Skip to content

Commit

Permalink
Drop redundant sentence (#51)
Browse files Browse the repository at this point in the history
Seems to repeat what the previous sentence already states.
  • Loading branch information
MartinquaXD authored Nov 29, 2023
1 parent 01ba96d commit ee6f5a7
Showing 1 changed file with 1 addition and 1 deletion.
2 changes: 1 addition & 1 deletion docs/cow-protocol/concepts/introduction/batch-auctions.md
Original file line number Diff line number Diff line change
Expand Up @@ -6,6 +6,6 @@ sidebar_position: 4

CoW Protocol relies on batch auctions as a unique price-finding mechanism. Unlike traditional DEXs, where users submit orders directly on-chain, CoW Protocol collects and aggregates orders (intents) off-chain and settles them together in groups, known as _batches_. Instead of relying on a central operator, the protocol fosters open competition among solvers. Solvers are entities who compete to propose the best order settlement solutions for a batch. This approach aims to standardize prices for token pairs in the same block and enhance DEX trading by combining economic mechanisms like Uniform Clearing Prices and Coincidence of Wants.

The primary motivation behind adopting batch auctions as a price-finding mechanism in CoW Protocol is two-fold. First, it seeks to enable the Ethereum DeFi ecosystem to establish consistent prices for identical token pairs within the same block, addressing the inconsistency caused by the design of Constant Function Market Makers (CFMMs). Unlike other transactions executed atomically, CFMMs require sequential processing to determine token pool ratios and execute trades accordingly, resulting in varying prices within the same block. Batch auctions ensure uniform clearing prices, eliminating opportunities for MEV bots to reorder trades and exploit traders. Not only that, but batch auctions also provide traders with consistent pricing within a batch, freeing them from the lottery game for the order - and hence, the price - at which their trade will get cleared.
There are two big motivations behind adopting batch auctions as a price-finding mechanism in CoW Protocol. First, it seeks to enable the Ethereum DeFi ecosystem to establish consistent prices for identical token pairs within the same block, addressing the inconsistency caused by the design of Constant Function Market Makers (CFMMs). Unlike other transactions executed atomically, CFMMs require sequential processing to determine token pool ratios and execute trades accordingly, resulting in varying prices within the same block. Batch auctions ensure uniform clearing prices, eliminating opportunities for MEV bots to reorder trades and exploit traders.

Additionally, CoW Protocol's batch auction mechanism aims to tackle liquidity fragmentation in DeFi. It allows traders to benefit from Coincidences of Wants (CoWs) by sharing liquidity across multiple orders. If there's insufficient liquidity, excess trades can tap into on-chain liquidity to fill the order. Essentially, CoW Protocol transforms trading into a vast barter economy where users can engage in peer-to-peer swaps or access specialized markets to complete their transactions. Notably, batch auctions facilitate the integration of off-chain interactions (CoWs) and on-chain interactions within the same transaction, offering a comprehensive solution for decentralized exchange trading.

0 comments on commit ee6f5a7

Please sign in to comment.