How Introducing Competition Fixes De-Fi w/ Anna George and Andrea Canidio (CoW Protocol)

Transcript

[Music] hello and welcome back for another episode of The Strange waterer podcast thank you for joining us let's say I have three friends Alice Bob and Charlie Alice has five apples but wants a gallon of milk Bob has a gallon of milk but wants a bouquet of roses and Charlie has a bouquet of roses but he wants five apples now these are not hard problems to solve Alice Bob and Charlie can all head down to the farmers market and let the free market work this all out Alice

can head to the Fruit Stand and sell her apples and then use the cash to buy milk Bob can sell his milk at the Dairy and then go pick up flowers and Charlie can sell the roses for cash to be used for apples and yes this definitely works all my friends walked away with exactly what they needed but if you look under the hood the picture is a little less Rosy maybe the florist noticed Bob was coming in and raised his prices or maybe the Fruit Stand just got a huge over supply of apples and so gives Alice a bad price and even if everyone can trade at the real market price every leg of every transaction needed to pay

taxes but what if we were just a little bit smarter about solving this problem maybe Alice Bob and Charlie have all shared their goals with me and I notice that this problem can be solved internally or maybe these three are also friends with Edward who realizes that if he incorporates Fred and Greg into this everyone can actually end up with even more of what they want this is the idea behind cow swap cow is an acronym that stands for Coincidence of wants a want or also called an intent looks like Alice intends to trade five apples for one gallon of milk or maybe more applicably

Alice intends to swap x e for y z token Tak an into individually an intent looks like a trade but taken together intents form an intricate puzzle with thousands of different solutions cow swap is a platform for specialized entities called Searchers to scan through these intents and to build different solutions whichever Searcher is able to maximize the outcome for the users that are actually generating the intents when's the privilege of actually executing it and capturing fees from it so this will give you enough background for today's guest cow swap CEO and

co-founder Anna George and Senior research Economist Andrea canido today's conversation is an incredible look into one of the most exciting companies in crypto we go deep into How cow swap is built and how it works and we go through a lot of exciting cow swap road map and Alpha but for me what was most interesting about today's conversation was taking a step back and thinking about how cow swap facilitates communication between offchain compute and onchain settlement as we enter the era of the modular blockchain the age of the world computer I am just so struck by How cow

swap has already deployed these ideas to facilitate over a billion dollars of trading volume every month and it's only growing one more thing before we begin please do not take Financial advice from this or any podcast ethereum will change the world one day but you can easily lose all of your money between now and then also extra disclaimer I own a small position in the cow token and so everything I say should be taken with an extra grain of salt today okay and now Anna and Andrea Andrea Anna thank you so much for

joining us on the strange waterer podcast yeah thank you Rex for having us thank you for having us of course so I'm a huge believer that uh the most important part of every conversation are the people in it so can't wait to get to cow Swap and intense and figuring out how we're changing blockchain but before we get there can you both just give us a little bit about your background and how you found computer science and then maybe how you found crypto maybe Andrea first yes so I never found computer science actually I'm a background as an economist so I have I I started out my career as an academic Economist with my PhD started working as assistant professor my main research topic has always for a long time been blockchain and uh the game theory of blockchain the mechanic design applied to blockchain

and then uh you know I decided to uh switch to the to actually from studying things to doing things and I think as a as a mechanism design expert I think there was no better place than cow swap since it is actually like the core of the thing is an auction is a mechanism and so that's how I landed in my current position it is a senior research Economist at at cowap and I just have to dig in a little bit more on that I mean at a certain point any respectable economists looked the first time they looked at Bitcoin and crypto thought like this is a scam and then some of us actually figured it out and made the transition over but for you what was the your kind of hook that got you interested and what was the thing that

made you decide to make the leap uh I think uh when the like Bitcoin and blockchain came out a lot of The Economist were very skeptical because it looked like a very inefficient technology to do something that we could already do uh better with existing technology um which was somewhat correct because obviously having a whole network of miners mining versus having a single server doing the same thing was much more would have been much more economical but where my of Economist training came in was like okay it's technologically more efficient to have a single server but this single server has Monopoly power so can access can charge fee can extract value through that and so was really about hey look there is a maybe a technologically more inefficient

way to do things but where economically from the point of view of reducing Market power uh is actually better so I was got intrigued for through this angle let's put it this way I do think that um if you have any interest or or experience dealing with Monopoly in the real world like crypto makes a lot more sense than if you you know I used to work for um anheiser Bush inbev which in Europe is like beex Stella you know it's the largest beer company in the world and until you actually experience either getting screwed by Monopoly or being able to screw other people with the power Monopoly it just kind of seems like something academic that doesn't really matter and um I think crypto is like you have to believe that Monopoly

is a problem to realize that crypto is a solution absolutely so Anna how did you find the world computer um I was not directly computer science but um I was working as a data analyst at the United Nations and um essentially and I think it was 2017 when there was this Innovation Department that was part of like a bigger apartment department where I was working at um started looking into blockchain um so essentially how can blockchain can be leveraged also for International Development work and usually if the UN is looking into something it's a sign of oh we already quite late there has been already quite

a lot of progress in that technology um I was living in New York at the time so I started attending um meetups from consensus mostly um and that's kind of how I got initially hooked into the topic and um then I switched entire gears because I got more and more excited I was like okay this is something that's actually more future driven that's something where I had the feeling you can be more impactful and what you're doing on your dayto day um and so I decided to entirely switch gears and that's how I um initially joined nosis and then uh now basically co-founder with Felix in in cwell and I I have to ask I mean at the UN looking at crypto in 2017 I mean

I didn't even find crypto until 2021 so I I'm so impressed that that was even happening and I guess my question for you is if you kind of had to evaluate both your specific group and the entire un do you think the UN looks at this technology as something that is like interesting and solves real problems or as something that is you know like scammy and dark web and all this stuff and how how do you think the UN specifically uh is like addressing this uh this realm in which so many institutions kind of treat us like um criminals right I I think it's difficult

to respond for the whole organization because it has so many different departments and it's also I left them in 2017 so I'm not super up to date what they think about it today but they were definitely looking into it as a technology that could be supportive and they had Innovation hubs across the globe basically trying to water more efficient ways of doing development work what are Innovative approaches um but to be honest I also think it was a buzzword for a lot of companies or like institutions or like anyone who wanted to essentially get a project funded it was kind of as a sexy term of like if I include somehow blockchain even if it doesn't make entirely sense uh it can guarantee me to

get some more fundings and I think that might have been a bit part of the motivation back in 2017 eh you know what like at the very least like it gave us you and it gave us like some people that like saw the technology and decided that like they needed to shift their career to change the world in it so even if it was just a buzzword I guess I'm glad it happened um great so I think um I think like let's just like Dive Right into cow Swap and I think in order to to understand cow swap we need to start with uh nosis chain so I guess um Andrea or Anna whoever is like better equipped to answer this question can we start a little bit about um maybe like what is nosis chain and how how does the story

of cow swap fold into like what what even this side chain or extra chain is yeah so initially the the journey with gnosis started long time before they became their own chain um and I think they had their icoo also in 2017 but they were already live on ethereum before ethereum was live essentially they were already building on top and um what they initially started with was prediction markets um and from that that was really like the initiating Factor because they were looking into building something similar on bitcoin already and then got in touch with Joe Luben from consensus who then kind of convinced them to do to

do it on on ethereum instead and then by working on prediction markets that kind of had a knock on effect because for for prediction markets essentially it's surface one problem which was how do you actually make those outcome tokens that you create for a market um tradable how do you ensure that there's enough liquidity that even if somebody wants to sell the outcome token there is there's a Marketplace for this and that was kind of the initiation of cob because the solution to this or the solution that we started to look into was bch auctions essentially how can you provide liquidity for a bunch of different assets in a way um that is more efficient than a normal typical

order book and the solution for this was okay let's batch different order types together and um so yeah basically since 2017 we have been looking into different types of batch auctions um worked on multiple different versions uh and ultimately came to what is now C which we launched in 2021 so it's almost three years at this point Point H and theosis chain is basically another huge project that they took on but I think it was about a year and a half ago or so that gsis basically expanded into this and um gnosis chain has huge advantages it is has significantly cheaper transaction cards

it has a very good validator set that is like really decentralized um but yeah basically that is less related to CB itself like really how like the role of CB developed out of gooses was related to to prediction markets and how to create more efficient markets around it so just to be clear what what was going on was the nosis chain like had they created a product and then the realization was like okay the product's kind of cool but there's not really any way to trade in and out of these positions so we need a new uh Paradigm for that and that was like the birth moment of um Nosa sorry of cow swap correct yes correct so I guess like um you can answer this question from

back at that time or today is cow swap itself a like independent blockchain where it's you know a bunch of different servers that are held in sync through some sort of consensus algorithm is it a single like Computing resource that's able to do all of these like Coincidence of wants like what what is um at the very basic level the product that you're building I can answer on the basic level and then we can see if Andrea wants to expand on top of it but to try to explain it very in a simple way it's essentially it's an application that is that can be deployed on any blockchain so right now we are live on ethereum and we are also live on

kosis chain but we also have plans in Q2 to expand to more networks as well so potentially Pon bin and marchain and many others um cop it is an application um it is on in the really easiest way of explaining it um a DEX aggregator it's essentially a venue a trading venue where um there is a um basically a way for a normal user who is not necessarily especially sophisticated in trading can go to and is guaranteed that they get the best possible execution and this happens by um having in a way an obstruction layer where the

user only needs to express their tend what they actually want to achieve from the trade so they say I want to sell a for B and I'm willing to pay at least x amount for this and um like like the maximum amount I'm willing to pay is this and then um we have a decentralized solver Network so it's essentially professional parties who are really equipped with understanding how does etherum or how does the blockchain environment actually work what are the risk how can those risks be circumvented Ed they um they compete with each other and finding the best possible execution pass for the user and then the server who's actually able to find the best

execution is the one who gets to execute the trade on behalf for the user and then there a bunch of like ways of how we guarantee that it's really the best possible execution and to ensure that also like the user is really protected in in this complex environment of blockchain basically even if you don't know much to make sure that you get the best possible outcome for your Trend one way to say it is that essentially there is a there is an onchain element to the mechanism um that provides uh pretty strong guarantees to the Traders on cwap and on top of this onchain layer there is an offchain component which is the auction in which

uh you know different solvers as Anna was describing compete to provide the best possible um uh we call them Solution by the best possible terms of trade to our uh Traders and uh these solvers are bonded so if they misbehave we can slash them but I mean u in a say we right now we do sit in them in the middle and run this mechanis run this auction um in the interest to our user of course the goal is to um decentralize as much as possible uh the architecture um but uh you know running auction on chain or in a decentralized way is an active area of development uh it involves privacy because you don't

want the bid to be visible by other participant in the auction um uh it involves uh yeah so there are many difficulties and uh it's as I said that many many companies are trying to innovate and so we think that okay at some point we'll be able to build this auction as a decentralized system um but um I mean from our point of view so cop intermediate about1 billion US doll monthly um we don't want to jump on the very latest technology still to be proven uh and expose our traders to risk so uh yes so I think there is a bit this misconception that because something is done on chain it's safer than a possible hybrid

architecture but we know that smart contract can have bugs So currently we think the best tradeoff is to have a uh strong guant is on chain plus an offchain mechanism and we will be uh threed to progressively uh do everything on chain or in a decentralized way as the technology matures so I think what you guys have just explained to me is that when you are looking at the architecture it starts with like a smart contract that exists on any chain right today it's ethereum and nosis chain in the future it'll be polygon BNB chain whatever maybe even outside of the evm and the idea is that like I as a user let's say I have one eth I will tell this smart contract I'm willing to part

with this one eth for uh 2,300 usdc and all of these what is called an intent my intent to sell the eth will gather up in this smart contract and then I think what you're saying is that you have a network maybe not a blockchain network but this word is very buzzwordy but we have a group of computers that are constantly looking into that smart contract and that pool of intents and saying if I take as many of these intents as possible I can Sol like I can uh resolve this many and at the best price possible and then the smart contract will say no one else is able to give anything better and this is

looks like reasonable so therefore we'll allow you to execute all the intents and then kind of we'll give uh the proceeds to who they're supposed to go to and and kind of continue the transaction from there so first of all is that correct yeah that's a good that's a good description in my view and know what do you think good no good awesome so I guess my question for you is when you're thinking about architecting this from a like more and more chain perspective how um how connected are each of these chains to each other from like the cow swap perspective so for example if I see a bunch of intents on ethereum that don't match and then I see a bunch of intents on salana that don't match but

like I can match them by sourcing from both of them is that kind of the idea behind what a multichain cow swap looks like that is the advanced version of a multi-chain cow swap it's something that we still need to Pro like do significant Research into what would be the best possible solution to implement this um So currently we are not supporting bridging yet I think this would be like the natural next step to basically allow um user X goes to cwap um and is asking oh actually um I would like to have X amount of token y um and maybe it's actually not having the best liquidity on the network that

the user is operating on but maybe the best liquidity is on a chain like polygon or whatever so the first step would be that we allow actually This decentralized Server Network to take the tend bridge over the funds get do the trade on the other network and Bridge back to ensure that the user gets the liquidity from wherever it is the best available one then the step after is what you're describing to actually take advantage of the possibility of cows also in a cross-chain environment where let's now assume that user Anna call myself you would basically want to swap a for B and then Andrea on on another chain wants to swap

B for a and we actually make this match possible but this is something that will still take some time to really be to basically develop this further um there are some other providers that are really specialized in building um cross Chain Solutions of like like bridging Solutions who we are currently collaborating with um but yeah that that's basically the the future that we envision because ultimately what experience do we want to have for our users is that they don't even have to worry about what network they're operating on anymore right like if you really think how does blockchain get a lot of um adoption is by them not even being aware about what is the difference of ethereum polygon gnosis chain Etc ultimately they

just want to have the best possible experience fast execution low fees and a smooth experience not having to deal with bridging themselves and that's something that intends facilitate intend open up this opportunity to to really abstract away this difficult user experience from users basically taking care of the bridging aspect themselves so that users don't have to do it intend facilitate this and so this is the journey we are taking and then yes cow specifically offered like this additional benefit of even in a cross chain environment finding even more Coincidence of ones what K stands for like finding matches perfect matches for the existing trade um so it would

expand on the amount of on on different basically order books where we could tap into so the more networks we are adding um but I think this is something this is even not necessarily to be solved this year but more so a little bit of a future scenario but let me just add so this is all kind of the exciting opportunities that working with intent uh kind of open but even sticking to what is what is possible right now in a sense even if uh the expression of the intent for the moment you can do it on e theum oros chain then on the other side there are solvers that are competing to match the the those trades we provide the best possible solution and those solver could find liquidity anywhere so for example

they could work with private market makers and have access to liquidity that is not publicly available and to the extent that they have enough inventory they could also find liquidity in other chain so they could see a good price on Solana and then essentially if they have reserves on Solana and in on Main net they could just essentially directly use the liquidity on Solana so it's already there is already a sense in which you do not are not bound to the liquidity public available on Main net uh because solver could pull liquidity from everywhere in their quest to kind of beat the other solver and be the one awarded the right to execute an order and then of course if we expand this to actually C being on other chain so on

and so forth the the thing become becomes even more exciting yeah well I guess my question for you is um and and I totally hear you that like we're already talking about such future state that so that much of this is up in the air but I guess like as it exists today so if I want to participate as a cow swap solver am I running software that you guys created that in the same I'm an ethereum Staker right and like I just downloaded some software and I run it and I don't even think about it is that kind of what it takes to be a cow swap operator or is to be a cow swap Operator just to be someone that says hey I'm going to accept what the format of the intents are in this smart contract and

then I'm going to run whatever solver whatever block Builder whatever crazy Arbitrage software I have in order to just create an output that is accepted by the smart contract like what does it mean to be a solver so the from the point of view of the competition solers can be whatever they want I mean we we don't impose any constraint on OB there has to be a communication and this has to follow certain protocols but beside that they can do whatever you want and we do see many creative ways to be a solver there are solvers that uh really uh optimize um on access to public liquidity on Main net there are solvers that clearly uh chose to instead

cultivate very close relationship with private market makers uh there are solvers that specialize in exotic token that require wrapping wrapping or things that uh you know um they require certain specific knowledge um there are solers that are more optimized toward finding complementarities between different orders of other that are less optimized for that and more things so in some sense um you can be competitive and participate in the competition and win Bates and win rewards in many many ways so yeah it sounds like in order to be a solver you're deploying whatever strategy bespoke strategies and using whatever bespoke software it takes in order to solve the wants and it's not

really about like running the cow swap package just to be another note in this decentralized network no no no it's not like mining that you just press s right no no then maybe to give a like simple example like what someone could be doing is essentially very API from 1 in Paras swap zerox as other Dex aggregators and then always check what their execution part is path is suggesting and what would be the best across them this would be like a simple strategy if you want to start with something that's not highly competitive because of course like the hardware that are deployed today are already more advanced in that but it would be a starting point into like

entering the game and then expand from there trying to add on more liquidity come up with more sophisticated strategies and so on so if anyone is interested to to start operating a solver it's that would be good starting point we have information on our developer docs and are also of course super supportive if anybody is reaching out to to help up with the setup process and and just to be explicitly clear about what you're talking about that that is as simple as creating a standard application in your favorite programming language that all it does is check the cow swap smart contract take the intents plug them into the 1 in or the matcha or the Paras swap API and then sending the results back to the cow swap API and if

if that happens to be the best one like you'll start winning auctions correct yeah that would be the the entry way well I guess that so that is been looking for a moment to fit in this question but can you talk a little bit through why what cow swap is built does give better results and you can you can use the word results and however you want but better results than like the traditional aggregator that we think of that are just basically going and checking all the pools out there sure I can start and then Andrea again can expand on it um I would say for multiple reasons so first of all CA really was the first intent based aggregation model um maybe even to start super simple um

one solution is of course just to go to an existing amm right all liquidity you are trading against is the one that is deployed on that amm so if I go to Unis swop that's all I get access to if I go to balancer or balancer is actually specific case because if have C integrated but like let's let's say like Unis swsh curve exactly all you trade against is the existing underlying liquidity that's in the pools now you are already more advanced if you go to Dex aggregator instead because what a DEX aggregator does it's essentially it splits your trade if it sees okay it's a large order if I only trade against Unis swap then um I have quite a bit of a

price impact so it's smarter to split the trade in two send one to Unis Swap and send the other one to Sushi swap to leverage existing liquidity um so I already have a a better trade execution there now what cow swop does um it was essentially the first Dex that allowed for this intent based model and that has a few advantages so essentially as a user you're not Comm committing to your trade execution pass yet neither to your worst slippage amount meaning you again you pick the sell and the buy token and you define this is the maximum slippage I'm willing to get on this trade obviously you try you prefer to not get a high

slippage but as a user you need to decide if I put a 0% slippage then there's a high risk that my trade doesn't get executed because there's a lot of onchain price movement I paid gas costs and and um then my trade fails and so basically just ended up spending a bunch of money for nothing this happens on a traditional Dex aggregator on cow SW you're only paying gas costs if you actually get executed otherwise there's no gas implemented which is one advantage already um another one is that you're not bound to spend entire or to publish your entire slippage tolerance willingness instead we have to solve a compet so if they CEO actually the the

user um decided 0.5% price slipage tolerance is acceptable to them but we are able to set it this with only 0.2% slippage tolerance it is they they will only set it with a 0.2% sage tolerance and the remaining 0.3% cannot be extracted um so in that sense it's much more protective of um of the user order itself um and then essentially this I don't know how much everybody is like deep down into the rabbit hole of me um all the risk that exist basically on Shain currently by like reordering your transactions to really try to max out

your your slippage tolerance this is something that is entirely avoided with cow Swap and then one huge advantage that also even though there's currently more intent based models because one inch and and Unis swop last year decided to join this sphere as well because they saw the advantages that intent based models have but what they don't offer yet what which is really unique to cwap is again this Coincidence of ones that we are able to um basically match different user orders peer-to-peer and does provide additional Price benefits so basically if we are able to match user orders without using onchain liquidity um we can ensure that they get

less price impact they need to pay less gas costs and they also don't need to pay the fees the underlying protocol fees that some of the underlying protocols liquidity amm pools would have so there's a bunch of different price advantages that cop can offer yeah I mean sorry Andrea go ahead no no no so just to to so C belongs to the class to uh a class of Dex aggregator that try to exploit comp comption competition between special identity to produce better prices for the users unlike uh most of the actors in the space that use what is called Dutch auctions essentially they auction out order by

order so there is one order auction out one winner one order we auction out a sort of our tire order book and solvers are ready are are are able to pick orders and combining into batch them to try to exploit additional efficiencies by the fact of putting order together the most evident one is Coincidence of want because if I find someone who wants to exchange A4 B and someone else want to exchange B4 a I just put them together but in fact there are many types of efficiencies accessing the same amm1 saving on gas uh if there is a multihop execution you could Coincidence of what's within like in some intermediate hop so say solvers can really be creative and trying to squeeze out additional efficiency improve even more the prices by mixing a

matching order that are available uh in a batch yeah I I what you just brought up was exactly what I was going to queue on which is that like what is special here is the introduction of competition and I think because look like if you're not using cow swap or some sort of like intense based um solver essentially what happens when you create a transaction is you put it out you put your baby out into the sea and then a bunch of sharks fight amongst themselves over like who gets to consume that baby whereas like what I'm noticing with cow swap is like that Dynamic is shifted and I can't quite like metaphorically put my

head on it yet but you are not giving up your transaction to the Sharks right like you're staying there to protect it until it's um like time to go and I I wonder if you just like have any Reflections or um like thoughts on like how this like extra layer of competition uh really like drives down like prices for everyone just a quick comment on this I think your metaphor is quite nice actually it's because if you would not have this excess s a competition layer what would happen is exactly what you said you expose your transaction to the public menol and then how you call them sharks or Bots or whatever would be fighting for extracting value from you

and I think what is so interesting about the C of competition is it that it's exactly reversed they're not fight fighting for extracting value from you but they're fighting for how can we get the most value back to the user because only the one who gets the most value back to you the user is the one that wins the competition so it's in a way a very RSE competition to what would otherwise happen to your trade in addition to that there is also the fact that uh if a solvers are the big the professionals and uh once they win the right to execute a trade they of course announce a price uh to win um then they must deliver that price and so it's up to it's their responsibility to go out and

uh take all the necessary measures to avoid being sandwiched so on and so forth and actually that's one aspect and the second aspect is that now that we have like many Traders uh uh and you know our solvers are intermediating a very large volume it also makes sense to make an investment in the infrastructure for example M blocker that is another another product that is uh been U developed um by cwop in collaboration with others is essentially a private RPC endpoint that allows our server but if at anybody to communicate directly with the with the Builder and avoid being sandwiched but investing in this infrastructure it makes sense if you have a certain volume of Trades that you

want to protect so even even before this infrastructure solvers were ultimately liable so it was they had to make the investment to prevent uh beam sandwich uh and then uh since the once the volume reached a certain threshold it made sense to make this Collective investment to protect solers and indirectly our users yeah yeah I mean it like there is not a better example of a protocol that like gets more flexibility and can do more things with scale than C with Coincidence of wants it's like the more wants the more you can do so that makes a lot of sense and I guess I still there's something just so interesting Happening Here right cuz like cow swap we have solvers but like in this crypto

world like we use this word solvers for like the the actual block Builders and like me bots on the first layer and I just on the base chain and I there's just something so cool about how you guys have built basically the exact same competition that we have on bass layer with you know me boost and hopefully one day PBS and like all this uh just like me games and I guess by like taking it to the application layer and yeah just reconfiguring some of the the pieces like the same competition is happening but now like instead of the the tip or the funds or whatever going

to the proposer who is completely third party to the actual application it's like you've you've you've been able to kind of keep the value contained in at the application layer as opposed to like flowing down to the base layer which is good but as a bag holder of eth it hurts but but sorry why does it hurt because essentially what good um does PBS actually do to ethereum like I I think ultimately it it is maybe different if you would be a um a Blog Builder or validator because essentially what happens is that um validators of course do earn from Meb extraction

because essentially how the supply chain works is Searcher extracts value from end user has to pay a tip to the block Builder so the block Builder includes this bundle essentially then the then the block Builder has to pay the validator for for their um block to be included and the one to be picked and so the validator like everybody from the supply chain earns the only one who's screwed is the user and if you doesn't matter if you're holding East bags you as a user of ethereum you don't want to be exploited Meb right like you don't want to lose this value why is it fair that you as a user get value extracted from your on normal transaction and then ultimately the other question is also how bullish are you on a chain that does

extract millions of dollars of value from users and that kind of leads us to the beginning of the podcast where you were asking also Andrea how did you get into blockchain and what did Economist think at the beginning and then Andrea was saying well at the beginning it looked like a replication of a financial system that already existed but not not even make it more efficient and that's the risk we are running into if we start allowing M and not trying to solve it at a at a level where users are protected because which user in a few years from like how do you get Mass adoption on a chain where you know as a user you're still screwed you would basically rebuild a financial system that is screwing the user so that's something that want to avoid so especially if you

hold ECS I think you should be bullish on solutions that are trying to protect the user against this value extraction yeah I mean I think if i i i s by so by memory but I think currently the top three Builders build about 80% of blocks so I think and thisly me is threatening the whole premise of blockchain as a decentralized system because these three entities can control which transaction get included more or less so and that's one thing and obviously M as an was saying decreases usage I mean it's a tax on User it's a tax on liquidity providers that get wacked by aiter by through what is called like lever or LV so anyway that arer can extract profit

from from rid and it it it it R it is a tax on on traders who get sandwiched uh these are the main one but then there are other other sources of MV uh in the context of lending protocol because which again is attacks on the on the users if this wasn't there people will use more definitely accept the push back and I think that ultimately you're right and CU and I think what it comes down to is that like when you have order of magnitude changes in um like efficiency or speed or anything right like entire new use cases for technology opens up and I think that like once we are able to do you know like sub Penny transactions where we know that no value

is being like extracted for us then you know we can do microtransactions and that's how like create you know I do very much agree that the less value that's extracted the more efficient the system is and the more usage we can get I do think that like what is different about crypto and I have trouble wrapping my hands my my mind around is that inherently the the system is based on this like cryptoeconomic security where like we maybe like the true safety comes from the social layer but at least like on first principles like the safety is supposed to come from the value of eth and um like I think that in the current

Paradigm of me like eth is like particularly valuable because one like we all hope that it's going to 10x but two like there's some pretty like desirable yield opportunities through staking um and I wonder what happens to like the entire crypto Economic Security model as like it becomes less interesting to stake I would disagree in a sense that uh uh the the amount of the the the the there is an explicit rewards that comes from you know new token allocated to the validator and there is an implicit reward coming from MV so the fact that not implicit but let's say less visible from the point of view of

the folks that are designing ethereum so they don't they don't have control over the that's side of the rewards but they do have control over the explicit uh reward that is given out to validator every time uh this validator adds a new block and that part adjusts so there is a there is a function with respect to how many validators there are that this rewards increases and decreases so I don't think it's really a matter of level of rewards because that can be adjusted it's whether uh this reward is uh explicit in the mechanism and it's under the control of the designer or it's something else uh that is really taken from the user and then forward it to validators so I mean if tomorrow the validator set shrinks because uh we

eliminate me uh there is an automatic increase in the rewards in the explicit rewards for validator so I wouldn't be worried about that no no super fair and I guess so this is I'm going to take us a little bit away from cow swap for a moment we'll come back but something that I'm noticing especially on eth Bas layer on Main net and this is not like a particularly insightful comment right everyone's noticing it is that like we all know that on Bas layer there's probably not going to be Financial transactions like yes maybe like nation state level like huge amounts but you know like gas costs we all expect are going to be so high because of l2s and

like other distributed computing pieces that like the the finan activity will migrate to like l2s or just cheaper environments and I guess my question for you guys is as we move to a phase where at least on ethereum L1 most of the transaction volume and like the eth paid will be for nonr non-financial models sorry nonfinancial transactions do you see a um a role for intense in like let's say settling blob data to ethereum or like is is what you're building around intents like really specific to like the trading back and forth of assets oh intense is is not specific to trading again like intense

is essentially a way to express um what you want to do with your transaction ultimately and have other parties who are more professional um in doing the transaction execution take over but I think there's a bunch of different use cases um where intents can expand I also think it might be a little bit overhyped by uh it's kind of what I said at the beginning with the United Nations like everybody was like looking into blockchain blockchain was a buzzword now last year intense has kind of become a buzzword um so but but it definitely is more powerful than focusing on trading

activity only um and I don't know with with your regards I I do agree that of course I mean block that there's only so much that block space available for ethereum so I do agree that some of like the the like payment networks Etc will move over to layer tools that are cheaper like for example we see this with gnosis Jan who has launched gnosis pay which basically for for much less than a cent you can do specific transactions um but I do believe that etherum will still be a global sat layer for basically coming what is like the the price finding for a specific asset for example and with that in that in regard there also still going to be

um some Financial transactions on ethereum of course of large magnitude um but yeah to to answer your question for intense specific there there's definitely more use cases a lot of them are financially related um I mean I there's one layer of trading then bigger layer of finances but but then there's also the possibility Beyond like we discuss bridging for example in itself it's not a financial necessarily um it's not a defi product and so the the the broad spectrum of solution space is bigger than that yeah no fully agree and okay there is nothing specific to as I said so as Anna said intent is not specific to to swapping and neither is specific to main net so

one can think of C swap appli to other chain and to whatever and in the future also to uh other use case like uh bridging or something else um but I do believe that uh for for the moment let's say um a blockchain is primarily about defi I would say so that's a main uh use case and although many l2s uh and side chains are coming out with many interesting properties uh the majority of liquidity is still on Main net and so um yes so I will say it's primary finance and and finance is primarily still main net I will say because uh yes you can have the perfect mechanism but

okay payment is another thing but large transaction we really care about where the liquidity is so if nl2 has the perfect infrastructure for finance but the liquidity is on Main net then it's not so obvious that you want to go and make a large trade on the N2 maybe it's still better to do it where the liquidity is so but again you know we we we we will be we you know there's nothing inherit in inherit um say ethereum specific in what we do so if tomorrow things change we can move easily yeah yeah and I point point taken and I definitely agree with what both you are implicitly and explicitly saying is that yeah maybe

there's going to be more uses for blockchain but like right now it's Finance so like what are we even talking about but I do um foresee a world where like in very very short term where like for example like if intense can be just a tiny tiny bit more expressive like I can totally see a world where cow swap can facilitate like not only the um settlement of like finan like straight up Financial trades but also like what if my intent is I'm an L2 I need to post this set of transactions in data availability I don't really care if it's manle if it's uh sorry if it's Igan da if it's Celestia if it's like ethereum

main net I just need this data to be posted somewhere like who can give me the best like pricing and I to me that's like how these same types of models and like systems that you're building are like really really going to um like be important to like getting to this next phase of like the modular blockchain thesis so any thoughts on that H I don't like I currently it's so I'm we we not an expert in that two but it looks to me like people feel very strongly of whether your your your reference you're posting your data on bainet on on ethereum and in which case you are an L2 or lap or whether you post it on uh Celestia or some other thing in which

case you are uh there's another word for this um validum or volition yeah validium exactly sorry with me and there was recently like a whole back and forth of Twitter because I think vital said that this chain is really validum because it post on on Celestia and there was a whole M like storm out of this so in says I take it as saying that for the moment is not exactly the same it's not exactly like oh just post it wherever is cheaper I don't care and if it makes sense because the validity and the finality or the two really depends on the validity of finality or where you post your data and you may think that you know final as in ethereum F Finance final means something and so but perhaps

in the future people everything will become sort of homogeneous and then it's just a matter of cost and in which case yes why you can think of an intent like I want to spend less than this please post my blog wherever is cheaper because you know different chains different concept of finality would be more or less considered the same but I think it's kind of far yeah or or maybe even some like if it's time based stuff right where like a rollup could say my int is that within the next 48 hours this batch needs to be posted to Celestia or to mainnet or whatever and then like a cow swap or sorry a cow operator can say okay well I know it's going to be cheaper at midnight on in US time so I'm

going to just gather up a bunch of these and then post it then but point is is that like it is super clear that intents go much further than like I have one thing and I want other thing yeah cool so um I with the last few minutes here I like want to talk a little bit about like the road map and what you guys are like really excited for um in the next like I don't know year or so of cow swap so um I I can talk like a little bit of the the Rumblings I've seen on Twitter I think somebody has been talking about um like maybe some cool Integrations to do some like BTC native stuff but I don't want to give you too much Direction other than to say like please never changed the moo of the cow when I make my swaps

but otherwise like what can we look forward to um as we like continue to use cow swap over the next year I'm going to let Andrea answer this one first because we're working on something really exciting that will launch soon it's quite something big that especially Andrea has been working on and has been one of the brain founders of the project so he's going to he can introduce this and then later on I can give few additional additions on what else we are focusing on uh yes so the I think the most IM media thing that would be live hopefully within the like weeks a couple of weeks or something similar like this uh is the creation of what internal we call it CM uh the scientific name in the sense that in the paper that goes with this

idea we call it function maximizing amm to distinguish it for from constant function amm which is the the standard model uh that essentially is based on the assumption that you can amm will trade as long as it stays on the function this new model is always trying to maximize the S so essentially try to give an even better deal to the liquidity provider um the reason why we think this is important is that uh as you said like n now is 95% uh two things one is sandwich attacks and uh solving that I think we already do it quite well like people can swap in our uh with on cow Swap and uh be reassured that they won't be sandwiched and the other important uh

actually the vast majority of of Ms however what is called lever or Arbitrage profit so it has a few names and it's the idea that arbitrager who are bet who are um informed about price changes can trade on an amm and at advantageous price uh Whenever there is a rebalancing effect so essentially Whenever there is a change in the price the first arbiture that hit an amm we rebalance that amm but we do so at an advantageous price and therefore extract profits from the liquidity provider and that's the reason why there is this whole debate or are people providing liquidity on say Unis swap actually making any money or they're just losing money and of course A lot of it depend

on what is the Benchmark but there is clearly strong sense that even just by looking at how much so Arbitrage Bots are the one that are most willing are always top of the block because they are the one that are uh the willingness to pay to be top of the block is the highest because that's the most Prof profitable type of M so anyway liquidity provider are also exploited by uh so lose money in this other form of me and we've been thinking about the system which we can extend the cop guarantee to also liquidity provider and so we will be launching a c amm or an amm a pool of liquidity that is uh accessible only uh by trading via our batch so uh so if you want to buy or

sell to this amm you have to first put of trade on the batch um the reason being that um essentially what's going to happen this the solution so the price at which this amm will trade will be produced Again by the solver competition uh and solver will will will outbeat each other to provide a better price to the amm and hence every time there is a rebalancing event every time the price change and you need to change the composition of the of the reserves uh the solware competition guarantees that the uh LPS in this amm will trade at the correct price and will not be exploited yes and so this has then a several Advantage first of all uh if you

are a Trader you know that there is for specific token Pairs and there is a a specific amm C amm uh you will easily find liquidity on C because there is an amm attached and the trade can be forwarded there um if you provide liquidity on a km we show that this is equivalent to running a passive investment strategy because uh once you remove Arbitrage profit uh an amm essentially behaves as if uh it's always trying to uh keep equal value um of the two assets the composition it doesn't have to be equal but the simplest possible constant product will give you equal value uh and this has Advantage from like U you know diversification like you know you you

you you you constantly run this passive investment strategy and ultimately if you are a DA and you run a km with your own tool toen you will be providing liquidity in a very efficient way uh for your token because you do not lose money to arbiture so this will be the next uh you know few weeks I think we'll be start we'll be putting on uh live uh V1 um which will specific to cow toen p with uh to provide liquidity to to to test and to develop the whole idea but also support liquidity of the cow token uh and then uh you know expand it to other Dows and of course um you know this doesn't have to be a pool of liquidity that is uh on a smart contract that we create but it could be a pool of

liquidity somewhere else the Only Rule is that it has to have our bat has to have exclusive access to it so that's kind of a but we could integrate with balancer we new well like it's not exclusive so that's kind of excited and then uh you know Anna maybe you can discuss other uh other projects yeah and maybe just to add on this we really believe that this is the next Innovation on amm like it has been a known problem that amms are not profitable for liquidity providers and then there's the open question what is the futures of IMM also as other protocols other trading venues become more efficient like with help of C for example The Coincidence of once um which is also increasingly

taking over um trading volume and like users who use those protocols and um something that is in a way um yeah fighting lvr that's fighting me and it is more going in line with the general Trend and it's more efficient and for liquidity providers and actually can be profitable for them is is basically the next step in the amm landscape which is and it's really exciting because cow amm is the first as such protocol first as such amm that is actually going live and there is a few other projects that are trying to like work on similar Solutions but we don't know when they will be live so the

first really in production implementation of an lvr resistant amm is basically going live in two three weeks from now so it's really exciting congratulations yeah and then basically just to expand on it um to what what else we we are focusing on maybe like quite a lot actually but maybe to pick out two more different things is one what we launched last year was programmatic orders and um there's a bunch of different order types possible with that not all of them alive yet but basically the The Innovation Spectrum around it is huge um what does programmatic order mean it's basically a way that you can program an order to be executed in the future so

one implementation that's already live is a Time weighted average price order t-w in short um and that allows you for example to to have a strategy of every day or every week or every once I want to sell x amount of a specific asset um you can however get much more sophisticated with that as well you can also say let's say I have a um I have a position on makad and um let's say that it's backed like I want to have a loan of di tokens and I back it up with EA I can now um have an basically a smart contract deployer that is checking oh okay um what's the price point what of my backing of the asset um is a close at

risk to being liquidated if so um increase my backing that I have to ensure my position is not being liquidated um increase the amount of ease that I'm putting into the contract for example and there's a bunch of different use cases possible um and it's essentially super super exciting and we are having we're working together with a bunch of granes also um who are looking into developing additional smart orders on top of car protocols it's not just our own team working on it but essentially anyone who has an idea can do so and a bunch of projects are currently in the making of creating new order types and um another the second thing I wanted to mention is that we what we

also launched last end of last year was this pre and postorder interaction which now allows you to really um bundle a bunch of transactions together and uh ensure that they're executed in a single trade so that also significantly improved moves the the use cases that you can enable with cow swap so simple solution would be oh I want to swap and brid over for example or I want to lend an asset um and then I want to swap it against another asset and then I want to um Bridge it over to something else and there's also a bunch of endless possibilities and there we are also currently considering if you want to create like some sort of framework UI

that makes it easy for other protocols to integrate themselves so the those are like two other major projects that are in the making so much exciting stuff is like not on the road map it's like right in front of us and I could sit here with another hour with you guys and really unpack both like the new paradigm of amm and just all like the crazy stuff you can do with programmable um orders I guess I'm not yeah programmable orders but I guess to walk us out I think it's worth reflecting on so in this podcast we talk a lot about ZK and what like the magic of ZK is is that like through like essentially just math we can do computation off chain and then

like project it back in chain through verifying the proof and like what we're seeing is how like the ethereum really does become the world computer is we can project all this like much more intense like hard computation into the world computer via ZK cool what is like so cool to me me about what you guys have already built is like that is the vision of what you're building which is like we have the cow swap contract and so we're going to allow like a bunch of intents or just like data to collect there and then we're going to have this like system of like much more advanced very sophisticated like high resource

environments to do really really hard computation and then just give the result back to ethereum and therefore like we can call that the computation kind of happening within ethereum right and so I think one I just want to take a moment to say like oh my God you guys are so ahead of the curve like congrats but two just to say I think there's something so cool about crypto and no matter like how uh tribal our groups get like Cosmos versus ethereum or or how crazy stuff gets like everything really is converging on basically the same design with ZK without whatever it doesn't matter it's just about like how do which

parts of the computation need to remain trustless and which parts can be moved to uh different places and um I guess to sum it up if anyone had any doubts about how ZK is going to be the answer to blockchain scaling like after this conversation that should be completely over because we have in action doing over a billion dollars a month the exact Paradigm uh powering cow swall so man I'm just so impressed and so excited and so grateful that you guys took the time to uh have this conversation so thank you thank you Rex thank you so much for having us it was a great conversation of course before I let you guys head out can you please just uh let the audience

know where they can find you where they can find cow Swap and if they're interested in getting involved maybe starting uh to run a cow swap solver like what's the best way to get started um I think the easiest to to reach out to the team is either on Twitter it's ell very simple um or on our Discord server we are also very responsive we have a master C moderating it um and then I think Andrea and I we both also have our own Twitter accounts but yeah for the company itself um Twitter and Discord are the easiest yes same Twitter will be the best way Andrea canido c n diio which is my last name um yeah for uh I don't post very often but

you can reach out you can have a a conversation and of course like um we we just revamped our docks so I think for once we can say that they're quite up to date so you know uh that see for example someone is interesed in running a solver they should start for by looking at the Docks there are many like a lot of information and if anything is not clear or uh this person is looking for even more uh more details they should definitely reach out and we'll be happy to to help them out awesome incredible and I'll make sure that um all of the appropriate contact links and the Twitter links are in the uh show notes so Andrea an Anna thank you so much for uh the time you spent with us and just

have a great rest of your day yeah thank you Rex thank you so much bye bye n