Returning the Cows to the Barn - Trading Ethereum Assets on the Cheap

By kev_nag | kev_nag | 11 May 2021


Well, I don't like dealing with Ethereum because I absolutely hate paying the associated ridiculously exorbitant dreaded gas fees. But, like most of us, we have some Ethereum or some ERC 20 assets sitting in a wallet somewhere, doing nothing for us - just lazy money.

That is the predicament I found myself in last week. For years I had some Ethereum just sitting in both my Metamask and Trust Wallets gathering cyber-dust. Last week I decided these assets shouldn't be so damn lazy and that they really needed to go to work for me.

In looking around I found a couple of liquidity pools I was interested in. But I needed some Chainlink to enter one of them. So off to Metamask I went and punched in a transaction trading a mere $35.00 Ethereum for Chainlink. My happiness with the idea of finally putting this Ethereum to work was quickly replaced with shock and anger - $144 gas fees. They really expected me to pay $144 to transfer $35 in assets - what are they? Nuts? I promptly and without reservation cancelled the transaction.

This anger generated by crazy gas fees set me off on yet another mission. Somewhere in the cyber-world there had to exist a platform providing low gas cost Ethereum asset transfers. And my mission yielded success. So why Cows you may ask? Let me introduce you to my find - COWSWAP.

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CowSwap is a cool proof-of-concept decentralized application which has been built on the Gnosis Protocol v2 (GPv2), testing the capabilities of GPv2 by offering gas free trades. That's right, I said GAS FREE TRADES! In actuality, the platform is not entirely free, but it's one hell of a lot cheaper than any of the other alternatives I've investigated. Let me explain.

Each executed order has a fee which is captured by the protocol. Part of the fee is paid to solvers (entities which provide order settlement solutions) to incentivize their participation. The fees charged by CowSwap consist of the 'base cost to execute the trade' and the 'protocol fee' which the user sees as one combined fee. The user is only signing a message to submit the trade and an underlying solver will submit the transaction on the user's behalf. In essence, the user is paying the 'base cost to execute the trade' with the sell tokens including this cost in the price estimation.

At present CowSwap is subsidizing 90% of the gas cost, and the protocol fee is switched off. It gets better - you only have to pay the low fees if your transaction is executed. Gone is the necessity of shelling out gas fees on failed transactions.

Just how is CowSwap able to offer such low fees? Prior to employing on-chain liquidity, CowSwap attempts to match Coincidences of Wants within the set of existing valid orders directly with one another. Using these Coincidences of Wants result in better pricing as the fees paid to the liquidity provider are removed.

In the event that Coincidences of Wants are absent, CowSwap taps into the DEX that affords the next best price. Utilizing this method, CowSwap is able to deliver performance that is the same or better than the existing DEX aggregators.

The gas free trades exist in CowSwap as the orders themselves are submitted off-chain by signed messages. Once a user approves the funds for spending, signed messages are used to submit orders containing all of the trades details (limit price, amount, timestamp, etc,)

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The CowSwap transaction is not, however. totally devoid of the need to have some Ethereum in your wallet. For the trade itself no Ether is required. But remember, you first need to approve the subject funds for spending on CowSwap and for this action Eth is required to pay gas fees for the approval.

Presently only limit sell and buy orders are enabled by the protocol. Any valid ERC trading pair may be traded on CowSwap provided there is some basic degree of liquidity in the pair on a DEX such as Balancer or Uniswap.

Finally, a word of caution. CowSwap is in ongoing development and as such is not a Beta product. What it is is a proof-of-concept decentralized application for community testing prior to the release of its final version. CowSwap reports that its code has been carefully tested and peer reviewed. While this may be viewed as a step forward in security for the protocol, you should use CowSwap at your own risk.

**CONCLUSION**

Let's face it, I would not be writing about CowSwap unless it worked. By using CowSwap, I was able to convert $127.75 worth of Ethereum into Wrapped Ethereum paying only $7.14 for the entire transaction. A far cry from the $144 Metamask wanted to charge me for a transaction approximately 25% smaller in value. For me, CowSwap is worth the risk for smaller valued transactions.

I am merely an ordinary small investor who likes to share what I've learned and found interesting. Please take a few minutes and check out my other published articles. I am not in any way a financial advisor and as such, do your own research before investing. If you enjoyed this article please comment, like and/or tip. Feedback is always welcome here.

 

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kev_nag
kev_nag

Just an ordinary casual crypto investor.


kev_nag
kev_nag

Retired, finally. I enjoy learning about crypto and sharing my discoveries. Also, I follow the News closely and enjoy discussing current events. I have no political agenda, but advance views based in reality with a slant toward real world consequences.

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