Balancer v2 and Gnosis’ ‘CowSwap’ take aim at MEV with planned integration
Decentralized exchange Balancer and DeFi platform Gnosis have announced today a planned integration dubbed the Balancer-Gnosis-Protocol (BGP), a collaboration that will combine Balancer’s v2 pool mechanisms with Gnosis’s DEX aggregation and batch auctions designed to mitigate miner extractable value (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 AMMs with customizable curves.
Gnosis, meanwhile, is set to release the proof-of-concept for their forthcoming Cowswap DEX today. Cowswap integrates “all liquidity sources on Ethereum” as an aggregator similar to 1inch, and also offers a partially-offchain system that may lead to gasless transactions, as well as tight slippage and MEV protection.
MEV is a phenomenon where bots frontrun transactions on DEXes, 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 DEXes since 1 Jan 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 a “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,” said Balancer CEO Fernando Martinelli of the integration.
Balancer has been particularly active with integrating with other protocols as of late, highlighted by the collaboration with Aave in their v2 design. These integrations appear to be part of a larger movement of collaborations heating up across the DeFi space.