Author: BlockBeats

CowSwap is the DeFi token that has recently seen the most significant increase, and it is also one of Vitalik's favorite DEXs. It serves as a platform for large holders to offload their assets on-chain and is even the go-to DEX for the Trump team.

However, many people do not know that behind CowSwap lies an underrated top incubator within the Ethereum faction—Gnosis. I believe this is the true reason for the surge of $COW.

Recently, a piece of on-chain news about the DeFi project World Liberty Financial (WLFI) from the Trump team has attracted market attention in the Chinese community. Although $COW is not included in WLFI's asset list, on-chain analyst Ai Yi mentioned that recent token purchases by WLFI have utilized CowSwap. This aligns with the habit of Ethereum founder Vitalik Buterin, who frequently uses CowSwap.

This special on-chain behavior has directly influenced market sentiment. With the dual expectations of Trump about to take office and the popularity of political concept coins, the price of $COW surged by 62% in just one week and skyrocketed by 162% within a month.

The Power Behind CowSwap is Gnosis

Gnosis is the powerful force behind CowSwap.

CowSwap originated from Gnosis Protocol V1, launched in 2020, which was the first decentralized trading platform to achieve circular trading through a batch auction mechanism. Its unique design allows all orders to share liquidity and efficiently complete settlements.

In 2021, Gnosis Protocol V2 introduced an innovative solving mechanism (Solvers), which not only significantly improved order matching efficiency but also successfully addressed the long-standing MEV (Miner Extractable Value) issue that has troubled DeFi traders. That same year, Gnosis Protocol was renamed CowSwap, becoming the aggregator we know today.

It can be said that CowSwap's rise is inseparable from the deep accumulation 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 published thoughts on the combination of MarketMaker and OrderBook on his forum, which is one of the earliest concepts for decentralized prediction markets in the industry.

Martin Koeppelmann was also one of the earliest Ethereum developers, having joined before the DAO era. Living in Berlin, he maintained close ties with Vitalik, who was also in the Berlin office at the time.

Over the years, he has participated in many discussions within the Ethereum development community, frequently discussing L2, ZK, and the Ethereum roadmap with Vitalik. From Martin's comments on social media, one can see his level of integration into the community.

Based on this technological accumulation, Gnosis has gradually developed a complete ecosystem. From Gnosis Protocol evolving into CowSwap, Martin and his team further derived products such as Gnosis Chain, Safe, and Gnosis Pay, ultimately forming a highly collaborative ecosystem.

Thus, mutual integration is a natural outcome. The most representative example is the integration of CowSwap and Safe.

The Trump Family's Preferred Wallet

As the star product in the Gnosis ecosystem, Safe is the most popular multi-signature wallet in the Ethereum ecosystem and is used by large holders. When Safe issued tokens this year, the top 100 addresses for the airdrop were almost entirely project teams or institutions.

This means that the early large holders of Safe were primarily project teams, not individual users, including OP, Polymarket, Drukula, Worldcoin, Lido, and others.

Initially, Safe's audience was more DAO and crypto project teams. However, as the crypto industry entered the next phase, traditional finance, traditional institutions, family funds, and old money began to enter the market. Given the high barriers to entry in crypto, the safest way to protect funds while engaging in on-chain crypto is through multi-signature wallets, and Safe is the choice.

Safe's design greatly enhances the security of fund management. Through a multi-signature mechanism, funds are stored in a smart contract address, and transactions can only be executed when a pre-set number of signatures (e.g., 3/10) is met. This mechanism effectively reduces the risk of single-point failure; even if one signature address's private key is leaked, it is difficult for an attacker to obtain enough signatures to complete the transaction. Additionally, during the multi-signature confirmation process, the signing operations of pre-signers do not require Gas fees, as the transaction remains in a "pending execution" state. Only the last address confirming the execution operation (e.g., transaction, transfer, etc.) needs to pay Gas. This optimization not only reduces usage costs but also makes Safe the optimal choice for institutional users and large holders.

According to Safe guardians, the simplest ways to determine whether an on-chain address is a Safe wallet address are: first, the "MultiSig" label shown on ARKHAM; second, the address displayed directly below on the debank page will show "MultiSig:Safe."

Trump project's address

Vitalik's address

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

From this perspective, the preference of large holders like Trump and Vitalik for CowSwap may not only be because CowSwap is an MEV-resistant aggregator DEX but also due to the synergistic effects exhibited by the Gnosis ecosystem, which is tailored to meet the real needs of large holders.

From Incubator to Investment DAO

As mentioned earlier, Gnosis has been laying the groundwork since 2015. Initially, it was a prediction market platform based on Ethereum, which later evolved into the Gnosis ecosystem, giving rise to many projects such as Gnosis Chain, Safe, CowSwap, and Gnosis Pay.

Gnosis Chain is a well-known Ethereum sidechain from the previous cycle, focusing on efficient and secure decentralized application development. According to DefiLlama data, as of the writing of this article, Gnosis Chain's total value locked (TVL) is $349.31M, which includes $71.61M in native assets and $277.7M in cross-chain bridge assets. The market cap of stablecoins reaches $119.98M, with DAI accounting for 74.07%, and trading volume remains stable.

Gnosis Chain data, source: DefiLlama

Gnosis Pay is an on-chain payment debit card that provides users and institutions with a convenient payment experience through seamless integration of blockchain technology. Along with CowSwap and the multi-signature wallet Gnosis Safe (now known as Safe).

GnosisDAO is the core governance body of the Gnosis ecosystem, promoting the incubation and development of innovative projects through decentralized autonomy. As ecological incubation flourished, GnosisDAO also began to explore investment operations.

In addition to incubating well-known projects like Safe and CowSwap, GnosisDAO began laying out in the blockchain field through its investment department GnosisVS as early as 2019, supporting over 60 startups.

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

This year, the investment operations further expanded. In October, GnosisDAO approved a proposal to launch a $40 million venture capital fund. GnosisDAO contributed $20 million, while the other half of the funds came from external limited partners (LPs). This dual structure not only increases the fund's capital size but also creates more opportunities for external collaboration.

The fund, named GnosisVC Ecosystem, will prioritize investments in projects engaged in the tokenization of real-world assets (RWA), decentralized infrastructure, and financial payment channels.

What Makes CowSwap Strong?

It can be said that CowSwap's rise is the best embodiment of the collaborative efforts of the Gnosis ecosystem, but this does not mean that CowSwap itself has not created a new paradigm.

To be more specific, CoW Protocol is a decentralized trading protocol, while CowSwap is a DEX built on CoW Protocol, serving as its front-end interface, allowing users to interact with CoW Protocol through CowSwap.

As a front-end application of CoW Protocol, CowSwap further amplifies the advantages of the protocol. It is referred to as the "trading assistant" of CoW Protocol, a Meta DEX aggregator that can switch between multiple AMMs and other aggregators to help users find the best prices currently available in the market. Unlike traditional DEXs that require users to compare prices themselves, CowSwap's mission is to eliminate cumbersome operations through intelligent matching, ensuring that transactions are completed in the most favorable manner. From this perspective, CowSwap addresses a long-standing pain point faced by DeFi users: the front-end dependency issue.

Is the Ultimate Solution to MEV Intent?

Miner Extractable Value (MEV) has long been a significant issue for traders. MEV refers to the additional value extracted by miners or other traders from ordinary users' transactions by manipulating transaction order or inserting transactions. According to a report by Galaxy Digital, MEV bots have extracted as much as $300 million to $900 million in user profits on the Ethereum network alone.

This is very unfriendly to large holders and whale traders. Even Ethereum founder Vitalik Buterin himself has been troubled by being "sandwiched" frequently, causing significant headaches. Therefore, the MEV issue is one of the most concerning problems for Vitalik during the development of Ethereum, and he often mentions it in various speeches and Ethereum roadmaps.

CowSwap effectively addresses this issue.

In traditional DeFi interactions, users' operations (such as asset bridging, swapping, staking, and withdrawals) directly interact with on-chain contracts. This design is not only complex but also exposes users' transaction needs, making them easy targets for MEV bots. Therefore, CoW Protocol fundamentally changes this interaction model by migrating users' transaction needs from on-chain to off-chain processing. This solution is called "off-chain preprocessing," which is more commonly known as "intent trading."

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' transaction needs, CowSwap introduces third-party "solvers" off-chain to match and process transactions. This mechanism brings multiple benefits, significantly reducing users' direct exposure to on-chain risks, optimizing the protocol's liquidity management, and making user transactions more efficient, secure, and private.

To be more specific, through intent narrative, CoW Protocol has designed three core protective mechanisms against MEV:

1. Unified Clearing Price Batches

CoW Protocol introduces a "unified clearing price" mechanism. When the same token pair (e.g., ETH-USDC) is traded multiple times in a batch, all assets will be cleared at the same market price. This mechanism makes transaction order irrelevant, fundamentally eliminating the possibility for MEV bots to profit from reordering transactions. More importantly, this mechanism also addresses the price inconsistency issues caused by the constant function market maker (CFMM) model in traditional AMMs (like Uniswap), providing users with a fairer trading environment.

2. Delegated Trade Execution

Users' trades are executed by guaranteed 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 risks but also significantly improves transaction execution efficiency.

3. Demand Coincidence Model

Compared to traditional automated market makers (AMMs) or centralized limit order books (CLOBs), CoW Protocol's advantage lies in its core auction mechanism. This mechanism allows multiple trades to occur simultaneously, akin to an efficient large market promotion. In this event, those who can find the best matches will reap the greatest benefits. This is known as the "coincidence of wants (CoWs)," which is also the origin of CoW Protocol's name, cleverly spelling out "cow."

Thus, driven by the Gnosis ecosystem's flywheel and CowSwap's product push, CowSwap has seen a rapid increase in trading volume on the Ethereum chain over the past 30 days.

The Past Grievances with Uniswap

Many people do not know that CowSwap has some past grievances with Uniswap. Last year, the DEX leader Uniswap announced UniswapX, which was embroiled in a CowSwap plagiarism controversy.

After Uniswap announced version V4, it quickly announced the launch of UniswapX, but the community was very dissatisfied with UniswapX, with many questioning, "What is the difference between UniswapX and CowSwap?" Some even jokingly said, "UniswapX should thank the open-source spirit of the crypto industry."

The official Curve Finance account directly commented, "To be frank, the rules of the game changed long ago: when 1inch first performed high-quality aggregation, when CowSwap launched the Solvers model. UniswapX is good, but it is not the pioneer, nor even the second player."

This public pressure posed a significant challenge for Uniswap. To shake off the title of "Tencent of the DEX world," two months ago, Uniswap Labs launched the Ethereum Layer 2 network Unichain based on OP Stack, managing to "score a small victory."

One of the major innovations is that Unichain innovated the MEV revenue distribution mechanism, using Trusted Execution Environment (TEE) to directly distribute part of the MEV revenue to users or liquidity providers (LPs), achieving a fairer value-sharing model.

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

Wintermute "Riding on a Rainbow" Arrives

Looking at it this way, CowSwap's product is good, but there are many ways for useful products in the crypto space to "die." Few can make it onto top trading platforms, and even fewer can rise by 162% in a month.

If we turn back the clock four months, we will find that the beginning of the price increase of $COW coincided with the collaboration with Wintermute.

Initially, to increase on-chain liquidity, CoW DAO proposed to allocate 10 million $COW tokens to inject market liquidity for ETH/COW. This proposal included an innovative strategy: part of the $COW tokens would be converted into ETH and injected into a brand new Function Maximizing AMM (FM-AMM) liquidity pool along with the remaining $COW. FM-AMM differs from traditional AMMs in that it effectively eliminates most MEV attacks and the high profits of arbitrageurs while reducing risks for liquidity providers (LPs).

However, merely having on-chain liquidity was still insufficient to meet market demand; the depth of centralized trading platforms is also crucial. After all, the markets there are larger, with more money. At that time, the only way to acquire $COW was through decentralized channels, with the largest pool being ETH/COW on Balancer on the Ethereum mainnet. Without a CEX trading scenario, many users and institutions could not position themselves in $COW.

At this moment, Wintermute "riding on a rainbow" arrived.

Wintermute proposed to borrow 7.5 million $COW tokens from CoW DAO's treasury to support liquidity on decentralized and centralized trading platforms. This proposal received strong support from the community and officially opened a new chapter for $COW liquidity.

As a leading market maker in the crypto industry, Wintermute excels at establishing efficient markets between centralized and decentralized trading platforms. Its founding team previously worked at the traditional financial giant Optiver, possessing rich experience in market depth management.

During the months of collaboration, Wintermute provided depth market support for COW with ETH and other trading pairs, ensuring liquidity and providing a stable trading environment for DeFi aggregators (such as CowSwap, UniswapX, and 1inch). Meanwhile, Wintermute offered large trade support for institutions in the OTC (over-the-counter) market, further expanding the user base for $COW.

This bidirectional market-driving effect directly propelled the price of $COW to soar.

Even in the second month of Wintermute's market-making, Coinbase announced that it would include $COW in its listing roadmap and launched COW perpetual contracts three months later. Since then, $COW has successively landed on major top trading platforms, with Binance following closely behind, launching the COW/USDT spot trading pair.

These are the true reasons I believe $COW surged by 162% in a month.

The Flywheel Effect Between the Gnosis Ecosystem and Ethereum

From a broader public chain perspective, during a bull market, the Solana ecosystem, which Wall Street bets on, has grown rapidly, while Ethereum appears somewhat fatigued. However, from the on-chain dynamics of the Trump team's WLFI project, it seems that Solana still has significant growth potential in serving institutional large holders, and the performance of multi-signature products is difficult to match the deep accumulation of Ethereum.

Although there are multi-signature products on the Solana chain, the assets they manage are not even on the same scale.

Taking Squads, the multi-signature protocol managing the most assets on Solana, as an example, its managed funds currently amount to about $170 million. In contrast, Safe within the Gnosis ecosystem manages assets totaling a staggering $89 billion.

More importantly, the products of the Gnosis ecosystem not only boast impressive scales but also form a powerful ecosystem capable of serving institutions and large holders through collaboration and deep integration. The security of Safe, the efficiency of CowSwap, and the convenience of Gnosis Pay collectively help Ethereum "catch its breath" in this round of public chain competition.

Moreover, and more importantly, the products of the Gnosis ecosystem have formed a good ecological circle to serve institutions and large holders through project collaboration, helping Ethereum "catch its breath" in this round of public chain race.

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