CoWSwap is a decentralized exchange (DEX) aggregator that looks across many venues to get you the best execution for your trade. Instead of putting every order directly on-chain, it uses an off-chain order book and a unique system of solvers to handle matching and settlement.
Here’s how it works step by step:
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Order submission:
- When you place a trade, your order is created and submitted off-chain.
- It remains in a pending state until it is either:
- Filled by a solver, or
- Expired if no match or liquidity is found.
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Solvers (the matchmakers):
- Solvers are specialized actors in the CoWSwap system that compete to fill your trade.
- They can either:
- Match your trade directly with another user (peer-to-peer), or
- Route it through liquidity pools and exchanges to secure the best price.
- Because solvers compete, you benefit from improved pricing and reduced slippage.
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What happens if the order expires?
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ETH or BNB as input:
If you start a trade using ETH (on Ethereum) or BNB (on BNB Chain), an on-chain transaction occurs when the order is submitted.
If the order expires unfilled, your ETH or BNB is automatically refunded to your wallet. - Other tokens as input: If you use another token (like USDT), no funds are debited until the order is actually filled. Since the order is off-chain, those funds remain fully available in your wallet until execution.
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ETH or BNB as input:
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Settlement:
- Once a solver successfully fills your order, the transaction is settled on-chain.
- You only needed to approve the token once, so all subsequent trades for that token are gas-free from your side.
In short: CoWSwap makes Tokenized Stock trading possible by batching and optimizing trades off-chain, ensuring you save gas, get competitive prices, and retain full control of your funds until your trade is finalized.