RFP : CoW Value Distribution Mechanism

CoW Grants Program
1

RFP : CoW Value Distribution Mechanism

Research & Design - RFP

Requests for proposals are not intended to be prescriptive or exhaustive. The community is encouraged to submit proposals that expand upon the ideas presented in this post. The project scope may change based on the proposals received. The primary intent of this document is to provide a starting point for achieving the outlined goals; the final implementation may differ from the initial proposal.

All applications will follow the standard Grants DAO process. This request should not be interpreted as an offer.

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Grant Engagement Terms

This is a CoW Grants DAO engagement. By applying to this RFP, applicants acknowledge that his is not a traditional service agreement or consulting contract. All grant recipients are bound by the following:

Key points from the Grant Agreement:

  • Payments are made in stablecoins (USDC, DAI, or USDS) on Ethereum mainnet

  • Grant recipients are independent of CoW DAO (not employees, agents, or partners)

  • All deliverables must be open source under approved licenses

  • Standard payment terms are 30 days after milestone completion

Applicants should review these terms before applying.

Summary

This RFP seeks research and design proposals for a COW Value Distribution Mechanism: a framework that defines how net profit accumulated in the Managed Treasury, generated by CoW Protocol, is captured, managed, and distributed to COW tokenholders.

As part of the commitment to and journey towards decentralisation, this RFP aims to engage key stakeholders (Core Team, Tokenholders, Delegates, and external Service Providers) in a project to improve outcomes for CoW DAO.

The expected impact is to strengthen the long-term sustainability and tokenholders’ incentive alignment within the CoW ecosystem by establishing a clear mechanism for value sharing.

Goal

The goal of this RFP is to research and design a sustainable, governance-compatible value distribution model for the CoW Protocol token (COW).

This includes:

  • Identifying how protocol value is accrued

  • Determining viable methods of returning value to tokenholders

  • Outlining a high-level communication strategy to guide future community engagement

The outcome should:

  • Clarify CoW Protocol’s value capture mechanisms

  • Provide an in-depth benchmark of how other DAOs are performing these programs

  • Present actionable distribution options aligned with DAO principles

  • Lay the groundwork for an informed governance discussion and eventual implementation

Success Criteria: An implementable design, with operational and technology diagrams and flows mapped and identified.

Scope

In Scope

The project aims to:

  • Identify ways protocol-generated value can be attributed to tokenholders

  • Design a governance-compatible implementation framework

  • Prepare a communication plan for eventual community rollout

Out of Scope

  • Linking the value distribution framework to the wider Solver mechanism

  • Linking the value distribution framework to the cross-chain validator roadmap item

  • Smart contract development or implementation

  • Legal opinion on securities classification (this will be handled separately by CoW Foundation)

  • Mapping of protocol revenue sources and P&L dynamics (to be provided by Core Team)

Deliverables

1. Research Report (40% of scope)

  • Comparative analysis (benchmark) of value distribution models across DeFi projects

  • Coverage of tokenholder incentive mechanisms: buyback-and-burn, staking rewards, wrappers, VE tokens, and other innovative approaches

  • Benchmark of comparable projects: Uniswap, Hyperliquid, Lido, Curve, Ether.fi, and others as appropriate

2. Design Proposal (50% of scope)

  • Recommended distribution mechanism(s) for CoW Protocol

  • Financial impact modeling or simulation to assess long-term viability

  • Operational and technical diagrams showing value flows

  • Implementation considerations and dependencies

3. Communication Plan (10% of scope)

  • Strategy for introducing the value distribution concept to the community

  • Visual “Value Flow Map” and explanatory materials for governance discussions

  • Documentation suitable for informing a future governance proposal (CIP)

The estimated timeline for deliverables should be included in the application.

Specification

Research Focus Areas

The research should explore (but is not limited to):

Tokenholder Incentive Design Options:

  • Buyback-and-burn mechanisms

  • Staking rewards with time-lock incentives

  • Token wrappers

  • VE token models

  • Hybrid approaches

Benchmark Requirements:

  • Minimum 10 comparable projects analyzed

  • Variables to include: mechanism type, implementation complexity, governance compatibility, regulatory considerations, market reception, measurable outcomes

Timeline

Phase Dates Activity
Application Period Jan 6 - Jan 20, 2026 RFP open, candidates apply
Selection Jan 20 - Jan 30, 2026 Review applications, conduct intro calls, select provider
Research & Design Feb 1 - Mar 14, 2026 Execute research, prepare deliverables
Review & Iteration Mar 14 - Mar 31, 2026 Core team and community feedback
Post-Project April 2026+ Governance proposal development (if applicable)

Method

Applicants may propose their preferred research and design methods, provided they address the objectives outlined above.

Interdisciplinary approaches combining economic modeling, tokenomics design, and governance best practices are encouraged.

Flexibility for iterative feedback and collaboration with the Core Team is expected.

Outputs must be open-source where applicable, and presented in a format that facilitates DAO governance review and adoption.

The selected provider will coordinate with an internal Core Team reviewer throughout the engagement. Interim materials may be shared with the community for feedback at the project coordinator’s discretion.

Application Process

How to Apply

Applications must be submitted via the confidential application form located on Notion: https://cownation.notion.site/2e08da5f04ca8049a65af1369be4dd73?pvs=105

Required information:

  1. Applicant name / firm name

  2. Contact email

  3. Proposal document (PDF) including:

    • Team/firm background and relevant experience

    • Proposed methodology and approach

    • Timeline and milestones

    • Budget breakdown

    • References or prior work samples

Confidentiality

  • Applications are confidential during the review period. This allows for sealed bidding without price anchoring.

  • All applications will be published simultaneously with the committee’s selection decision to ensure transparency.

  • Applicants who require confidentiality of specific commercial terms should note this in their submission.

Insider Trading Policy

Due to the price-sensitive nature of this research, all selected participants (individuals and firms) will be required to sign CoW DAO’s Insider Trading Policy before commencing work. This prohibits trading COW tokens within specified windows around material non-public information.

Evaluation Criteria

Applications will be evaluated on:

  1. Prior Technical Expertise: Demonstrated work performed in the tokenomics area

  2. Relevant Experience: Involvement in tokenomics of a prior Top 50 cryptocurrency is desired

  3. Methodology Quality: Clear, structured approach to research and analysis

  4. Understanding of CoW Protocol: Familiarity with CoW Protocol’s unique characteristics (batch auctions, solver competition, MEV protection)

  5. Deliverable Clarity: Well-defined outputs that meet the stated goals

  6. Timeline Feasibility: Realistic schedule aligned with project needs

  7. Cost Effectiveness: Reasonable budget with clear justification

Compensation

Core team suggests the following compensation structure:

  • Fixed fee for each deliverable, paid in stablecoins (USDC, DAI, or USDS) on Ethereum mainnet

  • Performance bonus: Allocation of 25,000 COW in case the proposed design is selected AND $COW doubles its average price between announcement date and 3 months after announcement date (“trading window”), up to December 2026, for more than two consecutive weeks

Applicants should provide their proposed fixed fee with justification in their application.

Selection Process

The Grants DAO committee will make the selection in coordination with the CoW Protocol Core Team. The committee will consider the above evaluation criteria, cost, timing, quality, and scope in their decision-making.

Roles:

  • Steward: Grants Committee member (coordination, administration, milestone tracking)

  • Reviewer: Core Team member (technical and strategic evaluation)

The committee reserves the right to:

  • Close or extend the application timeline

  • Request clarifications from applicants

  • Select none of the submitted proposals if none meet the requirements

  • Negotiate scope or budget adjustments with preferred candidates

Important Notes

  • This RFP is for research and design only. The output is a recommendation and framework, not a binding commitment to implement.

  • Final implementation decisions will be made through CoW DAO’s standard governance process (CIP).

  • Legal and regulatory review will be conducted separately before any implementation proceeds.

  • The Foundation Director and legal counsel will review the final recommendations.

Call for Action

  • Community: Before the RFP closes, community members are encouraged to provide feedback on this RFP by commenting below.

  • Applicants: Proposals should be submitted by January 20, 2026, via the application form linked above, following the standard Grants Program template where applicable.

  • Questions: Direct questions to the Grants Committee via Discord or forum reply.

Terms and Conditions

By applying to this RFP, applicants acknowledge and agree to be bound by the CoW DAO Grant Agreement Terms and the CoW DAO Participation Agreement.

Note: Feel free to use the thread below for general discussion or questions about this RFP.

3 Likes
2

My humble opinion is that, first of all, decentralization doesn’t work with initiatives of this importance. Someone (a ceo) and board of directors or in our case founders and the team should take the initiative, do all the research OR outsource and have it done and come up with a proposal after which it can be opened to tokenholder feedback for a couple weeks after which it can be voted after necessary modifications are made. This grant thing will be painfully slow and it’s not gonna be worth the time and effort of the team and the dao. It’ll be a waste of time. Even the criteria for potential grantees to enter into consideration is very harsh.

Also, it’s not like these decisions should be scientifically backed or something. They are all empirical at first. Trial and error, if you will. For instance, I could just say, let’s calculate the net profits at the end of every month and buy back half of that exact worth of Cow and burn it. The other half will be put in treasury for a rainy day. As funny and simple as that sounds, it’d be a start.

We don’t need that much time as mentioned above. There is no science to this.

3 Likes
Cow’s IR strategy
3

Note that I do not intend to apply for this grant directly. Here are my personal thoughts on the matter of revenue sharing. So people can discuss and prepare a draft based on those ideas.

CoW Value Distribution Mechanisms

Prepared Design Options

Design Principles (Shared Across Both Options)

Both mechanisms are built on the following principles:

  • Governance-first: All parameters are DAO-controlled and adjustable via onchain/offchain votes

  • Reversible & flexible: No mandatory irreversible actions (e.g. forced burning)

  • Treasury-aware: Preserves DAO capital for growth, grants, and strategic initiatives

  • Surplus-based: Uses protocol net surplus, not gross fees or solver-level flows

  • Regulatory-aware: No fixed yield promises or entitlement language

Option 1 — Governance-Controlled Buyback with Adjustable Burn Rate (Primary Recommendation)

Concept Overview

A configurable buyback mechanism where:

  • A DAO-set percentage of managed protocol surplus is allocated to token buybacks

  • A separately governed burn rate determines how much of the bought COW is burned

  • Burn rate can start at 0%, meaning 100% of bought tokens remain in the DAO treasury

This ensures:

  • Immediate token utility narrative

  • Long-term capital optionality

  • Governance retains full control over capital deployment

Key Parameters (Governance-Managed)

Parameter Description Initial State (Example)
Buyback Rate % of net surplus allocated to buybacks 0–X%
Burn Rate % of bought tokens burned 0% default
Buyback Frequency Cadence of execution Periodic
Treasury Retention Tokens held when burn = 0% 100%

All parameters are changeable via governance vote.

Value Flow (Burn = 0%)

Protocol Net Surplus
        ↓
 Managed Treasury
        ↓
 Governance-Set Buyback (%)
        ↓
    Buy COW
        ↓
 DAO Treasury (COW Reserves)

At 0% burn, buybacks act as capital accumulation, not supply destruction.

Value Flow (Burn > 0%)

Protocol Net Surplus
        ↓
 Managed Treasury
        ↓
 Governance-Set Buyback (%)
        ↓
    Buy COW
     ↓     ↓
 Burn %   Treasury %

Why Start with Burn = 0%

  • Preserves maximum optionality

  • Builds a war chest of native token

  • Enables future:

    • Incentive programs

    • Strategic liquidity provisioning

    • Grants or ecosystem bootstrapping

  • Signals long-term confidence, not short-term price engineering

Tokenholder Value Proposition

  • Clear link between protocol success and COW demand

  • Credible future upside via governance-controlled burn

  • Protection against premature capital depletion

This mechanism alone:

  • Improves token utility

  • Avoids regulatory pitfalls

  • Requires minimal UX education

Option 2 — Surplus-Funded Staking Distribution (Optional Extension)

Concept Overview

A staking-based value distribution mechanism where:

  • The same surplus allocation logic is reused

  • Instead of buybacks, surplus is routed to a distribution contract

  • Value is distributed proportionally to staked COW

Importantly:

  • This does not replace Option 1

  • It can be activated later or run in parallel

Key Parameters (Governance-Managed)

Parameter Description
Staking Allocation % of surplus directed to staking
Lock Conditions Optional time-lock or cooldown
Reward Asset ETH (currently used as a revenue collected currency)
Distribution Frequency Periodic

Value Flow

Protocol Net Surplus
        ↓
 Managed Treasury
        ↓
 Governance-Set Allocation (%)
        ↓
 Distribution Contract
        ↓
 Staked COW Holders

Design Characteristics

  • No inflation: Rewards sourced from surplus, not minted tokens

  • Proportional distribution: Based on stake size (and optionally lock duration)

  • Composable: Could later integrate governance weight or long-term locks

  • Opt-in: Tokenholders choose whether to stake

Relationship to Option 1

Two compatible configurations:

A) Mutually Exclusive

  • DAO chooses between Buyback OR Staking allocation

B) Split Allocation

  • Example:

    • 6% surplus → Buybacks

    • 4% surplus → Staking

All splits remain governance-controlled.

Tradeoffs vs Buyback Model

Aspect Buyback Model Staking Model
Complexity Low Medium
UX Passive Active
Regulatory Sensitivity Lower Moderate
Engagement Implicit Explicit
Capital Preservation High Medium

Strategic Rationale for CoW DAO

This two-option framework allows CoW DAO to:

  • Start conservatively and credibly

  • Avoid irreversible commitments

  • Build token utility before promising yield

  • Respond dynamically to market and regulatory conditions

  • Scale value distribution sophistication over time

Suggested Governance Rollout Path

  1. Phase 1

    • Approve buyback framework

    • Buyback rate > 0

    • Burn rate = 0

  2. Phase 2

    • Accumulate COW in treasury

    • Evaluate capital needs vs supply reduction

  3. Phase 3 (Optional)

    • Introduce burn

    • Or activate staking distribution

    • Or both

Why This Creates Confidence for Tokenholders

  • The mechanism exists even when burn = 0

  • Governance commitment is visible and enforceable

  • Token utility is tied to protocol performance

  • DAO retains the ability to pivot without redesign

5 Likes
5

I like those two options; however, I also believe that CoW still wants to pursue aggressive growth in the next few years, which will require substantial funding.

Instead of focusing on paying out funds to stakers or buying back tokens, the best scenario would be allocating resources effectively to pursue growth.

Hence, even if such a mechanism were in place, I would expect the burn to be 0 for the foreseeable future.

2 Likes
6

That is the idea, to satisfy and secure cow token holders needs we should implement the mechanism already and set that on idle 0%. This will prevent that topic to come back every so often and send a strong signal that in the future it is only matter of revenue distribution switch click. I agree that the current state of the protocol is at the growth phase though and all revenue should be reinvested.

1 Like