Balancer v2 and Gnosis’ ‘CowSwap’ take aim at MEV with planned integration
The two protocols will collaborate on a joint platform that will combine the best features of each.
Decentralized exchange Balancer and decentralized finance platform Gnosis have announced today a planned integration dubbed the Balancer-Gnosis-Protocol, a collaboration that will combine Balancer’s v2 pool mechanisms with Gnosis’s DEX aggregation and batch auctions designed to mitigate miner extractable value, or MEV.
Balancer’s v2, which is currently live for developer testing, was announced in February and boasts a host of new features: All liquidity will be pooled into a single vault for gas efficiency, unused liquidity will be put to work on lending platform Aave for additional yield, and users will be able to build their own automated market makers with customizable curves.
Gnosis, meanwhile, is set to release the proof-of-concept for its forthcoming Cowswap DEX on Wednesday. Cowswap integrates “all liquidity sources on Ethereum” as an aggregator similar to 1inch, and it also offers a partially off-chain system that may lead to gasless transactions, as well as tight slippage and MEV protection.
MEV is a phenomenon in which bots front-run transactions on DEXs, exploiting arbitrages and causing slippage. The demand to find ways to mitigate MEV has been growing in recent months, and according to MEV-Explore, over $420 million in value has been extracted from traders on DEXs since Jan. 1, 2020.
The collaboration between the protocols is designed to combine the best of pool and curvature mechanics with a next-generation liquidity aggregator and MEV-deterrent exchange platform. The current target date for the full integration is “mid-June,” and the teams noted that there will be an “incentive program,” presumably some form of liquidity mining, coinciding with the release.
“By collaboration, we can out-cooperate the competition—traditional finance—and bring traders unparalleled decentralization, transparency, and value,” Balancer CEO Fernando Martinelli said of the integration.
Balancer has been particularly active in integrating with other protocols as of late, highlighted by the collaboration with Aave in its v2 design. These integrations appear to be part of a larger movement of collaborations heating up across the DeFi space.