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What is Cowswap and How Does It Work?

cowswap logo onblue image of cows in a field
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CowSwap is an Ethereum blockchain-based, decentralised financial application. It attempts to settle buy and sell orders between its customers, i.e., to discover a coincidence of wants, thereby avoiding slippage and costs.

Orders not finding a peer-to-peer match are sent to the underlying automated market maker at CowSwap.

Differences between CowSwap and UniSwap

CowSwap's interface may appear similar to the ordinary DeFi user, as it is built on the Open Source code used to develop the Uniswap front end. Nonetheless, there are differences between the products:

It can settle orders on Uniswap, Sushiswap, 1inch, and Paraswap, offering users the best price.

When there is a Coincidence of Wants (CoWs), users can trade directly with other users without going through any pools, eliminating the need to pay Liquidity Provider costs.

In the event of a price movement against your order, the order will expire when users waste gas on unsuccessful transactions, whereas on Uniswap, users will pay.

It has no liquidity suppliers. Instead, it connects to all on-chain liquidity supplied by various protocols.

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Cancelling orders 

CowSwap allows users to cancel their orders for free. As a user, they sign the order cancellation in the same way that they place the order, and if the solution has yet to be mined, the order will not be performed and thereby cancelled.

Supported wallets

EOA wallets: Most EOA wallets are supported through WalletConnect, Metamask, or any injected wallet (mobile wallet app browser).

Smart Contract wallets: At the moment, smart contract wallets such as Gnosis Safe, Argent, or Pillar, since placing the order would need signing an on-chain transaction, rendering it no longer gasless.

CowSwap is a critical infrastructure for open finance, which will see the creation of more and more tokenised assets and lead to a reliable trading mechanism with the user's best interest in mind.

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Author: Emmanuel Baiden

Author: Emmanuel Baiden

7 years experience within the financial services sector most notably in Sales, Trading, research and writing articles within the crypto space. I have a bachelor's degree in International Business and a Master's in Investment and Risk Finance . I am also an associate member of the Chartered Institute for Securities and Investment.

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