Research on Sandwich MEV Impact On CoW Protocol

Grant Title: Research on Sandwich MEV Impact On CoW Protocol

Author: EigenPhi contact@eigenphi.com

About You: As a technology company focused on analyzing and researching transaction data on the blockchain, EigenPhi is committed to providing the best analytical tools for tackling emerging financial problems in the blockchain world with state-of-the-art data science approaches. Especially when it comes to economic attacks on protocols, our analysis based on real-time liquidity - token flow data - will allow us to draw transparent and credible conclusions and assist in effective decision-making. We have launched a token-flow-oriented data platform, eigenphi.io, with dashboards covering the main MEV types (Arbitrage & Sandwich), Lending, Liquidation, and Flashloan, and EigenTx, an on-chain transaction analysis and visualization tool to improve the efficiency of data analysis for professional DeFi users. To further leverage the value of our tools, we use them to investigate the problems DeFi protocols concern and specific cases that occur, and we expect to benefit stakeholders and interested parties as a result.

Additional Links: Website: https://eigenphi.io Twitter: https://twitter.com/EigenPhi

Grant Category: DeFi Data Infrastructure.

Grant Description: We propose to research Sandwich MEV’s impact on Cow Protocol. Sandwich MEV has been one of the shadiest attacks on daily crypto users. In 2018, Vitalik warned us about it. After the Merge, chefs of sandwiches took some time to adapt to the new block-building supply chain. Now they have found their foothold again. During the past 30 days on Ethereum, based on our data, the volume of Sandwich MEV-involved transactions has reached $7.3B. Among those 82.5K sandwiches, crypto traders have lost $4.7M to the chefs. EigenPhi has done MEV-related research on Uniswap V3 and Curve, the first of which won the 1st price of Unigrant #19. And the one about Curve was commissioned by the protocol itself. Both reports have studied the impacts of Sandwich MEVs, which were considerable regarding their volumes and victims’ loss. All can be found at: https://eigenphi.io/mev/research. Since CoW Protocol doesn’t have liquidity pools, no arbitrages are happening here compared with other DEXes like Uniswap and Curve. However, solvers of CoW still have a chance of being exposed to Sandwich MEVs, because their trades have to be done in other DEXes, which have been targets of Sandwich chefs since 2018. That being said, CoW’s features, including trades matching and batch auditing, provide possibilities for minimizing traders’ losses due to sandwiches. We’d like to deep-dive into the data of past Sandwich MEVs to reveal the trends of such on CoW and compare the result with Uniswap and Curve.

Grant Goals and Impact: Our goal is to reveal the trends of Sandwich MEVs on CoW and compare the result with Uniswap and Curve. The study will focus on the following:

• Revenue of Sandwich MEV searchers by attacking CoW Protocol Solvers
• Profit of Sandwich MEV searchers by attacking CoW Protocol Solvers
• Cost of Sandwich MEV searchers vs the cost of attacking regular DEX users
• Frequency of Sandwich MEVs, including daily trend and correlation with the price change.
• Top Contracts using CoW: Exploited vs. Non-exploited.
• Per-solver stats The time frame of the research: The whole year of 2022

Milestones:

• Submit detailed agenda
• Submit full report

Grant Timeline:

• Detailed agenda: 3-5 workdays
• Full report: 15 workdays

Funding Request: $1,200

Wallet address to receive the grant: 0x6EEe2F3912D6e92BFc07820c739fa3277F8B8F2b

We will share our methodology and data sets that we use to generate the report once it’s done. And we agree to be bound by the CowDAO Participation Agreement and the COWDAO Grant Terms and Conditions.