The Defiant

CowSwap Launches ‘Surplus-Capturing’ Limit Orders

MetaDEX Aggregator Has Facilitated Over $18B In Trades

By: Owen Fernau

CowSwap Launches ‘Surplus-Capturing’ Limit Orders

While the fallout from FTX’s implosion continues to cast a shadow over crypto, DeFi projects are still innovating and releasing new features.

CowSwap, a decentralized exchange (DEX) aggregator, launched limit orders on Dec. 12. Limit orders are a way for traders to set specific prices at which to buy or sell an asset.

The feature has processed $6.1M of volume on 147 trades in roughly the first day since its launch, according to a Dune Analytics dashboard.

Projects like 0x have already developed implementations of the mechanism, but some leaders in the crypto space are excited about the specific features of CowSwap’s version.

“Best way to trade in DeFi,” tweeted Hasu, a researcher and strategy lead at Flashbots, an organization dedicated to reducing Maximal Extractable Value.

He underscored how CowSwap’s approach enables “surplus-capturing” limit orders. This means that the DEX aggregator will pass on any savings if the price of an asset falls below where a user sets a buy order or above where a user sets a sell order.

“Unlike any other venue that I know in the blockchain space on-chain, when you place the limit order and the price moves in your favor on Cowswap, you will capture that price improvement, and we’ll give it back to you,” Felix Leupold, CTO at CowSwap, told The Defiant.

Cost Savings

Leupold told The Defiant that the surplus-capturing feature has saved users 0.1% since CowSwap’s limit orders launched roughly a day ago. While that doesn’t sound like a lot, he emphasized that the value goes directly back to the user.

As DeFi yields have collapsed and rates offered by traditional banks continue to rise, the pressure is on blockchain-based financial applications to deliver more value to users.

Further iterations on limit orders, a staple of trading in the traditional financial system, can only help DeFi attract and retain users now that the eye-popping yields of 2021 are largely a thing of the past.

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Using CowSwap doesn’t incur gas fees when creating or cancelling limit orders, and a fee is charged only when orders are filled.

Leopold also noted that traders don’t have to lock up funds to set limit orders.

“You can use one stack of cash to place multiple orders, and whichever gets hit first will be the one that actually uses your cash,” he explained.

CowSwap has facilitated $18.3B in trades since its inception, according to a Dune Analytics dashboard. Of course, those trades are routed through other decentralized exchanges and so will also show up in those venues’ volume numbers.

Leupold, for one, is hoping that the “set and forget” nature of limit orders will help CowSwap to retain more traders.

“Our hypothesis is that CowSwap wasn’t yet your place to do all your trades yet, specifically because you could only buy at market,” the CTO said. “You couldn’t go on vacation and leave a buy order in case there’s a crisis and Ether drops below $1,000.”