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CoW Protocol

Meta DEX Aggregator

CoW Protocol is a fully permissionless trading protocol that leverages Batch Auctions as its price-finding mechanism. CoW Protocol enables batch auctions to maximise liquidity via Coincidence of Wants (CoWs) and tapping all available on-chain liquidity whenever needed.

Batch Auctions are continuously run by the protocol through Solvers: the parties in competition to find the most optimal settlement for the batch. The winning Solver will be the one that can maximise traders’ surplus by either having the most optimal CoW, finding the best liquidity sources, or combining both in a single settlement. Because orders are placed off-chain and aggregated to be executed in batches—they all have the same uniform clearing price—which avoids potential losses through Miner Extractable Value (MEV).

At the time of this writing, CoW Protocol has executed $9.3b+ in all-time trading volume through 491k+ transactions on Ethereum. It has developed into one of the leading DEX Aggregator protocols, currently holding a ~10% share of the trading volume for the top market players (i.e. CoW Protocol; Paraswap; 0x; Matcha; 1Inch).

The CoW DAO wanted to secure enough runway to keep developing its market-leading products, regardless of economic junctures. CIP-19 passed on January 24, 2023, and karpatkey DAO was elected to create a Core Treasury Team.

Putting the treasury to work

Adequately managing a DAO’s treasury is time-consuming, requiring extensive research and risk management infrastructure and processes to ensure the best risk-adjusted portfolio allocation. An idle treasury has significant opportunity costs, so delegating the administration of the treasury to a professional non-custodial treasury management DAO such as karpatkey has proved to be the most economically efficient option.

CoW DAO will set up a new Safe multi-sig wallet with a 3/6 setup, where we’ll manage two signatures, and CoW DAO’s Core Treasury Team members will manage the other four. This way, the funds will always be in control of CoW DAO.

Execution meetings will be held with the participation of karpatkeyDAO and CoW DAO’s trusted signers from the Core Treasury Team, where the strategy drafted periodically by karpatkey’s Strategy & Ops team will be carried out. A tight security protocol provided by karpatkey will be observed during those meetings.

Scope of work

karpatkey was assigned to create, train, support, and audit a Core Treasury Team that will work jointly with us to carry out several treasury-related tasks. Its initial goal will be to provide enough liquidity to secure Cow DAO’s runway.

To be able to fund Cow DAO’s operation adequately, an initial analysis will be carried out to determine the organisation’s expenditure needs, including the following:

  • Solver execution costs;
  • CoW Grants Program; and
  • Monthly payments to contributors.

Operational expenses will be forecasted to assess liquidity needs. Once the necessary amount has been secured, the rest of the funds will be grown following our yield-generating strategies.

karpatkey will assist CoW DAO in bootstrapping its liquidity and optimising the yield for its idle funds by suggesting a series of strategies tailored to suit CoW DAO’s needs and risk profile. karpatkey DAO’s goals are the following:

  • Design and implement an efficient and robust treasury management system;
  • Identify the best economic opportunities for the treasury tokens; and
  • Facilitate COW liquidity.

We’ll provide a weekly report and support in identifying data elements upon request from CoW DAO’s community. Also, karpatkey DAO will review the data reported and assist in performing analytics and quality reviews to confirm the data accuracy.

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