This article unfolds a specific trade example analysis of three typical examples of MEV-protected DEX, ArcherSwap, CowSwap and MistX, by llamacorn. the following is a compilation of the original article.
During last DeFi summer, we saw many DEX aggregators such as 1inch, Matcha, ParaSwap, etc. These aggregators play an important role in our daily trading, allowing us to get better prices and less fees.
By the way, I have always had a view that instrumental crypto assets have a lower value cap than infrastructure crypto assets because the value of instrumental crypto assets relies on the evolutionary ability to prove their irreplaceability. That’s hard. Moreover, they are largely built on infrastructure crypto assets, such as what trading aggregators are to DEX and what interest rate protocols are to money markets.
Finding a product that can grow into an infrastructure is really difficult and they are more likely to fail, so there is a lot of fun to be had in studying innovation in instrumental crypto assets.
A year has passed and DEX aggregators have evolved to a more robust and comprehensive stage to address MEV (miner extractable value), gas and slippage issues.
This article will discuss 3 groundbreaking and innovative DEX aggregators in the space, namely ArcherSwap, CowSwap and MistX, which I call MEV-protected DEX.
The following are illustrated by trading examples
As written in this article, “Archer Swap provides traders with the absolute best prices for large trades on Uniswap and SushiSwap without the fear of robots”. The implementation of these features relies on Archer Relayer, which works with miners to find the most valuable trades for them and lets them submit them to the ethereum mainnet. In addition, it can benefit traders by allowing them to pay only a small fee to the miners, and Archer Relayer will help them bypass the public memory pool to settle the transactions.
Take this transaction as an example
A transaction on ArcherSwap
I bought 1.418 AAVE for 0.2 WETH. process: 0.2 WETH is first transferred to Archer Router address, then 0.0639 ETH is transferred to ArcherSwap TipJar contract and transferred to miner (UU pool) as tip. The Archer Router address is then routed to Uniswap. so I can bypass the public pool to complete this transaction with a 0 gas fee but a very high miner’s tip (set automatically).
On the ArcherSwap UI, there is also the option to turn on/off the manually set tip and enter the tip amount yourself. However, if the tip is not enough, miners will not be willing to pack your transactions.
Also, ETH must be sent to the ArcherSwap contract first, a design that can lead to some centralization issues. The success of the transaction is highly dependent on the complexity of the contract. My friend Blanker has described in Twitter some bugs in his contract that caused some non-transferable ETH to be left in their contract.
CowSwap is developed by the Gnosis team and supported by the MEV-protected Gnosis Protocol V2 (GPv2). GPv2 is optimized for coincident demands (CoWs), which can be explained as “an economic phenomenon where two parties each hold items that the other wants, so they directly exchange these items”.
That is, CowSwap first matches orders for traders off-chain, and if it does not find another demand transaction, it submits the transaction to another DEX on the chain.
CowSwap introduces the concept of slover to enable this functionality, encouraging Solvers to compete with each other to provide traders with the best order settlement in exchange for a reward per batch. Users submit trade orders with a degree of flexibility, as Solver needs to find the most optimal way to settle.
Since trades can be settled off-chain, CowSwap does not require external liquidity on the chain, thus reducing transaction costs. cowSwap will settle all orders in the same batch using a single price, called the batch auction mechanism.
Before confirming the swap, a signed form containing information such as sell/buy type, amount, expiration date, etc. is required to allow CowSwap to note your order down the chain. Then ‘Slovers’ starts looking to see if there are any CoWs for you.
Take this transaction as an example
You will find the transaction recorded in the Gnosis Protocol Viewer. Click on Transaction Hash to see the transaction details.
CoWs are found in the transaction
CoWs were found in this transaction, it was transacted off-chain and was not routed to Uniswap. so, you won’t find this transaction in your address, it’s their contract that actually settles the transaction.
And then, for example, also check the transaction details
CoWs were not found in the transaction
CoWs were not found in this transaction, Gnosis deducted the agreement fee and transaction fee of 0.005WETH from 0.2WETH and routed this transaction to Uniswap V2.
MistX is a project developed by the Alchemist team and works very similar to ArcherSwap. Also, a project called BackRunMe developed by the bloXroute team works in a similar way. archerSwap is compatible with FlashBots, MistX uses FlashBots directly, and BackRunMe is supported by bloXroute. flashBots, bloXroute and other similar tools are used as searchers to submit transactions to the ETH mainnet.
To be honest, the user interface of MistX looks exactly like a replica of ArcherSwap. However, the logic of MistX transaction routing is greatly improved compared to ArcherSwap. This is because it skips the first step of having to send ETH to ArcherSwap contracts, which can lead to some centralization issues.
While both MistX and ArcherSwap can automatically adjust miner tipping, MistX performs better and tipping is smarter.
Take this transaction as an example
A transaction in MistX
It cost me 0.2WETH to swap to 1.43AAVE. process: 0.00516WETH was forwarded as a tip to the miner address (Ethermine) and 0.000271WETH was forwarded to the MistX address. Then, the MistX Router Address is routed to Uniswap V2. Thus, MistX bypasses the public mempool and publishes the transaction as a bundle in Flashbot’s private mempool.
The following table compares the core functions of different MEV-protected DEXes and their similarities and differences.
Fee/revenue structure:No gas required?
The fee structure of these products is quite vague. They don’t want to be clear maybe because Degens only cares about the total transaction efficiency.
However, since I tried each product, I can give two general conclusions and some detailed explanations.
- these programs generate their income mainly from your trading funds or miner’s tips.
- There is no free lunch. No gas because the gas is compensated in other ways.
ArcherSwap, they do not charge a gas fee because it is included in the miner’s tip. Miner’s tips can be adjusted, but are usually not microtransaction friendly. archerSwap is able to take some fees from miner’s tips as revenue, but it looks like they don’t do that. Traders are also required to pay Uniswap/SushiSwap transaction fees.
CowSwap claimed not to charge an agreement fee during the testing period and now seems to charge around 1-1.5% of the transaction amount as a fee.
Again, take these two transactions as an example for comparison.
If GPv2 finds CoWs, you only need to pay the protocol fee, which is 0.0159 AAVE. but if GPv2 does not find CoWs, I guess the user needs to pay Uniswap transaction fee and protocol fee, which is 0.005 WETH in total. that’s why the two transactions’ fees are accounted for differently. (0.0159 aave/1.4636 aave=1.08%; 0.005 weth/0.2 weth=2.5%).
Also, interestingly, in the first trade, CowSwap paid me 0.00498 ETH as gas, so the net income was 0.0159 AAVE-0.00498 ETH ≈ -0.0028 ETH. And in the second trade, CowSwap paid me 0.02 ETH eth as gas, so Net income is 0.005 WETH – 0.02 ETH ≈ -0.015 ETH. CowSwap lost money in both transactions! It seems that microtransactions on CowSwap are detrimental to both CowSwap and traders.
MistX actually shares tips with miners, which can be seen in the transaction details. It charges about 5% of the total tip, regardless of the amount of the trade. (In the above example, 0.0002717 ETH/ 0.005435 ETH = 5%). Traders also pay Uniswap/SushiSwap transaction fees.
We must respect the innovation of these projects, they show us more possibilities to deal with MEV protection issues and there is a real demand for them for some large transactions.
However, all these projects are in their early stages and there are many things that need to be upgraded. Sometimes we regular traders need to be aware of the “hidden spend” when trading in these aggregators. And to be honest, large DEX and low slippage settings may be more effective when gas prices are low.
Also, the tools behind these products such as flashbots, bloXroute, etc. are awesome infrastructures that can help us safely traverse the dark forest of ethereum and have a wide range of application scenarios in many DeFi products.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/anti-arbitrage-attacks-will-be-the-new-trend-in-dex-development-comparing-the-three-pioneering-mevs-to-protect-dex/
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