MEV Explanation and CowSwap Guide

Cow protocol is the settlement layer for trading which is decentralized. This kind of trading will give you the opportunity to swap assets that have protection at the best exchange rate. CowSwap refers to a unique way of matching transactions for the product.

CowSwap

With CowSwap two people that hold the assets they want at the same time can match a transaction without the need for market makers or providers. By doing this the best price can be presented to the traders without the commissions of the market makers and providers.

The current Dex transaction aggregator depends on third-party liquidity which can improve the efficiency of the transaction, but there can still be transaction fees. CowSwap can reduce transaction costs because it uses a combination of Cow orders and third-party flows.

MEV   

MEV stands for minor extraction value. People call it the non-visible tax on Ethereum users. It refers to profits that can be made by extracting value from Ethereum users by reordering, inserting, or censoring orders transactions within blocks being produced.

One interesting fact is that MEV was founded in 2014, a year before Ethereum was launched in the crypto market.

Minor extraction value is connected with miners, but it is not a Proof-of-work or an Ethereum-exclusive issue. Most of these kinds of extractions come from arbitrage traders and bot operators. They are called searchers because they always seek opportunities on-chain and capture them.

You can find MEV on all smart contracts that have blockchains enabled like Ethereum 2.0.

How to swap on CowSwap and make more money by trading?

One thing that you can do on CowSwap is trade with WETH raft Ethereum.  WETH is Ethereum that is trading on top of Ethereum. Basically, a wrapped Ethereum token.

On CowSwap you can find the best rates within all DEX aggregators and do trades with no fees. Also, you have protection from all kinds of MEV.

If you are paying the recommended gas price on the Ethereum gas tracker it will take about five minutes to complete the swap. When using CowSwap there is no end date for using the length of the rewards program.

The gas plus all the protocol fees cost around $15-$20 of ETH to deposit. Traders are paying protocol fees depending on where liquidity is going to spring.

Because of the gasless trading, a small part of your token that is traded is going to be used for covering the network transaction fees. Before swapping CowSwap will show the fees under the fees section.

There are a lot of risks if you decide to trade with CowSwap, so first do your own research before you start. Smart contract risks, oracle failure, and governance attacks in Gnosis Protocol, systemic risk in Defi, stable coins may de-peg are just some of the risks in CowSwap.  

Tutorial

Here is a step by step on how to trade on CowSwap:

1. The first thing you need to do is go to the CowSwap app and connect your Ethereum wallet or xDAI
2. Secondly you should specify which tokens you want to swap. For example, you can choose to swap CRV to wNXM, as in the picture below.
3. Next, if you want to trade with ETH, you will need to wrap ETH to WTH first. CowSwap user interface will evoke you to do it.
4. In this step you are ready for trading. Now you are going to see the projected fees, which you will pay. In this example for the starting tokens (CRV) instead of ETH. CowSwap will even warn you if you are going to spend or lose a larger percent of your tokens with fees.

After you completed the previous steps you can click on the swap button. You will see a prompt window to approve the ERC20 token first. This will cost you some ETH for gas. Keep in mind that the second transaction is just a signature, so it will not cost you any ETH in gas.

In the end, you will pay any network/protocol fees with the token you are trading from CRV. Those are all the steps you need to know about trading on CowSwap.  

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