling-up.png

Limit Orders allow you to set and forget trades to execute into the future. In this blog, we explain what Limit Orders are, and how CoW Swap takes them to the next level. 


Limit Orders Explained

![delegate-3.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/delegate_3_f28eaa3bb8.png)
CoW DAO is launching a token delegation program for token holders. This will allow token holders to delegate their tokens to vetted members of the CoW DAO community who are able to participate in CoW DAO governance on their behalf.

  

This is an important step for the CoW DAO community, as it helps increase participation and improves public discourse.

## Why would you delegate your vote?

  

There are many reasons why you’d delegate your vote to a third party.

  

**It’s more time efficient:** If you don’t have the time to stay on top of every proposal, delegating ensures your votes are still contributing to the direction of CoW DAO.

  

**You can collaborate with experts:** You can delegate to someone with deeper knowledge or specialized expertise in areas critical to the DAO's success.

  

**It increases your Influence:** Feel strongly about a CIP? Pooling votes with a trusted delegate can amplify your collective impact on key decisions.

  

**It gives you more flexibility:** Delegation allows you to remain a part of the DAO even if you can't engage consistently.

  

**It helps build stronger governance:** By delegating to active participants, you contribute to creating a more robust and responsive decision-making process.

  

**It strengthens the community:** Delegation helps empower those who are deeply committed to advancing the DAO's mission, fostering a healthier ecosystem.

## What happens to my tokens when I delegate?

  

Even though you have delegated your votes to a third party, you retain a number of key features.

  

**You can still vote directly** - even if you’ve allocated your tokens to a third party, you still have the ability to vote on future CIPs.

  

**You can re-assign or revoke your delegation at any point** - If you feel your delegator is not voting in accordance with your values, you can revoke your vote, and re-allocate it at any time.

  

**Your tokens remain in your account and are not frozen** - Yep, you can use your tokens as you see fit. Want to buy more or sell tokens? You can. If you reduce or increase the voting power attached to your account, the delegate’s voting power updates accordingly.

  

There is no expiration date set for your delegation, so make sure you keep an eye on how your delegate is voting. A few other key points: Your delegate cannot delegate onwards and you cannot split your voting power across multiple delegates.

## How do I delegate my tokens?

  

We’ve made finding the right delegate, and assigning your tokens as simple as possible. There are two pathways. Below is a step-by-step process of each.

  

### Process 1: Via the CoW DAO Forum

  

**Step 1: Find your delegate**
![Screenshot 2025-02-05 at 11.48.50.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Screenshot_2025_02_05_at_11_48_50_a33cee2565.png)

Scroll down and you’ll find a heading called “[Current List of Recognised Delegates](https://forum.cow.fi/t/recognised-delegates-scheme/2688)”. Click a delegate's name to be taken to their Snapshot profile.

  

**Step 2: Click the ‘delegate’ button on the delegate’s profile**

  

Once you’re on the Snapshot page for a delegator, you will find a delegate button, in the top right hand corner.
![Screenshot 2025-02-04 at 12.43.18.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Screenshot_2025_02_04_at_12_43_18_215b987b0a.png)

Head to the CoW DAO forum and the dedicated page for Delegates called [“Recognised Delegates Scheme”](https://forum.cow.fi/t/recognised-delegates-scheme/2688).

  


**Step 3: Follow the instructions to connect your wallet**

  

A pop-up box should appear for you to connect your wallet of choice. Follow the instructions from there.

![Screenshot 2025-02-04 at 12.46.14.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Screenshot_2025_02_04_at_12_46_14_b32b84fe35.png)

### Process 2: Via the Snapshot Delegates Overview

  

Head to [Snapshot’s Delegation](https://snapshot.box/#/s:cow.eth) tab.

![Screenshot 2025-02-04 at 13.05.49.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Screenshot_2025_02_04_at_13_05_49_fa3dab458d.png)


You will then be able to view all current delegates. You also have the option to sort via voting power, or number of delegators currently assigned.

  

Please note: It is recommended you do not delegate to anyone without a statement, and to always do your own research before committing to a delegate.

![Screenshot 2025-02-04 at 13.20.36.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Screenshot_2025_02_04_at_13_20_36_a040944e29.png)

## How do I see who I have delegated to?

  

There are two options.

  

[A Dune Dashboard](https://dune.com/bleu/cow-dao-delegations)  - Head to the Dune dashboard and paste the address of your delegate; or scroll down and paste your own address

  

Snapshot - [Snapshot](https://snapshot.box/#/s:cow.eth) has a new UI which allows users to see who they have delegated to.

![Screenshot 2025-02-04 at 13.05.49.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Screenshot_2025_02_04_at_13_05_49_fa3dab458d.png)

## How do I contact my delegate?

  

You can contact your delegate by [heading here](https://forum.cow.fi/t/recognised-delegates-scheme/2688), finding your delegate and contacting them directly.

## Who gets to be a delegate?

  

Anyone can become a CoW DAO delegate, at any point in time, there is no “program close”. Becoming a delegate is permissionless.

  

However, to become a recognized delegate, there is a vetting process. Recognized delegates have to be vetted by at least one member of the GrantsDAO committee based on subjective evaluations of their expertise, knowledge, and contributions.

  

These delegates must allocate 10,000 COW tokens to their delegate address, signaling alignment with the community’s goals. They are also expected to disclose any conflicts of interest.

  

Delegates who wish to be included can reach out to the GrantsDAO committee by linking their introduction in [this thread](https://forum.cow.fi/t/recognised-delegates-scheme/2688/13). They are also encouraged to introduce themselves on the [CoW DAO Forum](https://forum.cow.fi/c/cow-improvement-proposals-cip/delegates/25) (using [this introduction template](https://forum.cow.fi/t/delegate-introduction-guidelines/2669)) and complete their Snapshot profiles.

  

## In summary: Delegation increases engagement in CoW DAO governance

  

CoW DAO is committed to creating a robust, balanced, and effective governance structure. We believe a delegate program helps deliver on that promise.

  

The delegation program fosters participation, enhances decision-making, and improves public discourse. It strengthens CoW DAO’s ecosystem and contributes to its long-term success.


large_delegate-3.png

medium_delegate-3.png

small_delegate-3.png

thumbnail_delegate-3.png

delegate-3.png

CoW DAO is launching a token delegation program for token holders. This will allow token holders to delegate their tokens to vetted members of the CoW DAO community who are able to participate in CoW DAO governance on their behalf. 


CoW DAO launches delegate program for token holders

![OFA.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/OFA_6463c6d8c0.png)

Want to know what makes CoW Swap unique? Apart from the amazing UI, MEV protection, and class leading surplus of course. It’s our unique use of Order Flow Auctions (OFAs). Never heard of them? You’re in the right place.

  

In this article we’ll explain what they are, how they work, and how they help traders on CoW Swap not only get the best prices for their trades, but help avoid dreaded MEV attacks.

## What is an Order Flow Auction?

  

Order Flow Auctions are, at their simplest, a process where solvers compete to fulfil trades. The aim is to ensure users capture as much value from each swap or trade, while also being protected from [Maximal Extractable Value (MEV).](https://cow.fi/learn/what-is-mev)

  

The key point to take away from OFA is that it’s a competitive bidding system where solvers compete over who can make the best offer, which is then selected by the protocol. This system not only simplifies the trading process but also ensures traders access the best available price without the need to manually search through multiple platforms.

## What’s the difference between Order Flow Auctions and regular swaps?

  

There is a difference between what happens when you swap on CoW Swap and what happens when you use platforms or wallets that don’t use OFAs.

  

When you trade or swap on other platforms that do not use Order Flow Auctions to manage trades, when you hit the button to trade, your transaction is sent to the mempool. This is a public queue of all transactions awaiting to be assigned to a block.

  

Validators then pull transactions from the mempool and add them to the next block when it’s time for it to be built. Here is where the opportunity to extract value through MEV comes in.

  

Validators are not required to add transactions to the block in the same order that they were submitted by users, so searchers can pay validators a fee to order transactions in a specific way. For example, they can pay to have their transactions come first if they want to frontrun someone else, or they can pay to have their transactions come right after a specific transaction if they want to perform a backrun — both are types of MEV.

  

On OFAs, however, your transactions are hidden from that mempool, meaning your trades are not exposed to prying eyes.

  

To find out more about how this system works, check out our page explaining [what MEV is and how it works.](https://cow.fi/learn/what-is-mev)

## Why are Order Flow Auctions important?

  

Order Flow Auctions not only offer a safer way for users to make transactions, they are also more efficient. That’s because inside CoW Protocol’s OFA is a matching system called a [Coincidence of Wants (CoW)](https://docs.cow.fi/cow-protocol/concepts/how-it-works/coincidence-of-wants).

  

The solvers we mentioned earlier who are competing to find you the best deal on your trades look at a number of different sources in order to find you the best deal. One of those might be another trade in the batch. If the solver does find someone with a mirror trade to yours, they will facilitate the trade, which can help you save on fees.

  

If the protocol does not find a CoW, the solvers search all available on-chain and off-chain liquidity to find the best price for a set of trade intents within a batch.

Liquidity sources include:

-   AMMs (e.g. Uniswap, Sushiswap, Balancer, Curve, etc.)
    
-   DEX Aggregators (e.g. 1inch, Paraswap, Matcha, etc.)
    
-   Private Market Makers
    

  

These different sources - some of which may not be available to users - mean users can search dozens of liquidity sources with a single click, saving time, effort, and money too.

  

Let’s take a deeper look at how the Order Flow Auction Process works.

## The Order Flow Auction Process Explained

  

There are several key steps to the Order Flow Auction process, which you can find below.

  

-   Gathering Orders: Orders from multiple users are collected and grouped together in a batch.
    
-   Auction Initiation: These batches are then presented in an auction format, and the auction begins.
    
-   Bid Optimization: Bidders assess the orders within the auction and then try to find the best execution based on what’s in the batch.
    
-   Selecting Winning Bids: Once all bids are submitted, the winning bid is selected.
    
-   On-Chain Settlement: The winning bids are pushed on-chain, along with all the orders included in the auction, and they are settled.
    

  

While these are the core components of each OFA, there are several different types of auction, which we explore below.

## The different types of Order Flow Auctions

  

There are three primary types of Order Flow Auctions:

  

-   RFQ (Request for Quote) Auctions: RFQs are optimized for price discovery, so they are particularly suited to market makers offering quotes for swaps. These auctions help facilitate price discovery through a system of bidders quoting swaps and market makers using private inventory to offer better prices than [automated market makers (AMMs)](https://cow.fi/learn/cow-protocol-glossary#:~:text=amm).
    
-   Frequent Batch Auctions: A combination of price discovery, price optimization, and settlement path, Frequent Batch Auctions enable multi-dimensional intent matching. This, in turn, allows for trade optimizations not available through other mechanisms and complete protection from MEV thanks to peer-to-peer trading.
    
-   Block Space Aggregator Auctions: Unlike other auctions that focus on price discovery and execution, Block Space Aggregator Auctions provide value to the user through post-trade rebates. These rebates come from capturing value that likely would have leaked out at the last stage of the supply chain.
    

  

CoW DAO has long understood the potential of Order Flow Auctions to ensure better prices and better protection. Let’s take a look at how CoW DAO has implemented Order Flow Auctions into its products.

## MEV Blocker RPC uses Order Flow Auctions at the block builder level

  

MEV Blocker is an RPC endpoint that facilitates Order Flow Auctions. If you're a wallet, a solver, or any project that settles transactions on behalf of users, MEV Blocker protects them from MEV and helps you earn some extra revenue.

  

Its primary objectives are to provide privacy, expedite transaction inclusion, and offer protection from MEV. MEV Blocker protects user transactions from the worst types of MEV, but it goes a step further by capturing backrunning opportunities and providing rebates. Users receive up to 90% of the value of any backrunning opportunity they create before MEV bots can take it for themselves.

  

Just 6 months after launch, MEV Blocker had protected 387,000 users, 7 million transactions, and $21 billion in DEX volume.

## CoW Swap uses Order Flow Auctions at the dApp level

  

CoW Swap is an Order Flow Auction operating at the dApp level. It relies on intents, which hardcode transaction outputs, in order to prevent MEV exploits. CoW Swap aims to protect users from MEV, enhance liquidity, offer fair pricing, and optimize fee consumption.

  

Let’s see how Order Flow Auctions works when someone makes a transaction on CoW Swap.

A timeline of an order on CoW Swap:

-   Users express an intent to trade
    
-   Intents are registered in the orderbook
    
-   The protocol initiates a batch auction
    
-   [Solvers](https://docs.cow.fi/solvers/solvers) optimize the trades within the batch auction
    
-   The protocol selects the winning solvers
    
-   Transactions are pushed on-chain, and users receive their tokens
    

  

CoW Swap’s efficiency lies in bundling multiple transactions into one which reduces block congestion and requires less gas. It also ensures uniform clearing prices for liquidity pools, promoting fairness and balanced liquidity.

## How have Order Flow Auctions helped users of CoW Swap and MEV Blocker?

  

So far, these products have had a profound impact. Since its creation, MEV Blocker has protected over $188 billion in trading volume across 2.4 million users from MEV and has returned over 4,324 ETH in rebates (for an updated version of these stats, check out the [MEV Blocker Dune dashboard](https://dune.com/cowprotocol/mev-blocker)).

  

CoW Swap, meanwhile, has optimized and protected tens of billions in trading volume across millions of users, (for an updated version of these stats, make sure to check the [CoW Swap Dune dashboard](https://dune.com/cowprotocol/cowswap)).

  

These figures highlight the essential role that OFAs play in enhancing the Ethereum ecosystem.

## Where might Order Flow Auctions go next?

  

Order Flow Auctions have the potential to benefit all Ethereum users through better price discovery, lower transaction costs, more liquidity, and fewer opportunities for exploitation.

  

The key features of OFAs are transparency and a competition mechanism that ensures only the best outcomes prevail.

  

CoW DAO is showcasing the power of OFAs through MEV Blocker and CoW Swap, two products that protect users from MEV and optimize block space usage.

  

In conclusion, as the blockchain space continues to evolve, Order Flow Auctions are emerging as a crucial tool for achieving fairness, efficiency, and transparency. CoW DAO’s [innovative solutions](https://cow.fi/learn/how-cow-swap-solves-the-mev-problem) offer promising glimpses into a future where users can trade with confidence in a secure and friendly environment.

large_OFA.png

medium_OFA.png

small_OFA.png

thumbnail_OFA.png

OFA.png

Order Flow Auctions are, at their simplest, a process where solvers compete to fulfil trades. The aim is to ensure users capture as much value from each swap or trade, while also being protected from Maximal Extractable Value (MEV). 

Order Flow Auctions Explained 

Traditional Ethereum accounts, known as EOAs, possess private keys that enable them to create cryptographic signatures. These signatures serve as proof of authorization for various blockchain operations, from simple transfers to complex decentralized exchange orders. Smart contracts, despite their programmable capabilities, cannot generate signatures in the same manner because they lack private keys.

This fundamental limitation created significant barriers for smart contract adoption in applications requiring signature validation. Decentralized exchanges with off-chain order books, authentication systems, and various DeFi protocols all rely heavily on signature verification. Without EIP-1271, smart contracts remained excluded from these ecosystems.

EIP-1271 introduces the `isValidSignature` function, which allows smart contracts to implement their own signature validation logic. This function accepts a hash of the data to be signed and a signature byte array, returning a specific magic value when the signature passes validation. The standard requires the function to return the bytes4 magic value `0x1626ba7e` when validation succeeds, providing a clear and standardized response mechanism.

## Technical implementation details

The EIP-1271 standard centers around a single function that must be implemented by contracts wishing to validate signatures. This function takes two parameters: a bytes32 hash representing the signed data and a bytes array containing the signature information. The implementation can incorporate any arbitrary logic to determine signature validity.

The standard imposes specific requirements on the `isValidSignature` function. It must not modify the contract's state, ensuring that signature validation remains a read-only operation. This restriction prevents potential attack vectors such as gas token minting during signature verification. Additionally, the function must allow external calls and return the predetermined magic value for valid signatures.

Smart contracts implementing EIP-1271 gain flexibility in defining their signature validation criteria. A multi-signature wallet might require signatures from multiple predetermined addresses. A time-locked contract could validate signatures only after specific temporal conditions are met. An oracle-dependent contract might check external price feeds before approving signatures.

## Practical applications and use cases

### Decentralized exchange integration

Decentralized exchanges frequently utilize off-chain order books to optimize performance and reduce gas costs. Users sign order messages off-chain, which are later validated and executed on-chain. Before EIP-1271, only EOAs could participate in this model. Smart contract wallets implementing EIP-1271 can now create limit orders, participate in Dutch auctions, and engage with intent-based trading systems.

Consider a decentralized autonomous organization (DAO) treasury management scenario. The DAO operates through a multi-signature smart contract that requires approval from multiple board members. With EIP-1271 implementation, this treasury contract can place limit orders on decentralized exchanges, automatically rebalance portfolios based on predetermined criteria, or execute complex trading strategies without requiring individual transactions for each operation.

### Authentication and access control

Web3 applications commonly require users to prove wallet ownership through message signing. Social platforms, NFT marketplaces, and DeFi protocols use signature-based authentication to verify user identity without requiring gas-expensive transactions. EIP-1271 enables smart contract wallets to participate in these authentication flows.

A practical example involves a corporate treasury managed through a smart contract wallet. Employees authorized to access certain DeFi protocols can trigger signature validation through the corporate wallet, proving their authorization to interact with specific applications. The smart contract can implement role-based access controls, time-based restrictions, or spending limits within its signature validation logic.

### Advanced order types and automation

EIP-1271 unlocks sophisticated trading strategies through programmable signature validation. Smart contracts can implement time-weighted average price (TWAP) orders that execute periodically based on market conditions. Stop-loss orders can trigger automatically when oracle prices reach predetermined thresholds. Dollar-cost averaging strategies can execute monthly purchases regardless of market volatility.

A hedge fund operating through smart contract infrastructure might implement EIP-1271 to enable automated portfolio rebalancing. The contract could validate signatures for rebalancing orders only when portfolio allocations drift beyond specified parameters, ensuring disciplined execution of investment strategies without manual intervention.

### Gasless transactions and meta-transactions

Many modern DeFi protocols offer gasless trading experiences where users pay transaction fees in the tokens they're selling rather than ETH. This functionality relies heavily on signature validation, as users sign transaction intents that third parties execute on their behalf. EIP-1271 enables smart contract wallets to participate in these gasless ecosystems.

For instance, a company's smart contract wallet could enable employees to make approved purchases using company tokens without requiring ETH for gas fees. The contract validates signatures for purchases within employee spending limits, while a third-party relayer handles transaction execution and gas payment.

## Security considerations and best practices

EIP-1271 implementation requires careful attention to security considerations. The standard places no gas limit restrictions on the `isValidSignature` function, potentially enabling contracts to consume excessive gas during validation. Applications calling this function should avoid hardcoding gas limits, as doing so might prevent validation of legitimate signatures from contracts with complex validation logic.

Smart contracts implementing EIP-1271 bear full responsibility for signature validation accuracy. Improper implementation can lead to unauthorized transaction approvals or denial of legitimate signatures. Contracts should implement robust validation logic, including proper cryptographic signature verification and comprehensive access control mechanisms.

The immutable nature of smart contracts makes EIP-1271 implementation particularly critical to get right initially. Unlike traditional applications where authentication logic can be updated, smart contract signature validation logic becomes permanent upon deployment. Thorough testing and security auditing are essential before production deployment.

## Impact on smart contract wallet adoption

EIP-1271 has significantly accelerated smart contract wallet adoption by eliminating signature-related compatibility barriers. Account abstraction initiatives, multi-signature wallets, and institutional custody solutions can now integrate seamlessly with the broader DeFi ecosystem. This compatibility reduces the technical friction that previously discouraged smart contract wallet adoption.

The standard enables innovation in wallet functionality beyond simple signature validation. Smart contract wallets can implement spending limits, transaction scheduling, automated compliance checks, and sophisticated access controls while maintaining compatibility with existing DeFi protocols and applications.

## Future implications and evolution

EIP-1271 serves as a foundation for more advanced smart contract capabilities. As the Ethereum ecosystem evolves toward account abstraction and programmable accounts, EIP-1271 provides the signature validation infrastructure necessary for these developments. Future improvements might extend the standard to support batch signature validation, gas optimization techniques, or integration with privacy-preserving signature schemes.

The standard's influence extends beyond Ethereum to other blockchain networks implementing similar smart contract capabilities. Layer 2 solutions, sidechains, and alternative smart contract platforms often adopt EIP-1271 or similar standards to maintain compatibility with Ethereum-based applications and tooling.

## Conclusion

EIP-1271 represents a crucial infrastructure component enabling smart contract participation in signature-dependent applications. By providing a standardized method for signature validation, the standard eliminates barriers between smart contracts and the broader DeFi ecosystem. Its implementation enables sophisticated trading strategies, automated financial operations, and seamless integration with authentication systems.

The standard's impact extends beyond technical capability to fundamental changes in how users interact with blockchain applications. Smart contract wallets can now offer feature parity with traditional EOAs while providing additional programmable functionality. This advancement supports the evolution toward more sophisticated, automated, and institutional-grade blockchain applications.

As the Ethereum ecosystem continues evolving toward account abstraction and programmable money, EIP-1271 provides essential infrastructure for these developments. Its adoption has already enabled numerous innovations in trading, authentication, and automated financial operations, with continued growth expected as more applications discover its capabilities.

## Frequently asked questions

### What is EIP 1271?

EIP-1271 is an Ethereum standard that enables smart contracts to validate cryptographic signatures. It introduces the `isValidSignature` function, which allows smart contracts to implement their own signature validation logic. The standard was created to solve the fundamental limitation that smart contracts cannot generate signatures like traditional Ethereum accounts (EOAs) because they lack private keys. When a signature is valid, the function returns a specific magic value `0x1626ba7e`. This enables smart contracts to participate in applications that require signature validation, such as decentralized exchanges, authentication systems, and DeFi protocols.

### What is EIP 712?

EIP-712 is an Ethereum standard that defines a structured data hashing and signing scheme. It provides a standardized way to hash and sign typed structured data, making signatures more readable and secure compared to signing raw bytes. EIP-712 creates a domain separator to prevent signature replay attacks across different applications and networks. It's commonly used in applications like permit functions, meta-transactions, and decentralized exchanges where users need to sign structured data off-chain. The standard improves user experience by making signed data human-readable in wallet interfaces.

### What is EIP 4337?

EIP-4337 is an Ethereum standard that introduces account abstraction without requiring consensus-layer protocol changes. It enables smart contract wallets to function as first-class citizens by creating an alternative transaction flow that doesn't rely on traditional externally owned accounts (EOAs). The standard introduces concepts like UserOperations, Bundlers, and Paymasters to enable features such as gasless transactions, batch operations, and custom validation logic. EIP-4337 allows users to pay transaction fees in any token, implement custom security policies, and enable more sophisticated wallet functionality while maintaining compatibility with existing Ethereum infrastructure.

### Why does `isValidSignature` (EIP-1271) need to be a view function?

The `isValidSignature` function must be a view function to ensure it doesn't modify the contract's state during signature validation. This restriction is crucial for security reasons as it prevents potential attack vectors such as gas token minting or other state changes during signature verification. Making it a view function ensures that signature validation remains a read-only operation, which is essential for maintaining the integrity of the validation process. It also allows external applications to safely call the function without worrying about unintended side effects or state modifications that could affect the contract's behavior or security.

### How to sign a Safe transaction with EIP1271 contract signature?

To sign a Safe transaction with EIP-1271 contract signature, you need to implement the signature validation logic within the Safe contract's `isValidSignature` function. The process typically involves: first, generating the transaction hash using the Safe's domain separator and transaction data; second, having the required number of Safe owners sign this hash off-chain; third, concatenating these signatures according to Safe's signature format; and fourth, when the transaction is executed, the Safe's `isValidSignature` function validates that the provided signatures meet the threshold requirements. The Safe contract checks that enough valid owner signatures are present and returns the magic value `0x1626ba7e` if validation succeeds, enabling the transaction to proceed through EIP-1271 compatible systems.

EIP-1271 introduces the `isValidSignature` function, which allows smart contracts to implement their own signature validation logic.

About EIP-1271

![DCA.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/DCA_4012e24431.png)


Are buying the dip, or selling the news? When it comes to crypto, there are lots of different terms, ideas, and strategies to buying and selling tokens. One of the most enduring is Dollar-Cost Averaging (DCA).

  

DCA is, at its simplest, a method for buying, or selling tokens over a period of time. The idea is that by spreading out the buying and selling, you can offset the price volatility that is common in crypto markets.

  

This article explores the concept in more detail and looks at how CoW Swap’s unique programmatic orders can take the hard work out of using a DCA strategy.

## What is Dollar-Cost Averaging (DCA)?

  

Dollar-cost averaging (DCA) is a strategy that seeks to reduce the impact of market volatility when it comes to buying and selling cryptocurrencies.

  

It does this by spreading out transactions across time, either weekly, monthly, quarterly, or even annually, depending on your preferred means of buying and selling.

  

Why would you spread these out over time? The primary goal is to buy and sell assets for an average cost. Volatility is common in crypto, meaning one week you might buy an asset for $1 but the next week it could $2.

  

By spreading out the amount you buy over time, you can offset the volatility of the token. The idea is to lower the average cost per unit over time.

## How Does Dollar-Cost Averaging Work?

  

Instead of buying an asset once in a single transaction, DCA means you buy an asset multiple times. So instead of buying $100 worth of tokens in one go, you buy $10 worth of tokens every week for 10 weeks. Let’s take a look at an example.

  

You’ve got your eye on a meme coin but are waiting for the right time to buy. Using a DCA strategy would mean allocating a fixed amount of money to purchasing, irrespective of market conditions.

  

So if the price is high in your first transaction, you’ll buy fewer tokens, but when the price is low, you’ll buy more. Over time, this can result in a lower average cost per unit compared to making a one-time lump sum allocation.

## Why would I use Dollar-Cost Averaging over a single transaction?

  

A DCA strategy eliminates the need to time the market. Picking the perfect time to enter or exit a market can be challenging, even for experienced traders.

  

By allocating or selling a fixed amount at regular intervals, you remove the guesswork, and the potential stress of entering and exiting a market or asset.

  

A DCA strategy is a good option if you’re trying to minimise the average cost per unit aims to potentially lower the average cost per unit of an asset. By allocating resources regularly, you acquire more units when prices are low and fewer units when prices are high. This can result in a lower average cost per unit over time.

## Who Can Benefit from Dollar-Cost Averaging?

  

DCA is a strategy that can benefit both beginners and long-term investors. For beginners, it's a simple and disciplined approach to resource allocation that doesn't require extensive market knowledge.

  

For long-term investors, it can be a strategy that helps iron out the bumps in the market and help with longer term planning and portfolio building.

## Taking the hard work of DCAing with Programmatic orders

  

CoW Swap has a number of unique features that take the hard work out of doing DCAing manually. We call them “[Programmatic Orders](https://cow.fi/learn/introducing-the-programmatic-order-framework-from-cow-protocol)”. Programmatic Orders are, at their simplest, orders that create more orders.

  

They require just one signature to create, then execute when on-chain conditions (prices, volumes, balances, times, etc.) are met. Programmatic Orders can execute indefinitely into the future, automating everything from complex trading strategies to advanced order types, portfolio management, DAO operations, and more.

  

One particular type of programmatic order we think you’ll love is [TWAP orders.](https://cow.fi/learn/why-twap)

  

TWAPs, or Time-Weighted Average Price (TWAP) orders are a unique type of trade that lets users apply a number of different parameters to their trades.

  

TWAP orders allow traders to spread their trade over a specified period of time. In essence: a TWAP order consists of multiple smaller orders placed at regular intervals over a predefined time period. You decide on the intervals, the number of parts, and other key factors including total duration and part duration. It’s like a DCA strategy inside one single signed transaction.

  

Investors can also use TWAP to sell their positions through dollar-cost averaging. Simply switch the assets you’re swapping and TWAP will help you exit the market for an average price.

  

But it doesn’t stop there. Using CoW Swap for your DCA strategy can help you do other things too.

## When you want to sell your small cap tokens

  

Built up a war chest of small caps but can’t seem to exit? [TWAP orders](https://cow.fi/learn/getting-to-grips-with-time-weighted-average-price-twap-orders) can be useful for breaking up the trade into chunks. Trying to push large trades in small caps can often face hurdles. But with [TWAP](https://cow.fi/learn/getting-to-grips-with-time-weighted-average-price-twap-orders) you can set your trade to execute over periods as long as a month and in multiple chunks, helping you exit small caps in one go.

## When you’re trying to reduce your slippage

  

If you’re trying to keep your slippage low, using [TWAP](https://cow.fi/learn/getting-to-grips-with-time-weighted-average-price-twap-orders) to split up a large order into smaller parts allows you to use a smaller slippage tolerance for each part. [TWAP orders](https://cow.fi/learn/getting-to-grips-with-time-weighted-average-price-twap-orders) are also protected from MEV, helping protect your trades. The MEV bots can look elsewhere.

## When you want to receive 100% of your order surplus

On [CoW Swap](https://cow.fi/cow-swap), all order surplus is forwarded to you. If your order executes for a better price than your quoted price — thanks to [Coincidence of Wants](https://cow.fi/learn/what-are-cows-on-cow-swap) or any other price improvement that solvers are able to find — the extra price improvement will be forwarded to you.

## When you’re trying to navigate volatile prices

  

By giving traders the time-weighted average price, TWAP orders smooth out market volatility, which makes trying to predict prices a thing of the past.

## When you want to specify certain conditions or parameters

  

TWAP orders allow you to fine-tune your order by specifying the number of parts you’d like it split up into, as well as the time period you want it to execute over. On [CoW Swap](https://cow.fi/cow-swap), TWAP orders also have a “price protection” option which protects your order from executing at an unfavorable price due to market volatility.

  

Ready to start DCAing on CoW Swap?

  

[Starting trading today.](https://cow.fi/cow-swap)

large_DCA.png

medium_DCA.png

small_DCA.png

thumbnail_DCA.png

DCA.png

DCA is, at its simplest, a method for buying, or selling tokens over a period of time. This article explores the concept in more detail and looks at how CoW Swap’s unique programmatic orders can take the hard work out of using a DCA strategy. 


Understanding Dollar Cost Averaging in Crypto

Exchange inflows—the movement of cryptocurrency from private wallets to exchange platforms—represent one of the most revealing indicators of market sentiment in the digital asset ecosystem. When investors transfer tokens to exchanges, they typically intend to sell, making this metric a powerful predictor of market dynamics.

For sophisticated investors new to cryptocurrency markets, understanding exchange flows provides a significant analytical advantage. Unlike traditional markets where institutional order flow remains largely opaque, blockchain technology makes these movements transparent and trackable in real-time.

## Why exchange inflows matter: the market psychology behind token movements

Exchange inflows serve as a window into collective market psychology for several fundamental reasons:

**Selling Pressure Identification**: When large quantities of tokens move to exchanges, selling pressure typically follows. This creates potential downward price pressure as supply increases on trading platforms. Unlike stocks, where insider selling may only be disclosed quarterly, crypto markets reveal these movements instantly.

**Sentiment Measurement**: Sustained high inflows across multiple exchanges often reflect broader market anxiety or profit-taking behavior. This aggregate view provides insight into whether selling pressure stems from isolated events or systemic concerns.

**Early Warning System**: Sudden spikes in exchange inflows for specific tokens frequently precede significant price movements, offering alert investors advance notice of potential volatility.

**Market Structure Analysis**: Coordinated large inflows can sometimes indicate institutional repositioning or, in some cases, potential market manipulation attempts by sophisticated actors.

## Implementing exchange flow monitoring with Nansen

### Accessing professional-grade analytics

Nansen's Exchange Flow dashboard transforms raw blockchain data into actionable market intelligence. The platform aggregates transaction data across major exchanges and networks, providing institutional-quality analytics previously unavailable to individual investors.

To begin monitoring:

1. Access Nansen's platform and navigate to the Exchange Flow dashboard
2. The interface presents comprehensive metrics including inflow volumes, exchange-specific data, and temporal analysis tools
3. Multiple filtering options allow customization based on your specific analytical needs

### Configuring analytical parameters

Effective exchange flow monitoring requires precise parameter configuration to filter signal from noise:

**Token Selection**: Focus on specific cryptocurrencies relevant to your portfolio or research interests. The platform supports hundreds of tokens across multiple networks.

**Exchange Filtering**: Monitor specific exchanges or aggregate data across all platforms. Different exchanges often serve different market segments—institutional vs. retail—making this distinction analytically valuable.

**Transaction Thresholds**: Set minimum values to eliminate minor transfers that may not reflect significant market sentiment. For example, filtering for transactions above $100,000 focuses attention on potentially market-moving flows.

**Temporal Analysis**: Adjust timeframes from hourly to weekly views, depending on your investment horizon and analytical objectives.

**Practical Example**: To monitor institutional-scale Bitcoin movements to Coinbase, configure filters for BTC, select Coinbase specifically, set a $500,000 minimum threshold, and focus on 24-hour periods for timely insights.

### Establishing real-time alert systems

Nansen's Smart Alerts functionality enables proactive monitoring without constant dashboard surveillance:

1. Navigate to Smart Alerts and select Exchange Flows as your alert category
2. Configure specific parameters:
   - Target tokens for monitoring
   - Inflow vs. outflow focus (typically inflows for selling pressure alerts)
   - Minimum flow thresholds based on token market capitalization
   - Network specifications for multi-chain tokens
   - Market cap parameters to focus on tokens of specific sizes

**Strategic Alert Example**: Configure an alert for mid-cap tokens (market cap between $100M-$1B) experiencing over $250,000 in exchange inflows within two hours. This setup identifies potentially significant selling pressure relative to the token's typical trading activity.

## Practical applications: from theory to investment decisions

### Case study 1: preempting market corrections

Consider monitoring a significant position in a mid-cap DeFi token. Effective protection strategy:

1. Establish a Smart Alert for your token with a threshold representing 2-3% of typical daily volume
2. When alerts trigger, immediately analyze the "Smart Money" wallet labels to identify if sophisticated investors are depositing
3. If multiple institutional or "Smart Money" wallets simultaneously move tokens to exchanges, consider defensive positioning

**Hypothetical Scenario**: Your alert system identifies $2 million worth of TOKEN-Y flowing to multiple exchanges from wallets labeled as "DeFi Funds" and "Smart Money" within a four-hour period. This represents 5x typical hourly inflows, suggesting potential coordinated selling that may precede significant price impact.

### Case study 2: identifying accumulation opportunities

Exchange outflows—tokens leaving exchanges—often signal accumulation by sophisticated investors:

1. Configure outflow alerts for tokens you're researching
2. Monitor correlation between outflows and Smart Money wallet activity
3. Look for sustained outflow patterns during price weakness, often indicating contrarian accumulation

**Real-World Application**: Observe $8 million worth of ETH leaving exchanges during a 15% price correction, with destination wallets labeled as institutional investors. This divergence between price weakness and smart money accumulation may indicate an attractive entry opportunity.

### Case study 3: event-driven flow analysis

During significant protocol events—token unlocks, governance votes, major upgrades—exchange flows provide crucial context:

1. Monitor baseline flow patterns before events
2. Track real-time changes during event periods
3. Identify divergences between expected and actual flow patterns

**Example Application**: A major Layer-1 protocol announces a significant upgrade. Despite initial price volatility, exchange inflows remain below historical averages, suggesting holder confidence in the upgrade's success rather than fear-driven selling.

## Advanced analytical techniques

### Integrating Smart Money intelligence

Nansen's wallet labeling system—identifying institutional investors, successful traders, and protocol founders—adds crucial context to raw flow data:

**Institutional vs. Retail Analysis**: Compare flow patterns between different investor categories. When retail investors deposit tokens while institutions withdraw, this divergence often signals opportunity.

**Founder and Team Monitoring**: Track token movements from project team wallets, providing early insight into potential insider selling or confidence levels.

**Cross-Referencing Success Patterns**: Analyze flows from wallets with historically successful trading records, as these actors often possess superior information or analytical capabilities.

### Multi-chain flow correlation

Modern DeFi operates across multiple blockchains, requiring comprehensive cross-chain analysis:

1. Monitor flows across Ethereum mainnet, Layer-2 solutions (Arbitrum, Optimism), and alternative chains
2. Identify chain-specific sentiment divergences
3. Track token migration patterns between networks

**Strategic Insight**: ETH deposits increasing on mainnet exchanges while ETH withdrawals occur on Arbitrum exchanges might indicate different sentiment across user bases or arbitrage opportunities between chains.

### Temporal pattern recognition

Historical flow analysis reveals recurring patterns valuable for predictive modeling:

**Cyclical Patterns**: Identify weekly or monthly flow cycles that correlate with price movements
**Volatility Precursors**: Establish baseline inflow levels and monitor for anomalous spikes that historically preceded significant price changes
**Market Phase Analysis**: Different market conditions (bull, bear, consolidation) exhibit distinct flow characteristics

## Implementation best practices

### Threshold calibration by market capitalization

Effective monitoring requires market-cap-appropriate thresholds:

- **Large-cap tokens (>$10B)**: $10+ million thresholds filter for truly significant flows
- **Mid-cap tokens ($1B-$10B)**: $1-5 million thresholds capture meaningful activity
- **Emerging tokens (<$1B)**: $100,000-$1 million thresholds depending on typical volume

### Contextual analysis framework

Exchange flows require interpretation within broader market context:

**Volume Correlation**: Compare inflow magnitude against typical daily trading volume. $5 million inflows matter more for a token trading $20 million daily than one trading $200 million.

**Address Concentration**: Single-address large inflows may indicate individual decisions rather than broader sentiment shifts.

**Velocity Analysis**: Rapid successive inflows from multiple addresses often carry more significance than isolated large transfers.

### Signal quality enhancement

Minimize false positives through sophisticated filtering:

**Exchange-to-Exchange Transfers**: Distinguish between user deposits and inter-exchange transfers, which may not indicate selling pressure
**Staking and DeFi Integration**: Account for technical transfers related to protocol operations rather than trading intent
**Event-Driven Exceptions**: Recognize when specific events (airdrops, forks, migrations) temporarily distort normal flow patterns

## Strategic integration and risk management

Exchange flow monitoring serves as one component of comprehensive on-chain analysis. Effective implementation requires integration with additional metrics including active addresses, transaction velocity, and network value transferred.

Consider flows as probability indicators rather than definitive signals. High inflows increase selling probability but don't guarantee immediate price impact. Market conditions, exchange depth, and concurrent events all influence outcomes.

For portfolio protection, establish predetermined response protocols. Define specific flow thresholds that trigger position sizing adjustments, hedging strategies, or deeper fundamental analysis.

## Conclusion: transforming data into investment edge

Exchange flow monitoring represents a paradigm shift in market analysis—providing real-time insight into investor behavior previously impossible in traditional markets. Through platforms like Nansen, sophisticated analytical tools once reserved for institutional players become accessible to individual investors willing to master on-chain analysis.

Success requires moving beyond simple pattern recognition toward understanding the behavioral psychology underlying token movements. When implemented systematically with appropriate risk management, exchange flow analysis provides a sustainable competitive advantage in cryptocurrency markets.

The transparency of blockchain technology creates unprecedented analytical opportunities. Investors who master these tools—combining technical proficiency with behavioral insight—position themselves to identify opportunities and manage risks with precision impossible in traditional financial markets.

By incorporating exchange flow monitoring into your analytical framework, you transform from reactive chart analysis to proactive market intelligence, anticipating rather than following price movements in the dynamic cryptocurrency ecosystem.

## Frequently asked questions

### What are inflows and outflows on crypto exchanges?

Exchange inflows represent the movement of cryptocurrency from individual wallets to exchange wallets, while outflows are the opposite—tokens moving from exchanges to private wallets. Inflows often indicate potential selling pressure as users typically deposit tokens to exchanges when planning to sell. Conversely, outflows may signal accumulation or long-term holding strategies. These metrics serve as key indicators of market sentiment, potential selling pressure, and can help detect unusual activity that might precede price movements.

### How to monitor exchange "inflows" with Nansen crypto?

To monitor exchange inflows with Nansen, first access the Exchange Flow dashboard after logging into your account. Configure the filtering parameters by selecting specific tokens, exchanges, and transaction size thresholds. For targeted monitoring, set up Smart Alerts to receive notifications when exchange inflows meet your specified criteria. Advanced users can combine exchange flow data with Smart Money tracking to see not just the volume but also which types of wallets are moving funds to exchanges, providing deeper insights into potential market movements.

### How to use the Exchange Flows feature on Nansen's platform?

To use the Exchange Flows feature on Nansen, navigate to the Exchange Flow dashboard after logging in. From there, you can select which cryptocurrencies to monitor, choose specific exchanges or view aggregated data, set minimum transaction value thresholds, and adjust the time period for your analysis. For example, if you want to monitor large Bitcoin inflows to Binance, select "BTC" from the token dropdown, choose "Binance" from the exchange list, set your minimum value threshold (e.g., $100,000), and select your desired timeframe.

### How to track onchain activity in real-time across all supported chains?

Nansen offers multi-chain support across 12 networks including Ethereum, Arbitrum, Optimism, and Base. To track onchain activity across these chains, use Nansen's cross-chain monitoring capabilities in the Exchange Flow dashboard. This allows you to monitor exchange flows across multiple blockchains simultaneously, identify which networks are experiencing higher inflows/outflows, and compare layer-1 and layer-2 exchange flow patterns, giving you a comprehensive view of market activity across the entire crypto ecosystem.

### How to create your own crypto or whale alerts?

To create crypto or whale alerts on Nansen, navigate to the Smart Alerts section and select "Exchange Flows" as the alert type. Configure your parameters by selecting the tokens to monitor, choosing between inflow and outflow monitoring, setting minimum flow thresholds, selecting which networks to monitor, and setting market cap limitations if needed. For whale tracking specifically, focus on large transaction thresholds and consider filtering for wallets labeled as "Smart Money" or "Institutions" to receive notifications when significant players make moves.

### How to use Signals with an example?

While Signals aren't explicitly mentioned in the article, they likely refer to actionable insights derived from exchange flow data. For example, you might identify a Signal when analyzing exchange flows during market events: if a major protocol is upgrading and you observe minimal exchange inflows despite price volatility, this could signal that most holders are confident in the upgrade's success. Another example would be spotting divergences where retail wallets are depositing tokens to exchanges while institutional wallets are withdrawing the same token, potentially indicating a buying opportunity.

### How to monitor developments within a crypto exchange?

To monitor developments within a crypto exchange, use Nansen's Exchange Flow dashboard to track net inflows/outflows for that specific exchange. Set up customized Smart Alerts that focus exclusively on your exchange of interest. Look for unusual patterns such as sudden spikes in deposits or withdrawals that might indicate changing user behavior. Also monitor the types of wallets interacting with the exchange by using Nansen's labeled wallet feature to determine if institutional players or retail users are driving the activity on that particular exchange.

### How to track major exchange wallets?

Nansen's platform allows you to track major exchange wallets through their labeled wallet system. These exchange wallets are pre-identified in the platform, making it easy to monitor their activity. You can filter exchange inflows and outflows by specific exchanges, allowing you to focus on particular platforms of interest. For more detailed analysis, you can examine which tokens are flowing into or out of these exchange wallets, the volume of these flows, and whether the activity represents a deviation from normal patterns.

### How to implement API-based tracking for automated data collection?

Implementing API-based tracking for automated data collection would typically involve using Nansen's API services to programmatically access exchange flow data. While not explicitly detailed in the article, this would likely require registering for API access, obtaining API keys, and developing custom applications that make API calls to Nansen's endpoints. These applications could automate the collection of exchange flow data, process it according to your specific requirements, and integrate it into your existing trading systems or analytical frameworks for automated decision-making.

### How to set up real-time alerts?

To set up real-time alerts on Nansen, navigate to the Smart Alerts section and select "Exchange Flows" as the alert type. Configure your alert parameters by selecting tokens to monitor, choosing between inflow and outflow tracking, setting minimum flow thresholds, selecting networks to monitor, and adding any market cap limitations. For example, you might set up an alert for when a mid-cap token experiences more than $100,000 in exchange inflows within an hour. Once configured, these alerts can be delivered through your preferred notification channel to provide timely information about significant market movements.

Discover how exchange inflows reveal market sentiment in crypto trading. Learn to use Nansen's analytics tools to monitor token movements, set up smart alerts, and identify selling pressure before price drops with professional-grade blockchain intelligenc

How to monitor exchange inflows with Nansen

![1230-yir.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/1230_yir_07af3b1e6d.png)

See you later 2024! But before we wave goodbye to this year, let’s review all the amazing things that went on in and around CoW DAO over the last 12 months.

  

Ready?

  

Let’s go.

## CoW DAO broke new ground in revenue, market share, and transaction speed

  

This year was big for CoW DAO, in all the ways. CoW DAO earned 2,815 ETH in revenue over the course of 2024, breaking all previous records since the project started.

  

As you can see from the chart below, things got better as the year passed, setting CoW DAO up for another stellar year in 2025.

![Screenshot 2024-12-30 at 13.47.51.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Screenshot_2024_12_30_at_13_47_51_37ad5d1632.png)

That was powered, in part by gains in market share. CoW DAO had an ambitious target for [CoW Swap](https://cow.fi/cow-swap): to become the largest DEX aggregator in the DeFi space. In January 2024, 1inch held a dominant position, with 40% market share, CoW Swap meanwhile, was second with 18%.

  

By the end of the year, CoW Swap had grown to 26.8% market share, pulling 1inch back to 35%. Our goal for 2025 still remains: to make CoW Swap the number 1 destination for DEX aggregation in DeFi.

  

In the anti-MEV market meanwhile, [MEV Blocker](https://cow.fi/mev-blocker) finished the year with an 81.3% market share, dominating the space.

  

Helping CoW Swap, and the underlying CoW Protocol achieve this feat was the tireless work CoW DAO’s engineering team did to improve transaction speeds.

  

CoW DAO engineers decreased the average execution time by 45% while increasing the percentage of orders executed in less than 50 seconds by 80%. Not bad at all.

  

But this was just the beginning. Below we delve into what else CoW DAO got up to in 2024.

## CoW Swap headed to new new chains

![cover_Co_W_Swap_Base_25636981fa.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/cover_Co_W_Swap_Base_25636981fa_8a787503ef.png)

It was a big year for new networks. In June CoW Swap [launched on Arbitrum](https://x.com/CoWSwap/status/1797996272349323412) - the first L2 for CoW Swap. That meant Arbitrum users for the first time had access to:

-   The most robust solver competition
    
-   Surplus-capturing (price-improving) swaps
    
-   Advanced order types and custom intents
    

  

Since launching CoW Swap has grown its market share to become one of the key DEX aggregators on Arbitrum. But we didn’t stop there.

  

In December, [CoW Swap launched on Base.](https://cow.fi/learn/cow-dao-deploys-on-base)

  

  

Traders who already used CoW Swap on Ethereum mainnet loved its features, and with the launch on Base, could now seamlessly switch to the L2 inside CoW Swap’s existing UI with the touch of a button.

  

You no longer need to leave CoW Swap to trade on the world’s fastest growing L2.

  

This launch positions CoW DAO as a foundational player in the Base ecosystem, targeting both traders and developers, while extending CoW DAO’s suite of products, which are now available to users on Ethereum, Gnosis Chain, Arbitrum and now, Base.

## CoW Product Launches and Tweaks
![8c799938-a80b-4e3d-8821-64cdc9d3b5fd.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/8c799938_a80b_4e3d_8821_64cdc9d3b5fd_e60d3106f0.png)


The engineering team were super busy in 2024, building and releasing new products, while simultaneously tweaking and improving existing ones. Here’s an overview.

### In January we overhauled [our technical documents](https://x.com/CoWSwap/status/1746916877677596936)

  

This was a mighty endeavour. Our technical documents are vital to helping developers understand and integrate CoW DAO products into their own tech stacks. We’re proud of how they’ve turned out.

  


### In March we launched [CoW AMM Safe app](https://x.com/CoWSwap/status/1767587714826956807)

  

Funded by CoW Grants and developed by BlueFi Studio, the CoW AMM Safe app allows anyone to deploy a liquidity pool between two tokens, inside the Safe app.

  

This made it simpler than ever to pick a token pair, and let CoW AMM power your very own passive investing strategy.

  


### In May we launched [MEV Scanner](https://x.com/CoWSwap/status/1796184456631374227)

  

In late spring, we launched MEV Scanner!

  

This is an X, Telegram, and Discord bot that checks how much MEV an Ethereum wallet address has suffered.

  

This meant that anyone could look up an Ethereum wallet address, or ENS name, and a bot will respond with how much MEV the address has suffered along with the most-MEV'd AMM contract.

  

Oh and we built a [website, too](http://mevscanner.com/)!

  


### In June we launched a new brand identity
![6c078b1c-e273-4205-92ea-b79fa13f8071.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/6c078b1c_e273_4205_92ea_b79fa13f8071_8f6525cea2.png)

CoW DAO is very different today than it was when it first launched.

  

CoW DAO was created to support CoW Protocol, but over the past two years it has launched two more mission-aligned products: MEV Blocker (the #1 MEV protection RPC) and CoW AMM (the first MEV-capturing AMM).

  

Supporting three products behind CoW Protocol proved awkward and confusing, so we're re-emphasized CoW DAO over CoW Protocol. With the rebrand this allowed us - and hopefully you - to see CoW DAO products as a house of inter-connected and mission-aligned brands.

  

Not only does the new brand provide a framework to hold existing products together – it creates a flexible and cohesive identity system that can incorporate future launches, while making it easier to cross-promote every brand in the family.

### In August, we launched CoW AMM

![IcNCDH5W.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Ic_NCDH_5_W_5c6044e055.png)

While CoW DAO’s other products protect traders from MEV, CoW AMM became the first product from CoW DAO built to protect liquidity providers directly. CoW AMM is the first product on any blockchain to tackle the LVR problem head on.

  

Launching CoW AMM was a natural extension of CoW DAO’s mission to protect Ethereum users from MEV. With two successful products (MEV Blocker and CoW Protocol) aimed at traders, it was the perfect time to extend MEV protection to liquidity providers.

  

LVR is a large problem, estimated to be responsible for over $500M in value lost to MEV bots every year - more than all trading-related forms of MEV combined.

  

CoW DAO is uniquely capable of bringing an FM-AMM design to market, as it relies on a surplus-capturing solver network to balance liquidity pools. CoW Protocol currently runs the largest solver competition on Ethereum, with 19 active solvers.

  

Since launch, CoW AMM has a TVL of more than $25 million, helping market makers everywhere avoid MEV.

### In August we also relaunched the progress bar

![GWD--uLaUAAgxxN.jpeg](https://celebrated-gift-f83e5c9419.media.strapiapp.com/GWD_u_La_UA_Agxx_N_2ee8094a09.jpeg)

CoW Swap's order progress bar got a facelift! In late summer, our front-end team put the finishing touches on a shiny new progress bar. This meant traders could now see:

  

- When your order is included in a batch

- When solver competition starts

- When the best price is found

- View all solvers that took part

### In October we launched 80/20 Pools on CoW AMM

![GbyTHNDbIAAuIVa.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Gby_THN_Db_IA_Au_I_Va_e9af35e541.png)


Following on from the summer launch of CoW AMM, we rolled out a unique new feature with our partners, Balancer.

  

Loss Versus Rebalancing (LVR) is DeFi's dirty secret. As the price of an asset deviates across exchanges, arbitrageurs rush in to take advantage of price differences between pools. The first to do so can trade using an outdated price, siphoning profits from LPs.

  

Those leaks lead to $100s of millions in losses for LPs. Not on CoW AMM. Its LVR protection means pools remain leak free. By introducing 80/20 pools, CoW AMM offers more flexibility for deploying capital.

  

Using CoW AMM and 80/20 pools gives LPs:

-   Asymmetric upside
    
-   Reduced impermanent loss
    
-   Hedging
    

  

In essence, these pools can maximize exposure to the native token while providing an avenue to boost returns via trading fees and token rewards.

  

CoW AMM's 80/20 pools give liquidity providers new pastures to play in.

## New Listings

![GfGzfPNaUAAmzxn.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Gf_Gzf_P_Na_UA_Amzxn_267cee31aa.png)


The $COW token went big in 2024. Lots of centralized exchanges listed $COW, helping new users discover the COW ecosystem.

  

The likes of BitVavo, Kraken, Coinbase, Binance and BingX Official all listed $COW in 2024.

  



  

This is a big step on our journey toward making DeFi safe and seamless for all. More access equals more liquidity, more awareness and, ultimately, more users.

## CoW Protocol became the place projects go to do big things

![6o6VOK3O.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/6o6_VOK_3_O_2c07fde243.png)


In the autumn, [CoW DAO](https://cow.fi/)  [partnered with Sky](https://cow.fi/learn/cow-protocol-maker-dao-sky-transition-token-migration), formerly MakerDAO to help the project migrate its tokens as it transitions to its next chapter.

  

The team behind Sky approached CoW DAO to integrate CoW Protocol into their SWAP feature to allow users to seamlessly, and safely swap their tokens between DAI and its replacement, USDS, and its governance token MKR to SKY.

  

This was a sizable task: the MakerDAO transition was one of the largest token migrations. DAI is one of the world’s largest stablecoins, with a market cap of $5.3 billion and [more than 500,000 holders.](https://etherscan.io/token/0x6b175474e89094c44da98b954eedeac495271d0f) MKR, meanwhile, has a market cap of $1.5 billion and more than [100,000 token holders.](https://etherscan.io/token/0x9f8f72aa9304c8b593d555f12ef6589cc3a579a2)

  

But thanks to the rock-solid architecture of CoW Protocol, the migration was a smooth and simple process for thousands of traders.

  

Thinking of doing something big in 2025? [Get in touch](https://discord.com/invite/cowprotocol).

## Reflecting on our Udderly amazing Journey, and cheers to a CoW-tastic 2025!

  

This year has been the most exciting year so far for CoW DAO. We’re already diving headfirst into 2025 with a renewed commitment to more products built for both novice and experienced users.

  

Here’s to another thrilling year at the forefront of DeFi!

  

Mooooo

large_1230-yir.png

medium_1230-yir.png

small_1230-yir.png

thumbnail_1230-yir.png

1230-yir.png

See you later 2024! But before we wave goodbye to this year, let’s review all the amazing things that went on in and around CoW DAO over the last 12 months.

CoW DAO: 2024 in Review!

Nansen stands apart from conventional blockchain analytics platforms through its sophisticated wallet labeling system and real-time data tracking infrastructure. The platform has systematically categorized millions of Ethereum and multi-chain addresses, creating taxonomies that include "Smart Money" designations, institutional investors, and other significant market participants whose activities often precede broader market movements.

### Smart money dashboard

The Smart Money Dashboard represents one of Nansen's most intellectually rigorous tools for trend identification. It provides transparent visibility into the positions and strategies of consistently high-performing wallets, offering insights into professional trading methodologies.

Consider this scenario: multiple Smart Money wallets begin accumulating positions in a newly launched decentralized finance (DeFi) protocol token that has yet to attract widespread market attention. This pattern often signals an emerging investment thesis worth investigating. The dashboard features performance visualizations and token treemaps organized by market capitalization, enabling users to filter for micro-cap or low-liquidity assets that may be in early developmental phases.

**Note for newcomers:** "Smart Money" refers to wallets that have demonstrated consistent profitability and sophisticated trading patterns over time. These are typically institutional investors, successful traders, or early adopters with proven track records.

### Token God Mode

Token God Mode delivers comprehensive analytical frameworks for individual tokens, encompassing:

- Top buyers and sellers across customizable timeframes
- Holder distribution analysis and concentration metrics
- Token flow dynamics (inflows and outflows)
- Price correlation studies with trading activity patterns

This analytical tool proves particularly valuable when conducting deeper research on specific assets within identified trends.

For instance, when a gaming-focused token begins gaining market traction, Token God Mode enables you to determine whether accumulation is driven by sophisticated institutional participants or primarily retail speculation. By examining the wallet profiles of major holders, you can assess their historical performance in similar investments, providing crucial context for investment decisions.

**Note for newcomers:** DeFi refers to "Decentralized Finance" – financial services built on blockchain networks that operate without traditional intermediaries like banks.

## Methodologies for identifying emerging trends

### 1. Monitor Smart Money capital flows

The most reliable methodology for identifying emerging trends involves tracking sophisticated investor behavior before broader market recognition occurs.

**Case Study:** 
Through Smart Money Dashboard monitoring, you observe five wallets with "Smart Money" classifications simultaneously accumulating significant positions across three artificial intelligence-focused cryptocurrency tokens. This convergent behavior suggests a developing investment thesis around AI-related digital assets. Validation comes through examining these wallets' historical performance in identifying successful projects at early stages.

Implementation framework:
- Configure Smart Money Dashboard filters for micro-cap token focus
- Identify accumulation patterns across multiple sophisticated wallets
- Analyze timing and position sizing of these investments
- Cross-reference findings with Token God Mode for holder quality verification

### 2. Analyze real-time decentralized exchange activity

Nansen's DEX Trades interface provides real-time transaction visibility across decentralized exchanges, enabling identification of unusual trading patterns or emerging token interest.

**Case Study:**
The DEX Trades feed reveals unusual volume activity in a token designated "META," showing multiple substantial purchases from wallets labeled as "Smart Money" or "Fund." Despite only two weeks of market existence, the token demonstrates consistent accumulation patterns. This activity often precedes mainstream media coverage of metaverse-related investment trends.

**Note for newcomers:** DEX stands for "Decentralized Exchange" – trading platforms that operate without central authorities, allowing direct peer-to-peer cryptocurrency trading.

Strategic implementation:
- Apply Smart Money filters to DEX trade monitoring
- Identify volume anomalies in recently launched tokens
- Compare current activity with historical trading patterns
- Focus on persistent accumulation rather than speculative price manipulation

### 3. Assess on-chain community development metrics

Community strength and growth patterns serve as leading indicators of project viability. Nansen's analytics framework enables tracking of on-chain metrics that reflect genuine community engagement.

**Case Study:**
Utilizing Nansen's Profiler, analysis of a new DeFi protocol reveals 45% growth in unique holders over one week, despite minimal marketing expenditure or media exposure. Additionally, token distribution patterns show increasing decentralization rather than concentration among large holders. These metrics typically indicate organic community development and growing project interest.

Essential monitoring metrics:
- Holder count growth trajectories
- Token distribution decentralization patterns
- Transaction frequency and consistency
- Protocol participation and staking rates

### 4. Deploy strategic alert systems

Nansen's Smart Alerts functionality enables automated notifications for specific on-chain events, including large token transfers or liquidity additions, providing early trend detection capabilities.

**Case Study:**
Configured Smart Alerts notify you when Smart Money wallets add liquidity exceeding $50,000 to new Uniswap token pairs. An alert indicates three different Smart Money wallets have added liquidity to a newly launched DeFi lending protocol. This early notification provides research opportunities before wider market awareness develops.

**Note for newcomers:** Uniswap is a leading decentralized exchange protocol. When sophisticated investors add liquidity to new token pairs, it often signals confidence in the project's potential.

Effective alert strategies:
- Monitor liquidity additions by historically successful investors
- Track multiple Smart Money wallet interactions with identical new contracts
- Set notifications for significant token accumulations by labeled addresses
- Monitor new contract deployments by teams with proven success records

## Conducting comprehensive due diligence

After identifying potential emerging trends or promising tokens, Nansen provides analytical tools for thorough investigation before investment consideration.

### Wallet Profiler for deep analysis

The Wallet Profiler enables comprehensive address analysis, revealing:
- Historical trading performance and profitability
- Portfolio composition and diversification
- Protocol interaction patterns
- Trading methodologies and strategic approaches

**Case Study:**
Following identification of a potentially emerging GameFi token showing accumulation patterns, Wallet Profiler analysis reveals that accumulating wallets previously held positions in three GameFi tokens that subsequently appreciated 5-10x in value. This historical pattern reinforces confidence in the identified trend.

**Note for newcomers:** GameFi combines gaming and decentralized finance, creating blockchain-based games where players can earn cryptocurrency rewards.

### Integration with off-chain intelligence

While Nansen provides sophisticated on-chain analytics, combining this data with traditional research methodologies creates comprehensive investment intelligence.

**Case Study:**
A token showing strong Smart Money accumulation on Nansen receives additional validation through GitHub repository analysis, revealing consistent development activity with regular code commits. The project's Discord community demonstrates steady growth with active developer engagement. This multi-dimensional approach validates on-chain signals identified through Nansen's platform.

## Systematic framework development

To consistently identify emerging trends using Nansen, consider implementing this structured approach:

1. **Daily market screening**: Allocate 20-30 minutes daily for Smart Money Dashboard and DEX activity review to identify pattern anomalies.

2. **Weekly analysis sessions**: Conduct comprehensive analysis of 2-3 potential trends identified during daily screenings.

3. **Performance tracking**: Maintain detailed records of identified trends and subsequent outcomes to refine analytical methodologies.

**Case Study:**
Daily screening identifies unusual Smart Money accumulation across tokens related to Decentralized Physical Infrastructure Networks (DePIN). Weekly analysis using Token God Mode reveals consistent accumulation patterns and expanding holder bases. This analysis identifies DePIN as an emerging sector warranting continued monitoring.

**Note for newcomers:** DePIN refers to blockchain networks that incentivize the creation and maintenance of physical infrastructure like wireless networks, sensors, or computing resources.

## Critical pitfalls to avoid

### 1. Distinguishing manipulation from genuine trends

**Differentiation strategy**: Utilize Nansen's wallet quality analysis and distribution metrics. Authentic trends typically demonstrate Smart Money accumulation with gradual holder base expansion, while manipulative schemes show concentrated ownership and dramatic early-holder liquidations.

**Case Study:**
A memecoin exhibits explosive 24-hour growth. Token God Mode analysis reveals 90% token concentration among five wallets with histories of creating short-lived projects. This concentration pattern suggests market manipulation rather than sustainable trend development.

### 2. Avoiding single-metric dependencies

No individual metric provides complete investment intelligence. Combining multiple Nansen data points creates more reliable analytical signals.

**Case Study:**
Despite strong Smart Money accumulation signals, holder metrics reveal minimal unique address growth and limited transaction activity outside major wallets. This contradictory data suggests potential trend weakness despite Smart Money interest.

## Conclusion

Nansen provides a sophisticated analytical suite for identifying emerging trends and promising digital assets before mainstream market recognition. Through systematic Smart Money monitoring, DEX activity analysis, community growth assessment, and strategic alert deployment, users can develop significant informational advantages in rapidly evolving cryptocurrency markets.

Optimal results require combining multiple Nansen features with disciplined analytical processes and strategic patience. Rather than pursuing already-appreciated assets, this methodology focuses on identifying quality projects during early accumulation phases, potentially enabling entry before significant price appreciation occurs.

**Important note:** While Nansen provides data-driven market intelligence, all cryptocurrency investments carry substantial risk. Always conduct thorough due diligence and implement appropriate risk management strategies when acting on identified trends. Past performance does not guarantee future results, and the cryptocurrency market remains highly volatile and speculative.

For those new to cryptocurrency investing, consider starting with small positions while developing familiarity with these analytical tools and market dynamics. The complexity of blockchain analytics requires time to master, but the insights gained can provide valuable market intelligence for informed decision-making.

## Frequently asked questions

### What is Nansen?

Nansen is a blockchain analytics platform that differentiates itself through its comprehensive wallet labeling system and real-time data tracking capabilities. It has labeled millions of Ethereum and other blockchain addresses, categorizing them into segments such as "Smart Money," institutional investors, and other significant market participants.

### How does Nansen work?

Nansen works by providing on-chain data analytics through several core features including the Smart Money Dashboard, Token God Mode, Wallet Profiler, and DEX Trades feed. These tools allow users to track wallet activities, monitor token transactions, analyze holder distributions, and identify patterns in trading behavior across different timeframes. The platform combines wallet labeling with real-time blockchain data to provide actionable insights.

### What are memecoins?

Memecoins are cryptocurrencies that originated from internet memes or jokes, often lacking serious utility or technological innovation. Unlike utility tokens that serve specific functions within ecosystems, memecoins typically rely on community engagement, viral marketing, and social media presence for their value. Examples include Dogecoin, Shiba Inu, and various other tokens that gain popularity through cultural references or humor.

### How to identify the next viral memecoin using Nansen?

To identify potential viral memecoins using Nansen:
- Monitor Smart Money wallets for early accumulation of new memecoin tokens
- Use the DEX Trades feed to spot unusual trading volume in recently launched memecoins
- Track wallet distribution patterns to distinguish between organic community growth and concentrated ownership
- Set up Smart Alerts for when known successful meme investors interact with new tokens
- Look for consistent accumulation rather than pump-and-dump patterns
- Cross-reference on-chain data with social media momentum

### How Nansen helps you spot the next big memecoin?

Nansen helps spot potential successful memecoins by providing insights into the quality of investors accumulating tokens. Using Token God Mode, you can analyze if sophisticated investors with track records of successful memecoin investments are buying a particular token. You can also track holder count growth, distribution patterns, and trading volume to differentiate between short-lived pumps and tokens with sustainable momentum. The platform allows you to see beyond price action and evaluate the underlying investor behavior driving memecoin markets.

### How to research a token using onchain data?

To research a token using on-chain data:
- Use Token God Mode to examine top buyers/sellers across different timeframes
- Analyze holder distribution to assess token concentration
- Track inflows and outflows to determine net accumulation or distribution
- Examine the wallet profiles of major holders to evaluate their investment history
- Monitor smart money movement related to the token
- Assess transaction frequency and trading patterns
- Compare on-chain metrics with price action to identify discrepancies
- Look at liquidity depth and changes over time

### How to group wallets to discover your own?

Nansen allows you to analyze wallet behaviors and create custom groupings based on specific criteria. To create your own wallet groups:
- Identify common transaction patterns or token holdings that interest you
- Study wallets with successful trading histories in specific niches
- Group wallets based on interaction with particular protocols
- Create filters for wallets that meet certain performance metrics
- Track these custom groups over time to validate their predictive value
- Refine your groupings based on performance data and evolving patterns
- Use these custom segments to supplement Nansen's pre-defined categories

### How to identify market trends alongside following professional trades?

To identify market trends beyond just following professional traders:
- Monitor sector-wide token movements (e.g., DeFi, GameFi, AI tokens)
- Track unique address growth across related tokens to identify emerging sectors
- Analyze protocol usage metrics alongside investment flows
- Look for correlations between on-chain activity and market performance
- Combine Smart Money movements with broader market participation patterns
- Set up comparative analytics between similar tokens to spot relative strength
- Use cross-referencing between on-chain data and off-chain developments like GitHub activity or social growth

### How to identify emerging trends and tokens with Nansen crypto?

To systematically identify emerging trends with Nansen:
1. Track Smart Money movements to spot patterns of accumulation in specific tokens or sectors
2. Monitor real-time DEX activity for unusual trading patterns or sudden interest
3. Track social and community growth through on-chain metrics like holder count growth and distribution patterns
4. Set up Smart Alerts for early detection of significant on-chain events
5. Conduct deeper analysis using Wallet Profiler to verify the quality of investors in promising tokens
6. Cross-reference on-chain data with off-chain information
7. Implement a systematic framework with daily screenings and weekly deep dives
8. Maintain a log of identified trends to refine your methodology over time

Discover emerging crypto trends before the market with Nansen's advanced blockchain analytics. Learn to track Smart Money movements, analyze DEX activity, and identify promising tokens through comprehensive wallet profiling and real-time on-chain data.

How to identify emerging trends and tokens with Nansen

Token flow analysis represents one of the most significant advantages of cryptocurrency markets over traditional finance: the ability to observe capital movements in real-time. Unlike conventional markets where institutional positioning and major transactions remain private, blockchain networks provide unprecedented transparency into how capital moves between participants.

This analysis examines cryptocurrency movements between wallets, exchanges, and other blockchain entities to reveal critical market intelligence including:

- **Accumulation and distribution patterns** by significant holders
- **Institutional positioning** preceding major market movements  
- **Sophisticated investor behaviors** that typically precede price action
- **Exchange flows** indicating directional pressure
- **Capital allocation** during significant market events

For professionals accustomed to traditional markets, this level of transparency requires new analytical frameworks and tools. Nansen Analytics provides institutional-grade infrastructure for interpreting these complex data streams.

## Essential Nansen features for token flow analysis

### Fresh wallet dashboard: identifying new market participants

The Fresh Wallet Dashboard monitors recently created addresses exhibiting significant transaction volumes. This feature provides valuable intelligence because:

**New wallet creation typically signals strategic intent**, whether for receiving substantial capital allocations or implementing transaction privacy measures. During major market events—token unlocks, institutional distributions, or regulatory developments—fresh wallet activity often precedes broader market movements.

**Strategic positioning becomes visible through fresh wallets**, particularly during token unlock events, airdrop distributions, or institutional rebalancing. These addresses frequently reveal coordination between sophisticated market participants.

**Exchange operational changes emerge through fresh addresses**, as major platforms periodically rotate cold storage infrastructure for security purposes.

**Practical Example**: Following BEAM's price appreciation from $0.018 to $0.023, sophisticated addresses transferred significant token quantities to Binance and MEXC. This pattern, visible through Fresh Wallet tracking, indicated coordinated profit-taking by informed participants ahead of broader market recognition.

### Token God Mode: comprehensive asset intelligence

This analytical dashboard aggregates multiple data streams for individual tokens:

- Real-time price and volume metrics
- Major holder identification and transaction history
- Sophisticated investor interactions and patterns
- Exchange flow analysis (inbound and outbound)
- Decentralized exchange trading behaviors

**Implementation Strategy**: When analyzing assets like Chainlink (LINK), Token God Mode enables identification of accumulation patterns through Fresh Wallet balance analysis. Wallets that maintain holdings rather than transferring to exchanges often signal confidence in long-term value appreciation.

## Professional applications of token flow analysis

### Sophisticated investor tracking

Nansen's Smart Money classification identifies addresses demonstrating exceptional performance in specific blockchain activities:

- **Decentralized exchange trading** with consistently profitable outcomes
- **Liquidity provision** generating superior risk-adjusted returns
- **NFT trading** with documented alpha generation
- **Airdrop optimization** through early protocol participation

**Analytical Process**:
1. Access Nansen's Smart Money Dashboard with appropriate time-frame filters
2. Identify tokens experiencing Smart Money accumulation or distribution
3. Monitor specific high-performing addresses for pattern recognition
4. Cross-reference behaviors across different Smart Money categories

**Strategic Insight**: When Smart DEX Traders accumulate specific tokens while Smart NFT Traders reduce exposure, this divergence may indicate sector rotation opportunities worth deeper investigation.

### Exchange flow analysis

Exchange movements provide leading indicators for directional market pressure:

**Inbound flows** to centralized exchanges typically precede selling activity, as users transfer assets to platforms for liquidation. **Outbound flows** generally indicate accumulation intentions or institutional custody transfers.

**Case Study Application**: Observing $5 million in mid-cap token transfers to Binance from multiple sophisticated addresses within 24 hours suggests potential selling pressure. Conversely, systematic weekly withdrawals of equivalent value typically indicate long-term accumulation strategies.

### Token distribution event analysis

Token unlock events create significant market volatility. Nansen enables comprehensive tracking through:

1. **Fresh Wallet monitoring** during unlock periods
2. **Source address identification** (treasury, team, or investor allocations)  
3. **Subsequent transaction analysis** (retention versus exchange transfer)

**Detailed Example**: During an ORBR unlock event, Fresh Wallet inflows totaled $502 million while ending balances measured $467 million—indicating approximately 7% distribution to secondary markets. Token God Mode confirmed these movements concentrated on Gate.io, providing advance notice of potential selling pressure.

## Advanced analytical strategies

### Custom Smart Segments creation

For multi-token analysis across specific cohorts:

1. **Define custom wallet groups** using Nansen's Smart Segments functionality
2. **Establish specific criteria** including token holdings, transaction patterns, and historical behaviors
3. **Implement collective monitoring** for cohort-based insights

**Strategic Application**: Create a "Solana Ecosystem Early Adopters" segment by identifying addresses participating in multiple protocol launches. Monitoring their subsequent allocations reveals emerging opportunities within that ecosystem.

### Real-time alert configuration

Professional-grade monitoring requires systematic notification systems:

1. **Configure threshold-based alerts** for specific tokens or address clusters
2. **Establish transaction size parameters** relevant to market impact
3. **Integrate notifications** with professional communication platforms

**Implementation Example**: Configure alerts for transfers exceeding $100,000 of specific tokens to major exchanges by Smart Money addresses, providing early warning systems for potential market movements.

### Multi-variable analysis framework

Sophisticated analysis requires combining multiple data streams:

- **Token flows + Smart Money activity + Exchange movements**
- **Fresh Wallet creation + Source identification + Transaction patterns**  
- **DEX volumes + CEX flows + Holder concentration metrics**

**Comprehensive Example**: A governance token displaying Smart Money accumulation, declining exchange balances, and expanding DEX liquidity—combined with increasing Fresh Wallet creation but minimal exchange transfers—suggests fundamental interest rather than speculative activity.

## Analytical limitations and professional considerations

Understanding Nansen's constraints ensures appropriate application:

**Exchange Internal Operations**: Only deposits and withdrawals are visible; internal trading and custody arrangements remain opaque.

**Address Classification Uncertainty**: Wallet labels rely on behavioral analysis and public disclosure rather than definitive identification.

**Privacy Implementation Complexity**: Cross-chain bridges, mixing services, and privacy protocols can obscure transaction flows.

**Correlation Versus Causation**: Token flows provide market intelligence but don't guarantee price movements without additional fundamental analysis.

## Professional integration and conclusion

Token flow analysis through Nansen provides institutional-quality intelligence typically unavailable in traditional markets. By systematically monitoring Fresh Wallets, Smart Money behaviors, exchange flows, and implementing custom monitoring frameworks, professionals can identify opportunities earlier and validate investment theses with quantitative blockchain evidence.

The most effective practitioners integrate Nansen's on-chain intelligence with fundamental analysis, macroeconomic assessment, and technical analysis to develop comprehensive market perspectives. As blockchain ecosystems increase in complexity and institutional adoption accelerates, platforms like Nansen become essential infrastructure for distinguishing meaningful signals from market noise.

For professionals transitioning from traditional finance, token flow analysis represents both a significant learning curve and a substantial competitive advantage. The transparency inherent in blockchain networks, when properly analyzed, provides unprecedented insights into market participant behavior and capital allocation decisions.

## Frequently asked questions

### Is Nansen AI worth it?

Nansen AI offers significant value for crypto investors through its token flow analysis capabilities. The platform provides unique insights into wallet behaviors, Smart Money movements, and exchange flows that aren't readily available elsewhere. Features like the Fresh Wallet Dashboard and Token God Mode deliver actionable intelligence on accumulation patterns, institutional positioning, and potential market movements. While the service requires a subscription, serious crypto investors often find the edge provided by seeing these on-chain signals before they manifest in price action to be worth the investment, especially when making decisions involving significant capital.

### How do I track my money flow in crypto?

To track money flow in crypto, you can use several approaches:

1. Monitor exchange inflows and outflows to identify buying or selling pressure
2. Track Smart Money wallets that demonstrate exceptional returns in specific on-chain activities
3. Analyze Fresh Wallet activities, which often signal strategic positioning
4. Examine token movements during unlock periods or significant market events
5. Create custom Smart Segments to monitor specific wallet groups
6. Set up Smart Alerts for real-time notifications about significant token movements

Tools like Nansen provide comprehensive dashboards for visualizing these flows, helping you identify accumulation patterns, distribution signals, and potential market opportunities before they become obvious in price action.

### How to use Nansen?

To use Nansen effectively:

1. Start with the Fresh Wallet Dashboard to identify recently created wallets showing high-volume activity, which often signals intent or strategic positioning.
2. Utilize Token God Mode for comprehensive insights into specific tokens, including price data, major holders, Smart Money interactions, and exchange flows.
3. Track Smart Money movements through the Smart Money Dashboard, filtering by relevant time periods to identify tokens being accumulated or sold.
4. Monitor exchange flows to gauge potential buying or selling pressure, with inflows typically signaling selling intent and outflows indicating accumulation.
5. Create custom Smart Segments for targeted analysis across multiple tokens based on specific criteria.
6. Set up Smart Alerts to receive real-time notifications about significant token movements.
7. Cross-reference multiple data points for the most effective analysis, combining token flows, Smart Money activity, exchange movements, and other metrics.

### How to analyse crypto tokenomics?

Analyzing crypto tokenomics effectively combines several approaches:

1. Study token distribution patterns using tools like Token God Mode to identify major holders and their activities.
2. Monitor exchange inflows and outflows to gauge market sentiment and potential price movements.
3. Track Smart Money interactions with tokens to identify accumulation or distribution patterns by sophisticated investors.
4. Analyze token unlocks and subsequent movements, particularly whether tokens are held or transferred to exchanges.
5. Examine holder concentration metrics to understand if tokens are widely distributed or concentrated among a few addresses.
6. Review DEX trading patterns and liquidity provision to assess market depth and trading interest.
7. Monitor Fresh Wallet creation and subsequent behaviors, especially during significant events like airdrops or token unlocks.
8. Assess token utility and actual usage on-chain versus speculative trading.

For comprehensive analysis, combine these on-chain metrics with fundamental research about the token's utility, governance structure, and the team's execution capabilities.

Master token flow analysis with Nansen's blockchain intelligence tools. Learn to track Smart Money movements, exchange flows, and Fresh Wallet patterns for professional crypto market insights and institutional-grade investment intelligence.

How to analyze token flows with Nansen

![Meta-dex.png](https://celebrated-gift-f83e5c9419.media.strapiapp.com/Meta_dex_d3eff919a4.png)


You’ve probably heard of a DEX, or decentralized exchange. But you’re probably not as familiar with DEX aggregators and probably less so with Meta DEXes. Don’t worry, you’ve come to the right place.

  

Decentralized exchanges have evolved at a rapid pace. New features and new mechanisms have emerged that make trading safer, simpler, and more customizable.

  

In this article we’ll walk you through all the different types of DEX and why Meta DEXes give more options, more features, and more peace of mind.

## What is a DEX aggregator?

  

As a starting point, it’s important to understand the differences between the types of decentralized exchanges we’re talking about in this article.

  

A DEX aggregator is a platform that searches multiple decentralized exchanges to find the best prices for your trades. In the world of crypto, the price of an asset will vary depending on where, when and what medium you use to make a trade.

  

But finding the best price manually can be time-consuming. This is where a DEX aggregator comes in. They provide a single platform where multiple options for buying and selling can be seen on one page. They search platforms such as Balncer, Uniswap, and others for the best price for your trade, and you can complete a trade without having to visit those sites yourself.

  

DEX aggregators have become pivotal to the world of decentralized finance (DeFi) by providing a single trading platform for users looking to get the best deal on their swaps.

  

DEX aggregators also provide users with a secure, non-custodial trading experience, as trades are executed directly from the user’s wallet, instead of a user having to deposit funds to the aggregator’s wallet.

## But aren’t there different types of DEX aggregator?

  

Absolutely yes. As the crypto industry has matured, so has the sophistication of DEX aggregators. Today there are lots of different types of DEX aggregator that have different features. Below is an overview of some of them.

  

-  ** Smart Order Routing (SOR) aggregators**: These DEXes use algorithms to route orders to the best markets based on factors like price, liquidity, and trading volume. SOR systems analyze real-time market data and route orders based on factors such as price, volume, liquidity, and fees. This helps traders to optimize their trading strategies and reduce trading costs by accessing multiple markets simultaneously.
    
-   **Market Maker aggregators:** These aggregators create their own liquidity by acting as market makers for and across multiple DEXs.
    
-   **Hybrid aggregators:** Combine the advantages of SOR and market maker aggregators to provide a more flexible and personalized trading experience.
    
-   **Liquidity aggregators:** Specialize in combining liquidity from multiple DEXs
    
-   **Intent-based DEX aggregators:** Offer personalized liquidity sourcing and optimized trade execution. More on these later.
    
-   **Meta DEX aggregators:** These take the DEX idea further again, by aggregating other DEX aggregators, to create one super aggregator. We’ll dive into these in a bit.
    

  

By now you’ll start to see that the DEX ecosystem is complex. DEX aggregators can help you find the best prices for your trades without you having to do all the work. But there are other reasons too why you might consider them.

### Benefits of Using a DEX Aggregator

  

DEX aggregators provide a number of benefits, simplifying trading and providing better outcomes for users. Below is a summary of some of the other benefits they can offer traders, too.

  

-   **Better Prices:** DEX aggregators look across multiple on-chain decentralized exchanges to find the best prices for any given token pair. Since most on-chain trading relies on [automated market makers (AMMs)](https://cow.fi/learn/cow-protocol-glossary#:~:text=amm), liquidity may be fragmented across various exchanges. As their name suggests, aggregators collect this liquidity in one place, giving traders the best deal for their swaps.
    
-  **Convenience:** By using a DEX aggregator, traders can reliably get good prices for their trades in one place without having to check multiple exchanges.
    
-   **Price Impact Protection**: Fragmented liquidity can sometimes make for shallow pools, meaning large trades experience significant [price impact](https://blog.cow.fi/cow-protocol-glossary-ad7313a2c71#:~:text=Price%20Impact). Aggregators can break up trades across multiple exchanges, reducing price impact and providing better prices.
    
-   **MEV Protection:** In the case of intent-based DEX aggregators, solvers execute trades on behalf of users—protecting them from price exploitation in the form of [maximal extractable value (MEV)](https://cow.fi/learn/understanding-mev-protection).
    

  

Fragmented liquidity often makes finding the best route for trades difficult. DEX aggregators bring this liquidity back together and take the work of finding the best prices off the backs of users.

  

But not all DEX aggregators are created equally. That’s why in the next section we’ll be looking at Meta DEX aggregators and how they’re shaping the future direction of DeFi.

## What is a Meta DEX Aggregator?

  

Meta DEX aggregators are a step up from traditional aggregators. As the “meta” name implies, they aggregate DEX aggregators. This leads to better liquidity coverage across more venues, while still providing users with a single interface for their trades.

  

Why would you want to aggregate an aggregator? There are many reasons. The first is that DEX and DEX aggregators have strong points and weak points. Some are better for large trades, others for small trades, and some are better across certain trading pairs. There’s a good bit of research on the strengths and weaknesses of DEX aggregators [here](https://jumper.exchange/learn/dex-aggregator). A meta DEX negates those weak points, by routing your trade to the DEX that is strong for the type of trade you’re trying to do.

  

Another key reason for a Meta DEX Aggregator is that it can integrate features not found on the DEXes themselves. We’ll discuss this more in our next section.

## CoW Swap - the Meta DEX built differently

  

CoW Swap is an Intent-Based Meta DEX Aggregator. Intent-based aggregators are the most advanced type of DEX aggregator out there.

  

That’s because they not only aggregate on-chain liquidity across exchanges and other aggregators, they also delegate execution to third parties known as “solvers.” These third parties provide additional sources of liquidity by including private inventory and, in certain cases, even matching trades peer-to-peer. This avoids protocol fees and makes for the most efficient trades in DeFi.

  

But there’s more. As a Meta-DEX, CoW Swap brings additional features, such as MEV Protection.

  

MEV or “maximal extractable value” is a hidden tax on all types of Ethereum transactions. Any time you make a DeFi trade, buy or sell an NFT, or lend tokens to a liquidity pool, opportunistic users known as “searchers” may manipulate your trades, resulting in unfavorable prices, failed transactions, and missed opportunities. With CoW Swap, you have no such worry.

  

That’s because this Meta DEX has built in MEV protection, so bots cannot see your trades. Find out how CoW Swap keeps [bots out of your business here](https://cow.fi/learn/mev-blockers-explained-how-they-protect-users).

  

Another feature found in a meta DEX like CoW Swap is different order types. Most DEXes have some order type functionality, CoW Swap goes further. Below is a list of the different types of orders you can do with CoW Swap.

  

-   **[Market orders](https://docs.cow.fi/cow-protocol/concepts/order-types/market-orders)** - buy or sell tokens as soon as possible at the current market rate.
    
-   **[Limit orders](https://docs.cow.fi/cow-protocol/tutorials/cow-swap/limit)** - set your own parameters for how much you are willing to buy and sell.
    
-   **[TWAP orders](https://cow.fi/learn/getting-to-grips-with-time-weighted-average-price-twap-orders)** - allows traders to spread their trade over a specified period of time.
    
-   **[Programmatic orders](https://docs.cow.fi/cow-protocol/concepts/order-types/programmatic-orders#:~:text=CoW%20Protocol's%20Programmatic%20Order%20Framework,elapsed%2C%20and%20much%20more).)** - create conditional orders that execute when certain on-chain conditions are met (such as asset prices, wallet balances, time elapsed, and much more)
    
-   **[Milkman orders](https://cow.fi/learn/what-is-milkman-cow-swaps-solution-for-delayed-execution-trading)**- delayed execution trading: set and forget your trades for optimum conditions.
    
-   **[CoW Hooks](https://docs.cow.fi/cow-protocol/concepts/order-types/cow-hooks)**- allow users to pair any Ethereum action (or set of actions) with an order on CoW Protocol, leveraging the [solvers](https://docs.cow.fi/cow-protocol/concepts/introduction/solvers) to execute the actions together in the sequence.
    

  

In summary, CoW Swap brings you class-leading MEV protection, liquidity access and custom order types to let you do more with less worry.

## So why should you use CoW Swap for your trades?

  

CoW Swap takes the world of DEX aggregators and takes it to the next level. CoW Swap is not only the largest intent-based aggregator, it’s also one of the largest DEX aggregators. In November 2024, it [handled $6.2 billion in trading volume](https://x.com/CoWSwap/status/1869017209345130511), and is trusted by thousands of traders.

  

Whales and DAOs (as well as retail users) rely on CoW Swap as their aggregator of choice too because CoW Swap does more than just aggregate liquidity. It also provides comprehensive [MEV protection](https://cow.fi/learn/understanding-mev-protection) and enables price optimizations — such as [CoWs](https://cow.fi/learn/what-are-cows-on-cow-swap) — that traditional aggregators can’t. Thanks to its intent-based architecture, CoW Swap supports 22 solvers that compete with each other to find the best prices for each user trade, and even provide a price surplus on top.

  

While other aggregators claim to provide the best prices, CoW Swap’s architecture is built from the ground up to incentivize the best prices and the most surplus for trades, all in an easy-to-use, worry-free interface.

  

Give CoW Swap a try for yourself at [swap.cow.fi](https://swap.cow.fi/#/swap?utm_source=medium&utm_campaign=dex-aggregator-article).

large_Meta-dex.png

medium_Meta-dex.png

small_Meta-dex.png

thumbnail_Meta-dex.png

Meta-dex.png

Meta DEXes are the next step in the DeFi journey. Find out what they are and why you should be using them. 

What is a Meta DEX - and why should you use it for your trades? 

CoW DAO develops the most user-protective products in Ethereum - so you can do more with less worry.

All articles