CowAMM is cool/interesting but not fully explained

[Mookow4eva]

I get the gist of it: Solvers compete to rebalance your pool to what is most profitable for the LPs, and solvers get to keep a little of that profit (similar to CowSwap).

But what isn’t immediately obvious and I had to deduce from reading the docs (and I’m not even sure if they’re true, hence this thread):

1. CowAMM pools are not public-facing. Joe schmoe can’t “use” the CowAMM pool you’re providing liquidity to. Only permissioned solvers can rebalance your pool.
2. Because of (1), you aren’t providing liquidity directly but only indirectly to the entire blockchain as a whole.
3. Rather than 1 pool per pair that every liquidity provider shares (as on Uniswap), every liquidity provider has to create their own pool. I think this is because Safe’s have to be used on the backend.
4. Do solvers on CowSwap have access to the liquidity in the CowAMM during solving? Or is it a separate auction going on simultaneously?

The way CowAMM was announced so far makes it seem like you can go to CowSwap, click “Pools” to see a list of pools, connect your wallet, and deposit 2 tokens just like on Uniswap.

Aside: CowAMM should advertise it’s APY for some pools. Pick the top 10 pairs by TVL, then of those pairs pick the pool with highest TVL, and show the APY somewhere on cow.fi. I’m curious myself… and it’s impossible to determine whether or not LPing with CowAMM is a good idea without seeing some numbers.

[middleway.eth]

@Mookow4eva

• CowAMM pools are not public-facing. Joe schmoe can’t “use” the CowAMM pool you’re providing liquidity to. Only permissioned solvers can rebalance your pool.
• Because of (1), you aren’t providing liquidity directly but only indirectly to the entire blockchain as a whole.

Indeed this is a technical implementation details that wasn’t solved yet. Up until now CoW AMMs were more of “rebalancing portfolios” rather than providing liquidity.
Having said that, there’s work in progress to get solvers to match CoW AMM liquidity directly with CoW Swap traders, which will make the AMM’s liquidity available to any trader on CoW Swap (therefore can be considered “public”)

@Mookow4eva

1. Rather than 1 pool per pair that every liquidity provider shares (as on Uniswap), every liquidity provider has to create their own pool. I think this is because Safe’s have to be used on the backend.
2. Do solvers on CowSwap have access to the liquidity in the CowAMM during solving? Or is it a separate auction going on simultaneously?

The way CowAMM was announced so far makes it seem like you can go to CowSwap, click “Pools” to see a list of pools, connect your wallet, and deposit 2 tokens just like on Uniswap.

The solution for this, is developing “pooled liquidity” CoW AMMs. This effort is also in the works and expected to launch in the coming months. The user experience would be very similar to depositing to a “traditional AMM”.

[AndreaC]

Hi @Mookow4eva

thanks for your message! We wrote an evaluation of CoW AMM so far, where we discuss the current limitations and when/how we plan to address them. It should help answering some of your questions. You can find it here:

4 months of CoW AMM: what we have learned and the next steps

TlDR. CoW AMM is still in beta, and there is ample room to increase the return for its LPs further. Despite this, depending on the method and the pool, the returns to providing liquidity to CoW AMMs are similar to or significantly better (3% extra per month) than the best alternative for passive LPs. Executive summary CoW AMM’s promise to protect liquidity providers from LVR, that is, the excess profits made by arbitrageurs when rebalancing an AMM. During the first few months of its existence,…

[Mookow4eva]

Thank you for explaining this. I would highly recommend linking to the forum post (4 months of CoW AMM: what we have learned and the next steps) in the “Cow DAO May 2024 Highlights” monthly blog post, as I’m sure there are others curious too.