CoW Construction Strategy

The Coincidence-of-Wants (CoW) construction strategy is YODL’s first listed strategy, allowing Operators to earn fee-backed revenue without taking any directional exposure. In this strategy, cycle pairs offset trades into a self-contained CoW loop. The strategy operates in two stages:

Pre-Trade: The Operator quotes the same price for both buying and selling a token pair across connected order-flow venues, maintaining neutrality and avoiding speculative pricing.

Post-Trade: The algorithm identifies the optimal path to close the CoW loop based on the evolving state of fills, dynamically adjusting pairs and amounts in future quotes to neutralize exposure. (For a detailed explanation, see the CoW Research Paper.)

YODL hosts the CoW construction logic and delivers proprietary identification and construction signals (pair, side, size, quote, expiry, batchId) to Operators. No models or code are provided.

Execution Flow

  1. Pre-Slash (if required)

    • Pre-slash vault inventory into the Orchestrator to make liquidity instantly available for low-latency venues such as 1inch.

  2. Quote Submission

    • The Settlement Relayer receives the Operator’s quote and relays it to the connected order-flow venue.

  3. Accounting Transaction

    • When a trade request is received, the Operator Binary sends a signed accounting transaction authorizing execution.

  4. Finalization Transaction

    • After taker tokens arrive in the Operator’s Orchestrator, a finalization transaction segregates the fees earned on that trade.

    • Finalizations can be batched per taker token but must occur before repayment.

  5. Repayment Transaction

    • Repay each Curator Vault to restore the vault’s balance and close the execution cycle.

Price Discovery

By default, quotes use oracle-based price discovery through YODL-approved oracles. Operators may select from the governance-maintained list.

Operators may integrate custom or proprietary strategies alongside the CoW construction module.

Quick Reference Table

Transaction

Trigger Event

Constraint

Purpose

Accounting (txn-s)

Quote accepted by OFV

Immediate (≤ 500ms)

Authorize trade execution

Finalization (txn-f)

Taker tokens received

Before repayment

Segregate operator / curator fees

Repayment

Epoch end / vault closure

Before epoch end

Restore the vault’s balance

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