RFP : CoW Value Distribution Mechanism

[Chim9]

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.

-–

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:

• CoW DAO Grant Agreement Terms

• CoW DAO Participation Agreement

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.

[Obodur]

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.

[karolak]

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

---

[Stefan]

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.

[karolak]

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.

[Sov]

Thanks to everyone who submitted proposals. We received a solid range of applications and the Grants Council has completed our initial review.

We’re now moving into calls with select applicants to dig into methodology, timeline, and deliverables in more detail. We’ll be reaching out directly to schedule those over the next week.

All applicants will hear from us individually with next steps or feedback. We expect to have a final selection within the next few weeks.

More updates to follow as the process moves forward.

[Sov]

The Grants Council, in collaboration with the CoW Core team, has completed the evaluation process for the Value Distribution Mechanism RFP. We received six applications, shortlisted three for interviews, and after a thorough review, have selected Aragon to lead this engagement.

Why Aragon

Aragon brings direct, relevant experience designing and implementing value distribution mechanisms for protocols operating at scale. Their work with other similar organizations gave us confidence that they understand the second-order effects of mechanism design in live DeFi environments. During the interview process, they demonstrated strong awareness of CoW-specific constraints, particularly around solver economics and the importance of not disrupting the incentive structures that make the protocol work.

A key factor in our decision was Aragon’s ability to carry this work from design through to implementation. Aragon can take the research and design output and execute on it using the tested, audited components they already maintain. This reduces handoff risk and gives us continuity across both phases of the work.

Their approach is grounded in practical benchmarking against comparable protocols, with mechanism design informed by lessons learned from prior engagements. They were transparent about tradeoffs in their own capabilities and committed to open-sourcing all deliverables.

What Happens Next

The engagement will follow the structure outlined in the RFP: a research and benchmarking phase followed by mechanism design and recommendation.

Updates will be shared as the work progresses. If you have questions about the selection process or the engagement itself, feel free to post below.

[Chim9]

Quick follow-up: As outlined in the original RFP, we committed to publishing all applications alongside our selection decision to maintain complete transparency.

You can view the full list of submitted proposals and their details here: List of Applications

Thanks again to everyone who took the time to put together these submissions.

[leuts.eth]

Hello everyone,

Leuts.eth from Aragon.

As extensive users of CoW Swap for years we are proud and thrilled to have been chosen to lead this engagement. It’s always a pleasure working with top organisations and protocols.

We have begun the research and benchmarking phase which will be followed by mechanism design and recommendations.

Don’t hesitate to reach out for any questions. Moo!

[leuts.eth]

I have posted the ratification proposal on Snapshot.

Thank you!

[karolak]

Any updates? We would love to see the proposal already overdue.

[leuts.eth]

Hello, apologies we’ve been heads down but have kept the Grants DAO up to date.

We are getting closer to a comprehensive and completed report that would be ready for review.

Just to be transparent that due to the KYC and signing requirements that took 1 week longer than expected (when we put forth our internal timelines we were not aware that a vote would go up after then followed by contract and legal document agreements) we are a few weeks away from completion, but still within the “post-project timeframe” that is in the RFP of “April.”

It’s coming and we’ll share more shortly. Thanks for your patience!

[karolak]

Any updates? I see no reason to not share with community what u share with grants dao.

[leuts.eth]

Hi all thanks for your patience.

Pleased to say that Aragon has completed the benchmarking, modeling, and implementation specification for the proposed path forward for COW value accrual.

We went through our initial conclusions with the internal working group including members of the CoW Swap team. The team has asked for a short period to review the deliverables ahead of the wider public forum post. We will share once this has been completed.

Thanks again,
Anthony

[leuts.eth]

Hi,

Aragon is happy to present our findings to the CoW community for discussion regarding the above RFP, commissioned by CoW Swap for the research and design of a value accrual mechanism for COW. Listed below are the full set of deliverables, along with an executive summary of our recommendations.

Full Deliverables

• Benchmarking Research Report

• Scenario Modeling for COW Value Distribution

• Implementation Specification for COW Value Accrual and Staking

• Communications Plan

Summary of Findings

Make the existing value flow legible

At CoW Protocol’s current revenue scale, no change to the value accrual mechanism can have a meaningful impact. Buybacks funded solely by free cash generated by the protocol, under any allocation policy, are too small relative to circulating supply and structural emissions to materially shift the supply curve. The cash flow is too thin to generate a competitive staking APR under distribution models. The constraint CoW Protocol faces today is scale, not design.

While scale is a challenge, CoW is generating free cash, running consistent buybacks, and has materially reduced structural sell pressure (legacy vesting completed in February 2026, replaced by a much smaller allocation as per CIP-83). This fundamental strength is not presented in an easily digestible, widely accessible format.

Formalising and surfacing the revenue waterfall is the low-hanging fruit

Gross protocol fees → variable costs (solver rewards, gas reimbursement, integration fees) → fixed costs (OpEx) → capped buyback.

This is already what happens, but across disjointed wallets and processes. For example, excess COW buybacks beyond the solver incentive budget are funded by cash flow net of OpEx. As OpEx is separately funded by the treasury, this flow is not immediately obvious to external audiences. Extending the existing reporting or providing dashboard data that clarifies cash flows would deliver more market signal than any change to the mechanism at the current scale.

We recommend this be done in two parts:

1. Aragon will propose a set of best practices for communicating value accrual, based on best-in-class examples, as part of the communication plan deliverable

2. We recommend segmenting the value-accrual cash flows into a separate set of contracts, in which additional mechanics can be activated at the DAO’s discretion. Details are provided in the implementation deliverable.

Adjustments in buyback policy and evaluation of buyback-and-distribute

Based on our research findings, we recommend a formal reassessment triggered when annualised free cash flow consistently reaches ~$9M/year, which we project will occur in approximately 18 months under conservative growth assumptions. Two distinct changes should be evaluated at that point:

• Shift from emissions-linked to surplus-linked buybacks.* Change the current 1.2x solver emissions target by delineating solver emissions replacement buying from the value accrual portion. Use a fixed share (e.g., 80%) of FCF after OpEx as a buyback target, scaling value accrual with revenue growth rather than capping it at solver costs.

• Consider implementing buyback-and-distribute.* Routing a portion of buybacks to stakers as a displayable APR. At $9M/year, FCF buybacks, net of solver rewards, exceed structural emissions. Furthermore, a staking locker could provide leverage on the amounts mechanically taken out of circulation by the buybacks alone

Reassessment is relatively straightforward, as the simulation model has already been developed as part of the research presented here and requires minimal adjustments.

Evidence Base

Benchmarking: 11 protocols, three consistent patterns

Full report

We evaluated 1inch, Paraswap, Jupiter, Hyperliquid, Sky, Ether.fi, Aerodrome, GMX, Aave, Uniswap, and Lido against criteria derived from CoW community sentiment: revenue-funded, visible, simple, solver-neutral.

Escrow mechanisms fail on aggregator margins. 1inch (8% stake rate, resolver-rev-share) and Paraswap (mechanism abandoned) are CoW’s closest structural analogues and clear failure cases. VE and social escrow cannot be sustainable within DEX aggregator economics without sizeable inflation emissions or a degradation of solver competitiveness.

Buybacks do not generate a sufficient signal at a moderate scale. Jupiter spent $70M in buybacks against $1.2B in unlocks, covering 6% of new supply. Aave is slightly deflationary but is still underperforming ETH. Buyback-and-hold preserves optionality but produces no holder-visible value story.

Distribute models are not completely circular thanks to the staking of rewards. Sky (72% restake) and GMX (70% restake) show that only a fraction of bought-back tokens being distributed to stakers are reintroduced into the circulating token supply. These effects were observed at double-digit staking APRs.

Model findings

Full Report

A weekly Monte Carlo simulation over a 104-week horizon was run against three stochastic inputs (COW price, weekly net revenue, solver share of revenue) and deterministic emissions schedules (CIP-83 core team vesting at ~1M COW/month, CIP-82 Grants DAO’s grants at ~125K COW/week). Each scenario was run across multiple sample paths to produce median, 50% and 90% outcome ranges.

Stochastic input ranges were calibrated from observed data: COW price modelled as geometric Brownian motion using historical weekly volatility; weekly net revenue sampled uniformly across $300K–$700K range (based on a post December 2025 fee structure change); solver share sampled at 40–60% of net revenue (centred on the ~50% historical mean). Policy levers tested included buyback target (current 1.2x emissions vs. surplus-linked at 50–80% of FCF), distribution split (0% vs 100% of buybacks routed to stakers), and revenue trend (0% vs +40% CAGR).

The discretionary buyback programme has limited impact on circulating supply at current revenue levels. Cumulative value-accrual spend has a median of $2.5M at 0% CAGR and $5.5M at 40% CAGR over two years. In the most aggressive scenario modelled (40% CAGR, Buyback and Hold), median circulating supply ends close to its starting level. Vesting and grants add about 3.5% inflation per year, so the supply trajectory is broadly stable.

Staking yields funded by buybacks require both revenue growth and moderate participation to reach competitive levels. Under 40% CAGR, the median APR crosses 10% at week 16 with 10% participation, week 52 with 20%, week 80 with 30%, and does not cross within the two-year horizon at 50%.

In all cases, the treasury remains well funded across the modelled scenarios and capable of supporting value accrual, provided that investment in growth translates into a higher revenue CAGR. Of course, if operating costs rise, the free-cash-flow threshold required for meaningful value accrual rises with them - and this will push the time needed before protocol revenue growth will be sufficient to support either model.

[notsoformal]

Appreciate Aragon’s work on this and the collaboration on getting metrics and data aligned with the current financial reporting - I agree that the main conclusion here is that extra context / content on metrics, flow of funds, etc is due to the community and is something to work on.

On the final report, I would like to reinforce the fact that currently the DAO is generating FCF (e.g. is cash positive). As complexity in the protocol business grows, OPEX should be forecasted to grow as an investment phase is still needed to ensure the current roadmap (B2B focus, Solana, Decentralisation of the protocol) is achieved.

The proposed CAGR (yearly) for the scenarios are reasonable, even amidst a harsh bear market, it is expected that the protocol will continue to grow market share and monetisation and we should see 2026 revenue eclipse the 2025 numbers.

In my opinion:

1. The improvement on the current buyback mechanism communication is a relevant point. Will jointly discuss some ideas to improve on that. Also, the proposed “separation” of the “extra buybacks” is worth considering. (recommendation #1 and #2)
2. Putting a “reasses the model when FCF > $9m” (or $10m in the comms plan) I think is also a reasonable consideration; that will require better community reporting from the Foundation on the consolidated sphere.

On the implementation, I think the implementation suggestion to be a bit over complex, and would favour a simpler splitter contract that receives the value accrual buybacks and implements the votes mechanism, versus trying to migrate a significant chunk of the protocol flows to a single smart contract.

Overall feel the modelling exercise done with Aragon contributes to clearer information for the CoWmunity and will be great to hear other opinions (will share a different post on the teams’ views).

[Chim9]

Hi @leuts.eth thank you and the Aragon team for the research and modeling you provided.

We have now executed the final payment for the 3 deliverables.

Great working with you!

[leuts.eth]

Thanks for the feedback! Responding to feedback:

On the implementation complexity, we’d stress a few points here:

Firstly, one theme that came from our research was many value accrual mechanics are effective if they are easy to communicate and easy to understand. In the current format, COW buybacks for value accrual are co-mingled alongside COW buybacks for Solver rewards.

Understanding what buybacks are accruing to COW’s value versus simply being bought as part of an operational workflow is quite involved. We highly recommend these processes be separated, this involves 2 parts:

Funds that are used for COW buybacks (and NOT used to reimburse solvers) are clearly visible.
The buybacks sit in a dedicated buyback wallet.

The above can be done with a purely multisig-driven approach: ETH is sent to a multisig and that multisig swaps ETH to COW. However our approach recommends that a dedicated buyback set of contracts is put in place to reduce the operational overhead AND regulatory risk of running the buyback programme, whilst also building the foundational contract layers for the future. Although the CLARITY bill in the USA has not been passed, control is a major factor, and many other jurisdictions will follow-suit. Reducing control is an important component of compliance, especially regarding value accrual. You kill two birds with one stone here.

This links to our second point.

Our observation is that the CoW DAO is active and willing to make substantial changes to its operating flows as seen with a number of improvements made in recent CIPs. We firmly believe, therefore, that the right value accrual mechanism for CoW today is one that can be flexible in response to changing market conditions, regulations, investor sentiment, and protocol evolution.

We can think of numerous cases from our benchmarking where systems had to change in response to evolving requirements:

1. Design revisions to value accrual: PancakeSwap & Pendle sunsetting ve systems (veCAKE deprecations and vePENDLE → sPENDLE) these are examples where VA had to be reworked and changed, so allowing that at source is minimal friction.
2. On the staking side, Aave’s staking system is being phased out and GMX changed its staking system.

The implementation we recommend allows for an evolution and revision of the value accrual flow, as new information comes in. The initial programmatic buybacks flow can easily be paused, adjusted or removed by COW holders. The staking system can be added and removed. The split of how much COW to send to the system and even conditional buyback and distribution logic can all be added and removed as needed.

This final part is something we maybe didn’t stress enough. We are not proposing a monolithic smart contract architecture, but instead decomposing the functionality into small, easy to understand building blocks that combine to create the desired system. In that sense there wouldn’t be a single smart contract, there would be a set of small routers/strategies/wallets that constitute the overall mechanism. These are configurable as the DAO grows. The reality with these systems, is that in many cases, the mechanical supply reduction is dwarfed by the signalling power of such a mechanism. We therefore conclue that, as the ecosystem evolves, the ability to adapt the mechanism to whatever brings the highest signalling multiplier at that time is a strategic advantage.

Thanks for your feedback and questions. Very much looking forward to more!

[mendesfabio]

@leuts.eth would Aragon add $COW to the OTF dashboard? Probably makes sense to wait until suggestions are incorporated, but curious if that’s on your roadmap. Thanks for the research btw.

[leuts.eth]

Hi there,

Certainly! We’d just need someone from the core-team to help facilitate.

We’ll reach out to them.

Thanks!