Maybe This Is the Real Reason Why COW Surged 162% in One Month

CowSwap is the recently skyrocketing DeFi coin, and is also one of Vitalik's favorite DEXes, as well as a whale-exclusive on-chain platform. It is even the official DEX used by the Degen King team.

However, what many people don't know is that behind CowSwap lies a highly underestimated top incubator in the Ethereum community—Gnosis. I believe this is the true reason for the $COW's meteoric rise.

Recently, a piece of on-chain activity in the Chinese community related to the DeFi project World Liberty Financial (WLFI) associated with the Trump team has attracted market attention. Although $COW is not included in WLFI's asset list, according to on-chain analyst Ai Yi, WLFI has made several token purchases using CowSwap. This aligns with Ethereum's founder Vitalik Buterin's habit of frequently using CowSwap.

This particular on-chain behavior has directly influenced market sentiment. With the dual anticipation of Trump's imminent inauguration and the frenzy around political concept coins, $COW's price surged by 62% in just one week and spiked by 162% within a month.

The Force Behind CowSwap is Gnosis

Gnosis is the powerful force standing behind CowSwap.

The precursor to CowSwap was the Gnosis Protocol V1 launched in 2020, which was the first decentralized exchange platform to achieve circular trades through a batch auction mechanism. Its unique design enables all orders to share liquidity and settle efficiently.

By 2021, Gnosis Protocol V2 introduced an innovative settlement mechanism (Solvers), significantly enhancing order matching efficiency and effectively addressing the long-standing MEV (Miner Extractable Value) issue that has plagued DeFi traders. In the same year, Gnosis Protocol rebranded as CowSwap, becoming the aggregator we are familiar with today.

It can be said that CowSwap's rise is inseparable from the deep-rooted foundation of the Gnosis ecosystem. In fact, the story of the Gnosis ecosystem can be traced back to 2015.

Compared to the now well-known Polymarket, Gnosis co-founder Martin Koeppelmann started researching decentralized prediction markets much earlier. In 2015, he published his thoughts on the combination of MarketMaker and OrderBook on his forum, one of the earliest decentralized prediction market concepts in the industry.

Martin Koeppelmann is also one of the earliest Ethereum developers, having joined even before TheDAO era. Due to his residence in Berlin, he had close contact with Vitalik, who was working in the Berlin office at that time.

Over the years, he has participated in many discussions in the Ethereum development community, often engaging with Vitalik on topics such as L2, ZK, and the Ethereum roadmap. From Martin's social media presence, it is evident how involved he is in the community.

Based on this technical accumulation, Gnosis has gradually developed a complete ecosystem. Evolving from Gnosis Protocol to CowSwap, Martin and his team further derived products such as Gnosis Chain, Safe, and Gnosis Pay, forming a highly collaborative ecosystem.

Therefore, mutual integration is natural. One of the most representative integrations is between CowSwap and Safe.

The Preferred Wallet of the DeFi King Family

As the star product in the Gnosis suite, Safe is the most popular multisig wallet in the Ethereum ecosystem and is a wallet for whales. During this year's Safe distribution, almost all of the top 100 airdrop addresses were project teams or institutions.

In other words, the early whales of Safe were project teams, not individual users. This includes OP, Polymarket, Drukula, Worldcoin, Lido, and more. Related read: "Safe Trading Soon: Tokenomics and Ecosystem Overview"

Initially, Safe's audience was more focused on DAOs and cryptocurrency projects. However, as the crypto industry entered the next stage, traditional finance, institutional players, family offices, and old money started to enter the space. Due to the high barrier to entry in crypto and the need to protect funds while engaging in on-chain activities, the safest way is through a multi-signature wallet, with Safe being the choice.

Safe's design significantly enhances fund management security. Through a multi-signature mechanism, funds are held in a smart contract address, and a transaction can only be executed once the required number of signatures is met (e.g., 3 out of 10). This mechanism effectively reduces the risk of single points of failure. Even if a signing address's private key is compromised, an attacker would struggle to obtain enough signatures to complete a transaction. Furthermore, during the multi-signature confirmation process, the signers prior to the final confirmation do not need to pay Gas for their signing operation, as the transaction remains in a "pending" state. Only the address that confirms the final signature to execute the operation (such as a transaction or transfer) needs to pay Gas. This optimization not only lowers the usage costs but also makes Safe the optimal choice for institutional users and whales.

According to Safe Guardians who spoke to BlockBeats, the simplest way to determine if an on-chain address is a Safe wallet address is through two methods: first, by seeing the "MultiSig" label on ARKHAM, and second, by the address displaying "MultiSig: Safe" on the debank page.

Trump's project address

Vitalik's address

Most importantly, as part of the Gnosis ecosystem, the built-in DEX in Safe is CowSwap. This is why whales like Vitalik and the Trump team favor CowSwap.

From this perspective, what whales like Trump, Vitalik, and others favor might not just be because CowSwap is an MEV-resistant aggregated DEX, but also due to the synergies within the Gnosis ecosystem, delivering tailored solutions that directly address the real needs of whales.

From Incubator to Investment DAO

As mentioned earlier, the Gnosis ecosystem has been expanding since 2015. Originally a Ethereum-based prediction market platform, it later evolved into the Gnosis ecosystem, giving rise to many projects such as Gnosis Chain, Safe, CowSwap, Gnosis Pay, and more.

Gnosis Chain, a prominent Ethereum sidechain in the previous cycle, focuses on efficient and secure decentralized application development. According to DefiLlama data, as of the time of writing, Gnosis Chain has a total value locked (TVL) of $349.31M, including $71.61M in native assets and $277.7M in cross-chain bridged assets. The stablecoin market value is $119.98M, with DAI accounting for 74.07%, and the trading volume remains stable.

Gnosis Chain Data, Source: DefiLlama

On the other hand, Gnosis Pay is an on-chain payment debit card that seamlessly integrates blockchain technology to provide a convenient payment experience for users and institutions. There is also CowSwap and the multisig wallet Gnosis Safe (now known as Safe). Related read: "Gnosis Card: The First Visa Debit Card Linked to a Wallet Is Coming".

As for GnosisDAO, it is the core governance body of the Gnosis ecosystem, driving the incubation and development of innovative projects through decentralized autonomous governance. As the ecosystem's incubation flourished, GnosisDAO also ventured into investment activities.

In addition to incubating well-known projects like Safe and CowSwap, as early as 2019, GnosisDAO began its blockchain investment journey through its investment arm, GnosisVS, supporting over 60 startups.

Some of the invested projects include: Monerium, on-chain fiat infrastructure for Web3 builders; Naptha AI, a decentralized platform for AI workflows; and Schuman Financial, a MiCA-compliant stablecoin protocol.

This year, the investment arm has further expanded. In October this year, GnosisDAO approved a proposal and launched a new $40 million venture capital fund. GnosisDAO committed $20 million to the fund, while the other half of the funding came from external limited partners (LPs). This dual structure not only increased the fund's size but also created more opportunities for external collaboration.

The fund is named GnosisVC Ecosystem and will prioritize investments in projects involved in Real-World Asset (RWA) tokenization, decentralized infrastructure, and financial payment channels.

The key investment areas are focused on three aspects: 1. Real-World Asset (RWA) Tokenization: Driving the digitization and on-chain representation of traditional financial assets through blockchain technology, providing more liquidity and transparency to the global financial markets; 2. Decentralized Infrastructure: Covering a wide range from node operation to decentralized computing and storage, supporting the efficient operation of next-generation blockchain applications; 3. Payment Channels and Middleware: Around solutions like Gnosis Pay, providing seamless payment capabilities to the DeFi and Web3 ecosystem.

What Makes CowSwap Stand Out?

One could say that CowSwap's rise is more like the best embodiment of the Gnosis ecosystem's collaborative efforts, but that doesn't mean CowSwap itself hasn't created a new paradigm.

More precisely, the CoW Protocol is a decentralized trading protocol, and CowSwap is a DEX built on top of the CoW Protocol, acting as its frontend interface, where users interact with CoW Protocol through CowSwap.

As the frontend application of CoW Protocol, CowSwap further amplifies the protocol's advantages. It is referred to as the "trade assistant" of the CoW Protocol, serving as a Meta DEX aggregator that can switch between multiple AMMs and other aggregators to help users find the best price in the current market. Unlike traditional DEXs where users have to manually compare prices, CowSwap's mission is to streamline users' operations through intelligent matching and ensure transactions are completed in the most favorable manner. From this perspective, CowSwap addresses a long-standing issue for DeFi users: the frontend reliance problem.

What Is the Ultimate Goal Against MEV?

Miner Extractable Value (MEV) has long been a major issue for traders. MEV refers to the additional value extracted by miners or other traders from ordinary user transactions through manipulating transaction order or frontrunning. According to Galaxy Digital's report, on the Ethereum network alone, MEV bots have extracted as much as $3-9 billion in user value.

This is very unfriendly to whales and large traders, even Ethereum founder Vitalik Buterin himself, as he is often "sandwiched," causing significant trouble and headaches. Therefore, the MEV issue is also one of Vitalik's most concerning issues in building Ethereum, and he frequently mentions this problem in various speeches and the Ethereum roadmap.

CowSwap effectively solves this problem.

In traditional DeFi interactions, users' operations (such as asset bridging, swapping, staking, and withdrawing) directly interact with on-chain contracts. This design is not only complex but also exposes users' transaction needs, making them vulnerable to MEV frontrunning attacks. Therefore, the CoW Protocol fundamentally changes this interaction pattern by migrating users' transaction needs off-chain for processing. This solution is called "off-chain preprocessing," which also has a more familiar name known as "intentions transactions."

The intention process is essentially an off-chain preprocessing black box where users' intentions are placed in an "invisible" preprocessing center. After collecting and preprocessing users' transaction needs, CowSwap introduces third-party "Solvers" off-chain to match and process transactions. This mechanism brings multiple benefits, significantly reducing direct on-chain risks for users, optimizing protocol liquidity management, and making user transactions more efficient, secure, and private.

To be more specific, through intention narratives, the CoW Protocol has designed three core protection mechanisms against the MEV issue:

1. Unified Settlement Price Batches

 The CoW Protocol introduces the "Unified Settlement Price" mechanism. When the same token pair (such as ETH-USDC) is traded multiple times in a batch, all transactions' assets will be settled at the same market price. This mechanism makes transaction order irrelevant, fundamentally eliminating the possibility of MEV bots profiting from reordering transactions. Importantly, this mechanism also addresses the price inconsistency issue in traditional AMMs (such as Uniswap) based on the constant function market maker (CFMM) model, providing users with a fairer trading environment.

2. Delegated Transaction Execution

 User transactions are executed by trusted third-party Solvers, avoiding direct exposure to on-chain MEV risks. Solvers must ensure that transaction prices are not lower than the price signed by the user, while optimizing liquidity through off-chain matching or private market-making. This design not only reduces users' price risks but also significantly improves transaction execution efficiency.

3. Coincidence of Wants Model

 Compared to traditional Automated Market Maker (AMM) or Central Limit Order Book (CLOB) models, the CoW Protocol's strength lies in its core auction mechanism. This mechanism allows multiple trades to occur simultaneously, akin to an efficient large-scale market promotion event. In this event, whoever can find the best match stands to gain the most benefit, embodying the concept of "Coincidence of Wants (CoWs)." The name CoW Protocol is derived from this concept, cleverly spelling out the word "cow."

Related Read: "Surging Over 40% in a Single Day, What Makes CowSwap Special?"

Therefore, driven by Gnosis's ecosystem momentum and CowSwap's product innovation, CowSwap has experienced significant transaction volume on the Ethereum chain over the past 30 days.

The History Between CowSwap and Uniswap

Many are unaware that CowSwap has a history with Uniswap. Last year, the leading DEX Uniswap's release of UniswapX was embroiled in a plagiarism controversy with CowSwap.

Following the announcement of Uniswap V4, Uniswap promptly declared the upcoming release of UniswapX. However, the community was highly dissatisfied with UniswapX, sparking numerous debates. Some directly questioned, "What is the difference between UniswapX and CowSwap?" Some even jokingly remarked, "UniswapX should thank the cryptocurrency industry's open-source spirit."

Curve Finance's official account provided a straightforward assessment: "Forgive my bluntness. The rules of the game changed a long time ago: when 1inch first engaged in high-quality aggregation, when CowSwap introduced the Solvers model. UniswapX is good, but it is not a trailblazer, not even the second player." Related Read: "Half Praise, Half Critique: Is Uniswap Truly the "Tencent of the Coin Circle"?"

This public opinion pressure has posed a significant challenge to Uniswap, seemingly aiming to shed the title of "Tencent of the DEX world." Two months ago, Uniswap Labs launched Unichain, an Ethereum Layer 2 network based on the OP Stack, finally turning the tide in a "small" way.

One of the significant innovation points is that Unichain innovated on the MEV revenue distribution mechanism. Through a Trusted Execution Environment (TEE), part of the MEV revenue is directly allocated to users or liquidity providers (LP), achieving a more equitable value sharing.

Furthermore, MEV revenue is proportionally injected into the validator and user reward pools. This mechanism not only reduces LP participation risks but also encourages more users to engage in ecosystem development.

Wintermute "Walking on Rainbow Clouds" Has Arrived

It seems that CowSwap's product is excellent, but there are many ways for good products in the crypto space to "die," and few can make it to a top-tier exchange, and even fewer can achieve a 162% increase in one month.

If we rewind time back by four months, we will find that the commencement of COW's price surge coincided with the collaboration with Wintermute.

Initially, to increase on-chain liquidity, CoW DAO proposed the allocation of 10 million $COW tokens to inject liquidity into the ETH/COW market. This proposal included an innovative strategy: part of the $COW tokens would be converted to ETH and together with the remaining $COW, injected into a brand-new Function Maximizing AMM (FM-AMM) liquidity pool. Unlike traditional AMMs, FM-AMM can effectively eliminate most MEV attacks and arbitrageurs' high profits while reducing risks for liquidity providers (LP).

However, on-chain liquidity alone was insufficient to meet market demand, and deep markets on centralized exchanges were also essential. After all, those markets are larger, and there is more money there. At that time, the only way to acquire $COW was through decentralized channels, with the largest pool being the ETH/COW pair on Balancer on the Ethereum mainnet. In the absence of a CEX trading scenario, many users and institutions were unable to acquire $COW.

At this point, Wintermute "walking on rainbow clouds" arrived.

Wintermute has proposed to borrow 7.5 million COW tokens from the CoW DAO treasury to support liquidity on both decentralized and centralized exchanges. This proposal has received strong community support and has officially ushered in a new chapter for $COW liquidity.

As a leading market maker in the crypto industry, Wintermute excels at efficiently bridging markets between centralized and decentralized exchanges. Its founding team has previous experience at the traditional finance giant Optiver, bringing with them a wealth of market depth management expertise.

Over the past few months of collaboration, Wintermute has provided deep market support for COW against ETH and other trading pairs, ensuring liquidity and maintaining a stable trading environment for DeFi aggregators such as CowSwap, UniswapX, and 1inch. Additionally, Wintermute has offered significant OTC trading support to institutions, further expanding the user base of $COW.

This dual-sided market-making effort has directly contributed to the skyrocketing price of $COW.

Even in Wintermute's second month of market-making, Coinbase announced the inclusion of $COW in its listing roadmap, with COW perpetual contracts launching three months later. Subsequently, $COW began listing on major exchanges one after another, with Binance swiftly following suit by listing the COW/USDT spot trading pair.

These are what I believe to be the true reasons behind $COW's staggering 162% surge in a month.

The Flywheel Effect Between the Gnosis Ecosystem and Ethereum

Looking at a broader blockchain perspective, during a bull market, Solana's ecosystem has seen rapid growth while Ethereum has shown signs of fatigue. Yet, in terms of the on-chain dynamics of the Trump team's WLFI project, Solana still has significant room to grow in serving institutional whales, as its performance in multi-sign products cannot match Ethereum's deep-rooted foundation.

While Solana's chain also hosts multi-sign products, the assets being held are not in the same league.

For instance, taking the most asset-managed multi-sign protocol Squads on Solana, its managed funds currently amount to around $170 million. In contrast, the Gnosis ecosystem's Safe holds assets in multi-sign wallets totaling a whopping $89 billion.

More importantly, the Gnosis ecosystem's products are not only impressive in scale, but also, through collaboration and deep integration, have formed a powerful ecosystem that can serve institutions and large holders. The security of Safe, the efficiency of CowSwap, and the convenience of Gnosis Pay together have helped Ethereum "fight tooth and nail" in this round of blockchain competition.

What's even more important is that, under project collaboration, the products in the Gnosis ecosystem have already formed a solid ecosystem to serve institutions and large holders, helping Ethereum "fight tooth and nail" in this round of blockchain race.

It is this synergy that has built the flywheel effect between the Gnosis ecosystem and Ethereum.