CowSwap is the most explosively growing DeFi coin recently, it is also one of Vitalik's favorite DEXs, a platform specially designed for whales to unload their bags, and even the official DEX of the Bull King team.

However, what many people do not know is that behind CowSwap lies a top-tier underestimated incubator in the Ethereum faction—Gnosis. I believe this is the true reason for the $COW surge.

Recently, a blockchain event related to the Trump team's DeFi project World Liberty Financial (WLFI) in the Chinese community attracted market attention. Although $COW is not included in WLFI's asset list, according to on-chain analyst Ai Yi, WLFI has made several token purchases using CowSwap. This aligns with Ethereum's founder Vitalik Buterin's frequent use of CowSwap.

This particular on-chain behavior has directly impacted market sentiment. With the dual expectations of Trump's upcoming inauguration and the trend of political concept coins, the price of $COW skyrocketed by 62% in just one week and surged by 162% in a month.

The Force Behind CowSwap is Gnosis

Gnosis is indeed the powerful force behind CowSwap.

Formerly, CowSwap was launched as Gnosis Protocol V1 in 2020, which was the first decentralized exchange platform to achieve ring trades through a batch auction mechanism. Its unique design allowed all orders to share liquidity and settle efficiently.

In 2021, Gnosis Protocol V2 introduced an innovative settlement mechanism (Solvers), significantly improving order matching efficiency and successfully addressing the long-standing MEV (Miner Extractable Value) issue plaguing DeFi traders. In the same year, Gnosis Protocol was rebranded as CowSwap, becoming the aggregator we are familiar with today.

It can be said that CowSwap's rise is inseparable from the deep-rooted foundation of the Gnosis ecosystem. In fact, the story of the Gnosis ecosystem can be traced back to 2015.

Compared to the now well-known Polymarket, Gnosis co-founder Martin Koeppelmann began researching decentralized prediction markets much earlier. In 2015, he posted his thoughts on the combination of MarketMaker and OrderBook on his forum, one of the earliest concepts of a decentralized prediction market in the industry.

Martin Koeppelmann was also one of the earliest Ethereum developers, having joined even before TheDAO era, and due to being based in Berlin, he had close interactions with Vitalik, who had an office in Berlin back then.

Over the years, he has been actively involved in many discussions in the Ethereum development community, often engaging with Vitalik on topics such as L2, ZK, and the Ethereum roadmap. From Martin's social media posts, it is evident how well integrated he is in the community.

Based on this technological foundation, Gnosis gradually developed a complete ecosystem. Evolving from Gnosis Protocol to CowSwap, Martin and his team further derived products such as Gnosis Chain, Safe, and Gnosis Pay, ultimately forming a highly collaborative ecosystem.

Therefore, integration is natural. One of the most representative integrations is between CowSwap and Safe.

The Trusted Wallet of the Prediction King Family

As a star product in the Gnosis suite, Safe is the most popular multi-signature wallet in the Ethereum ecosystem, also known as a wallet for whales. During this year's Safe token distribution, almost all of the top 100 airdrop addresses were project teams or institutions.

In other words, early Safe holders were mostly project teams, not individual users. This includes OP, Polymarket, Drukula, Worldcoin, Lido, and more. Related reading: "Safe is about to trade, a comprehensive overview of tokenomics and the ecosystem"

Initially, Safe's audience was more focused on DAOs and projects within the cryptocurrency community. However, as the crypto industry entered the next stage, traditional finance, institutional players, family offices, and old money started to join the space. Due to the high barriers to entry in crypto and the need to protect funds while engaging in on-chain activities, the most secure way is through a multisig wallet, with Safe being the top choice.

Safe's design significantly enhances the security of fund management. Through a multisig mechanism, funds are stored in a smart contract address, and transactions can only be executed when a predefined number of signatures are met (e.g., 3 out of 10). This mechanism effectively reduces the risk of single points of failure. Even if a signing address's private key is compromised, an attacker would struggle to obtain enough signatures to complete a transaction. Additionally, during the multisig confirmation process, signers before the final confirmation do not need to pay Gas fees as the transaction remains in a "pending" state. Only the address executing the final signature to confirm the transaction or transfer needs to pay Gas fees. This optimization not only reduces transaction costs but also makes Safe the ideal choice for institutional users and large holders.

According to Safe Guardians speaking to Dooonews BlockBeats, the simplest way to identify a Safe wallet address on-chain is through two methods: first, the "MultiSig" displayed on ARKHAM, and second, the address section on Debank's page directly showing "MultiSig: Safe".

Trump Project's Address

Vitalik's Address

Most importantly, as part of the Gnosis ecosystem, the DEX integrated into Safe is CowSwap. This is why whales like Vitalik and the Trump team prefer CowSwap.

From this perspective, what whales like Trump, Vitalik, and others appreciate may not only be CowSwap as an MEV-resistant aggregated DEX but also the synergistic effect demonstrated by the Gnosis ecosystem, providing tailored solutions that directly meet the needs of large holders.

From Incubator to Investment DAO

As mentioned earlier, the Gnosis ecosystem has been expanding since 2015. Originally a Ethereum-based prediction market platform, it later evolved into the Gnosis ecosystem, giving rise to many projects such as Gnosis Chain, Safe, CowSwap, Gnosis Pay, and more.

Gnosis Chain, a prominent Ethereum sidechain in the previous cycle, focuses on efficient and secure decentralized application development. According to DefiLlama data, as of the time of writing, Gnosis Chain has a Total Value Locked (TVL) of $349.31M, including $71.61M in native assets and $277.7M in cross-chain bridged assets. The stablecoin market value is $119.98M, with DAI accounting for 74.07%, and the trading volume remains stable.

Gnosis Chain data, Source: DefiLlama

Meanwhile, Gnosis Pay is an on-chain payment debit card that provides users and institutions with a seamless payment experience through integrated blockchain technology. Additionally, there are CowSwap and the multi-signature wallet Gnosis Safe (now referred to as Safe). Related reading: "Gnosis Card: The First Visa Debit Card Tied to a Wallet is Coming."

The GnosisDAO is the core governance body of the Gnosis ecosystem, driving the incubation and development of innovative projects through decentralized autonomous governance. As the ecosystem's incubation becomes more prosperous, the GnosisDAO has also ventured into investment activities.

In addition to incubating well-known projects like Safe and CowSwap, as early as 2019, the GnosisDAO began its foray into the blockchain space through its investment arm, GnosisVS, having supported over 60 startups.

Some of the investment projects include: Monerium, an on-chain fiat infrastructure for Web3 builders; Naptha AI, a decentralized platform for AI workflows; and Schuman Financial, a MiCA-compliant stablecoin protocol.

This year, the investment business has further expanded. In October this year, GnosisDAO approved a proposal and launched a new $40 million venture capital fund. GnosisDAO has allocated $20 million to the fund, with the other half of the funds coming from external limited partners (LPs). This dual structure not only increases the fund's size but also creates more opportunities for external collaboration.

The fund is named GnosisVC Ecosystem and will primarily invest in projects involved in Real-World Asset (RWA) tokenization, decentralized infrastructure, and financial payment channels.

The key investment areas focus on three aspects: 1. Real-World Asset (RWA) Tokenization: Driving traditional financial assets to digitization and on-chain through blockchain technology, providing more liquidity and transparency to the global financial markets; 2. Decentralized Infrastructure: Covering a wide range of areas from node operation to decentralized computing and storage, supporting the efficient operation of the next generation of blockchain applications; 3. Payment Channels and Middleware: Surrounding payment solutions like Gnosis Pay, providing seamless payment capabilities for the DeFi and Web3 ecosystem.

What Makes CowSwap Stand Out?

One could say that CowSwap's rise is more like the epitome of a synergistic effort within the Gnosis ecosystem. However, this does not mean that CowSwap itself has not created a new paradigm.

To delve deeper, the CoW Protocol is a decentralized trading protocol, and CowSwap is a DEX built on top of the CoW Protocol, serving as its frontend interface, through which users interact with the CoW Protocol.

As the frontend application of the CoW Protocol, CowSwap further amplifies the protocol's advantages. It is referred to as the "Trading Assistant" of the CoW Protocol, acting as a Meta DEX aggregator that can switch between multiple AMMs and other aggregators to help users find the best price available in the current market. While traditional DEXs require users to manually compare prices, CowSwap's mission is to eliminate users' cumbersome operations through intelligent matching, ensuring transactions are completed in the most optimal manner. From this perspective, CowSwap addresses a long-standing pain point for DeFi users: the frontend reliance issue.

What is the Endgame in Combating MEV?

Miner Extractable Value (MEV) has long been a significant concern for traders. MEV refers to the additional value extracted by miners or other traders from regular users' transactions through manipulating transaction order or front-running, among other tactics. According to a report by Galaxy Digital, MEV bots have extracted as much as $3 billion to $9 billion of user value solely on the Ethereum network.

This is very unfriendly to whales and large traders, and even Ethereum's founder Vitalik Buterin himself has been greatly troubled by being sandwiched frequently, causing a lot of headache. Therefore, the MEV issue is also one of Vitalik's top concerns in building Ethereum, and it is frequently mentioned in various speeches and the Ethereum roadmap.

However, CowSwap has effectively solved this problem.

In traditional DeFi interactions, users' operations (such as asset bridging, swapping, staking, and withdrawal) are directly interacting with on-chain contracts. This design is not only complex but also exposes users' transactional needs, making them highly vulnerable to MEV frontrunning attacks. Therefore, the CoW Protocol fundamentally changes this interaction pattern by migrating users' transactional needs off-chain for processing. This solution is called "off-chain preprocessing," which also has a more familiar name known as "intent transactions."

The intent process is essentially an off-chain preprocessing black box, where users' intents are placed in an "invisible" preprocessing center. After collecting and preprocessing users' transactional needs, CowSwap introduces third-party "Solvers" off-chain to match and process transactions. This mechanism brings multiple benefits, significantly reducing users' direct on-chain risk, optimizing protocol liquidity management, and making user transactions more efficient, secure, and private.

To be more specific, through the intent narrative, the CoW Protocol has designed three core anti-MEV mechanisms:

1. Uniform Clearing Price Batches

 The CoW Protocol introduces the "Uniform Clearing Price" mechanism. When the same token pair (such as ETH-USDC) is traded multiple times within a batch, all transaction assets will be settled at the same market price. This mechanism makes transaction order irrelevant, fundamentally eliminating the possibility for MEV bots to profit by reordering transactions. More importantly, this mechanism also resolves the price inconsistency issue in traditional AMMs (such as Uniswap) based on the constant function market maker (CFMM) model, providing users with a fairer trading environment.

2. Delegated Transaction Execution

 Users' transactions are executed by trusted third-party Solvers, avoiding direct exposure to on-chain MEV risks. Solvers must ensure that the transaction price is not lower than the price signed by the user, while optimizing liquidity through off-chain matching or private market-making. This design not only reduces users' price risk but also significantly improves transaction execution efficiency.

3. Coincidence of Wants Model

 Compared to traditional Automated Market Maker (AMM) or Central Limit Order Book (CLOB) models, the CoW Protocol's advantage lies in its core auction mechanism. This mechanism allows multiple trades to occur simultaneously, resembling an efficient large-scale market promotion event. In this event, whoever can find the best match will reap the greatest benefit. This is known as "Coincidence of Wants (CoWs)," from which the CoW Protocol derives its name, cleverly spelling out the word "cow."

Related Reading: "Surging Over 40% in a Single Day, What Makes CowSwap Special?"

Therefore, driven by Gnosis' ecosystem momentum and the core product of CowSwap, CowSwap has seen a significant surge in on-chain trading volume on the Ethereum network in the past 30 days.

The History Between CowSwap and Uniswap

Many are unaware that CowSwap and Uniswap have a bit of a history. Last year, the leading DEX Uniswap announced UniswapX, which stirred up a controversy as it was accused of being plagiarized from CowSwap.

Following Uniswap's announcement of the V4 version, the subsequent introduction of UniswapX led to significant community dissatisfaction, with many questioning, "What is the difference between UniswapX and CowSwap?" Some even joked, saying, "UniswapX should thank the cryptocurrency industry's open-source spirit."

Curve Finance's official account bluntly expressed, "Forgive my frankness. The rules of the game changed a long time ago: when 1inch first conducted high-quality aggregation, when CowSwap introduced the Solvers model. UniswapX is good, but it is not an innovator, not even the second player." Related Reading: "With Mixed Reviews, Is Uniswap Truly the "Tencent of the Coin Circle"?"

This public opinion pressure has posed a significant challenge to Uniswap, seemingly in an effort to shake off the title of "Tencent of the DEX world." Two months ago, Uniswap Labs launched Unichain, an Ethereum Layer 2 network based on the OP Stack, finally turning the tables, albeit slightly.

One of the major innovations is that Unichain has innovated on the MEV revenue distribution mechanism. Through a Trusted Execution Environment (TEE), a portion of the MEV revenue is directly allocated to users or liquidity providers (LPs), achieving a more equitable value distribution.

Furthermore, the MEV revenue is proportionally injected into the validator and user reward pools. This mechanism not only reduces the participation risk for LPs but also encourages more users to engage in ecosystem building.

Wintermute "Walking on a Rainbow Cloud"

It seems that CowSwap's product is good, but the "death" of user-friendly products in the crypto space is also plentiful. Few can make it to the top-tier exchanges, and few can achieve a 162% monthly increase.

If we rewind time back four months, we will find that the start of the COW token's price surge was the result of the collaboration with Wintermute.

Initially, to increase on-chain liquidity, the CoW DAO proposed allocating 10 million $COW tokens to provide liquidity to the ETH/COW market. This proposal included an innovative strategy: some $COW tokens would be converted to ETH and, combined with the remaining $COW, injected into a brand-new Function Maximizing AMM (FM-AMM) liquidity pool. Unlike traditional AMMs, the FM-AMM can effectively eliminate most MEV attacks and the high profits of arbitrageurs, while reducing risk for liquidity providers (LPs).

However, on-chain liquidity alone was insufficient to meet market demands; the depth market of centralized exchanges was also crucial. After all, those markets are larger and have more capital. At that time, the only way to acquire $COW was through decentralized channels, with the largest pool being the ETH/COW pool on Balancer on the Ethereum mainnet. Without a CEX trading scenario, many users and institutions were unable to enter the $COW ecosystem.

At this point, Wintermute "walked on a rainbow cloud" into the scene.

Wintermute has proposed to borrow 7.5 million COW tokens from the CoW DAO treasury to support the liquidity of both decentralized and centralized exchanges. This proposal has received strong community support and has officially ushered in a new chapter for $COW liquidity.

As a leading market maker in the crypto industry, Wintermute excels in establishing efficient markets between centralized and decentralized exchanges. Its founding team has prior experience at the traditional finance giant Optiver, bringing with them a wealth of market depth management expertise.

Over the past few months of collaboration, Wintermute has provided deep market support for COW against ETH and other trading pairs, ensuring liquidity and providing a stable trading environment for DeFi aggregators such as CowSwap, UniswapX, and 1inch. Concurrently, Wintermute has offered substantial trading support for institutions in the OTC market, further expanding the user base of $COW.

This bidirectional market-driving effect has directly fueled the surge in $COW's price.

Even in Wintermute's second month as its market maker, Coinbase announced the inclusion of $COW in its listing roadmap, eventually launching COW perpetual contracts three months later. Subsequently, $COW began landing on major top-tier exchanges, with Binance shortly following suit by listing the COW/USDT spot trading pair.

These are what I believe to be the true reasons for $COW's 162% one-month surge.

The Flywheel Effect Between the Gnosis Ecosystem and Ethereum

Zooming out from a more macro perspective of public blockchains, during a bull market phase, Solana's ecosystem, favored by Wall Street, experienced rapid growth while Ethereum seemed slightly fatigued. However, looking at the dynamics of the WLFI project chain by the Trump team, Solana still has significant room for growth in serving institutional whales, where the performance of multi-sig products struggles to match Ethereum's deep-rooted foundation.

While Solana's chain also has multi-sig products, the assets held in custody are not at the same scale.

For example, taking the multi-signature protocol Squads, which holds the most managed assets on Solana, it currently manages funds of around $170 million. In contrast, within the Gnosis ecosystem, the Safe multi-signature product secures assets worth a staggering $89 billion.

More importantly, the products in the Gnosis ecosystem are not only impressive in scale, but also, through collaboration and deep integration, have formed a powerful ecosystem that can serve institutions and large holders. The security of Safe, the efficiency of CowSwap, and the convenience of Gnosis Pay, together have helped Ethereum "fight tooth and nail" in this round of blockchain competition.

What's even more important is that, through project collaboration, the products in the Gnosis ecosystem have established a strong ecosystem to serve institutions and large holders, helping Ethereum "fight tooth and nail" in this round of blockchain race.

It is this synergy that has built the flywheel effect between the Gnosis ecosystem and Ethereum.

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