Summary
CoW DAO is launching CoW AMM, an MEV-capturing automated market maker to solve the LVR problem faced by liquidity providers. LVR leads to LP losses due to arbitrage bots, with research suggesting LPs earn less than 5-7% on major token pairs. CoW AMM aims to provide an advantage to LPs by allowing solvers to compete for rebalancing pools at better prices. The goal is to protect LPs from MEV bots and increase liquidity in the decentralized finance space. Balancer Labs CEO expressed excitement for custom AMM designs like CoW AMM.
Key Points
1. CoW DAO is launching an MEV-capturing automated market maker called CoW AMM to benefit liquidity providers.
2. CoW AMM aims to address the ‘loss versus rebalancing’ problem faced by liquidity providers, caused by arbitrage bots exploiting price discrepancies.
3. LPs for major token pairs earn less than 5-7% on their deposits due to LVR, with arbitrageurs causing an estimated $500 million in LP losses annually.