The AMM model is obsolete for complex, cross-chain trading. It fragments liquidity, creates predictable slippage for MEV bots, and fails to leverage aggregated market data. Protocols like UniswapX and CowSwap prove the demand for an alternative.
future-of-dexs-amms-orderbooks-and-aggregators
Blog
The Future of DEX Design Lies in Batch Auctions
Continuous-time AMMs are fundamentally flawed. Periodic batch auctions, as pioneered by CowSwap and adopted by UniswapX, offer a superior, MEV-resistant architecture for decentralized exchange.
introduction
THE UNBUNDLING
Introduction
Current DEX designs are being unbundled, with batch auctions emerging as the superior primitive for price discovery and settlement.
Batch auctions solve for MEV by aggregating orders into discrete time intervals. This eliminates front-running, creates a single clearing price, and allows for cross-domain settlement via solvers on networks like Ethereum and Arbitrum.
The future is intent-based. Users express desired outcomes, not specific execution paths. This shifts competition from latency races between searchers to optimization contests between solver networks like those powering Across and 1inch Fusion.
Evidence: CowSwap processes over $10B volume via its batch auction mechanism, demonstrating the model's scalability and user preference for MEV-protected trades.
thesis-statement
THE ARCHITECTURAL IMPERATIVE
The Core Argument
Continuous-time DEXs are fundamentally broken for large trades, and batch auctions are the only viable design for sustainable, efficient on-chain liquidity.
Continuous-time execution is obsolete. The current AMM model, from Uniswap V3 to Curve, exposes every trade to front-running and MEV. This creates a tax on users and fragments liquidity into inefficient, short-lived positions.
Batch auctions aggregate liquidity. Protocols like CowSwap and UniswapX collect orders into discrete-time intervals, settling them in a single, uniform clearing price. This eliminates price-time priority and the associated toxic order flow.
This design unlocks new liquidity sources. Solvers, including professional market makers and MEV searchers, compete to fill the entire batch at the best price, tapping into off-chain and cross-chain liquidity via bridges like Across and LayerZero.
Evidence: CowSwap has settled over $30B in volume, with users consistently achieving better-than-market prices (positive price improvement) on 97% of trades, proving the economic superiority of the model.
key-trends
THE FUTURE OF DEX DESIGN
The Market Shift: From Theory to Practice
The theoretical advantages of batch auctions are now being realized in production, solving core inefficiencies of continuous-time AMMs.
01
The Problem: MEV as a Tax on Traders
Continuous-time DEXs like Uniswap V3 are vulnerable to front-running and sandwich attacks, extracting ~$1.5B+ annually from users. This creates a toxic environment where latency, not capital, determines profit.
- Cost: MEV is a direct, unavoidable tax on every swap.
- Inefficiency: Creates a wasteful arms race in block space.
$1.5B+
Annual Extract
~90%
Arb. Loss
02
The Solution: Batch Auctions & CoW Protocol
By settling orders in discrete, periodic batches, you eliminate intra-block ordering advantages. CoW Protocol (and its solver network) finds coincidences of wants (CoWs) and routes residual liquidity via on-chain AMMs.
- MEV Resistance: No front-running within a batch.
- Price Improvement: Solver competition for routing yields better prices than the quoted limit.
~$20B+
Volume Settled
>$200M
User Savings
03
The Architecture: Solver Networks & Shared Order Flow
Batch auctions require a new infrastructure layer: competitive solvers. Projects like UniswapX and Across adopt this model, separating order flow aggregation from execution.
- Efficiency: Solvers optimize for total surplus, not just their own profit.
- Composability: A single batch can settle across multiple venues (e.g., Uniswap, Curve, 1inch).
10x+
Liquidity Access
~15
Active Solvers
04
The Future: Intents & Cross-Chain Unification
Batch auctions are the natural execution layer for intent-based architectures. Users submit declarative goals ("swap X for Y at best price"), which solvers fulfill across chains via protocols like Across and LayerZero.
- UX Revolution: Users no longer sign individual transactions.
- Chain Abstraction: Execution becomes a commodity, abstracting away liquidity fragmentation.
~$10B+
Intent Volume
5+
Chains Unified
DEX DESIGN FRONTIER
Architectural Showdown: AMM vs. Batch Auction
A first-principles comparison of the two dominant decentralized exchange architectures, evaluating core trade-offs for liquidity, execution, and composability.
| Core Mechanism | Constant Function AMM (Uniswap v2/v3) | Batch Auction (CowSwap, UniswapX) | Hybrid (1inch Fusion) |
|---|---|---|---|
Price Discovery | Continuous via bonding curve | Periodic via off-chain solver competition | On-demand RFQ + solver competition |
Execution Guarantee | None (frontrun risk) | MEV-protected (Uniform Clearing Price) | MEV-protected (Time-based auction) |
Liquidity Source | On-chain liquidity pools | On-chain liquidity + off-chain private liquidity | Aggregated DEXs + private market makers |
Typical Fee for $10k Swap | 0.3% (pool fee) + ~0.5% slippage | 0.0% (protocol) + solver fee ~0.1% | 0.0% (protocol) + resolver fee ~0.15% |
Gas Cost for User | ~150k-500k gas (on-chain swap) | < 10k gas (signature only) | < 10k gas (signature only) |
Settlement Latency | < 1 block (~12 sec) | ~30-60 seconds (batch interval) | ~5-30 seconds (RFQ timeout) |
Composability | Synchronous (within 1 tx) | Asynchronous (cross-domain intent) | Asynchronous (cross-domain intent) |
Primary Use Case | Passive LP yield, instant swaps | Large, MEV-sensitive trades | Optimal routing for complex trades |
deep-dive
THE ARCHITECTURE
The Mechanics of MEV Elimination
Batch auctions eliminate MEV by aggregating orders and settling them at a single, uniform clearing price, decoupling execution from transaction ordering.
Batch auctions neutralize frontrunning. By collecting all trades within a discrete time window and executing them simultaneously, they remove the race condition that allows searchers to profit from transaction ordering. This architectural shift makes the time priority of a transaction irrelevant.
The clearing price is the equilibrium. All trades in a batch settle at the same price, which is the point where aggregate buy and sell volumes intersect. This eliminates price impact manipulation and ensures traders receive the best possible price for the collective order flow, not just their individual trade.
This design inverts the MEV game. Instead of searchers competing via gas auctions to extract value from users, solvers compete to propose the most efficient batch settlement. Protocols like CowSwap and UniswapX operationalize this, using off-chain solvers and on-chain settlement to achieve MEV-resistant execution.
Evidence: Cow Protocol has processed over $30B in volume, with its batch auction model consistently returning over $200M in surplus to users versus trading on AMMs directly, proving the economic viability of MEV elimination.
protocol-spotlight
BATCH AUCTION PIONEERS
Protocols Leading the Charge
These protocols are moving beyond the continuous AMM model, using batch auctions to solve MEV, fragmentation, and liquidity inefficiency.
01
CowSwap: The Intent-Based Settlement Layer
The Problem: Traders leak value to MEV bots via public mempools.\nThe Solution: A batch auction solver network that matches Coincidence of Wants (CoWs) off-chain before settling on-chain.\n- Eliminates MEV: Orders are settled at a uniform clearing price, no front-running.\n- Gasless Trading: Users sign intents; solvers compete to find optimal routing via Uniswap, Curve, or 1inch.
$10B+
Volume
$200M+
MEV Saved
02
UniswapX: The Aggregator's Aggregator
The Problem: Liquidity is fragmented across hundreds of pools, forcing aggregators into complex, expensive routing.\nThe Solution: An open, Dutch auction-based system where fillers (solvers) compete to provide the best price across any venue.\n- Permissionless Filling: Any entity can become a filler, creating a competitive market for execution.\n- Gas Optimization: Aggregates multiple swaps into one transaction, reducing costs by ~30% for cross-chain trades.
0 Slippage
For RFQs
Multi-Chain
Native
03
Across V3: Capital-Efficient Bridging via Auctions
The Problem: Bridging is slow and requires locked capital, creating massive opportunity cost for liquidity providers.\nThe Solution: A batch auction model where relayers compete to fulfill cross-chain transfer requests, backed by a single liquidity pool on the destination chain.\n- Capital Efficiency: ~100x higher utilization than lock-and-mint bridges.\n- Speed: ~1-4 minute settlement via optimistic verification, vs. 10+ minutes for canonical bridges.
$2B+
TVL
<4 min
Avg. Time
counter-argument
THE REALITY CHECK
The Latency Trade-Off: A Steelman Critique
Batch auctions solve MEV and price manipulation but introduce a fundamental delay that reshapes the entire DEX user experience.
Batch auctions require patience. They aggregate orders into discrete time intervals, eliminating front-running but forcing users to wait for the next settlement block. This latency is non-negotiable and creates a new UX paradigm distinct from instant on-chain swaps.
The trade-off is explicit. CowSwap and UniswapX demonstrate that users accept this delay to capture better execution and MEV protection. The system's value is not speed but economic optimality over a time window.
This design fragments liquidity. High-frequency traders and arbitrageurs, who provide continuous liquidity on AMMs like Uniswap V3, cannot operate in a batched environment. Batch auctions must attract a new class of batch-native solvers to fill this role.
Evidence: CowSwap's success, with over $30B in traded volume, proves a market exists for intent-based, MEV-protected trading. However, its model depends entirely on third-party solvers competing within the batch, a different risk model than automated market making.
risk-analysis
WHY BATCH AUCTIONS ARE NOT A PANACEA
The Bear Case & Implementation Risks
Batch auctions promise a fairer, more efficient DEX, but their implementation faces significant technical and economic hurdles.
01
The Latency vs. Finality Trade-Off
Batch auctions require waiting for order collection, creating a fundamental tension between speed and price improvement. This is a non-starter for HFT and arbitrage bots that dominate on-chain liquidity.
- Key Risk: User abandonment due to ~10-30 second batch intervals vs. sub-second AMM execution.
- Key Risk: Increased exposure to oracle price drift during the batch window.
10-30s
Batch Delay
<1s
AMM Speed
02
The Solver Cartel Problem
Efficient batch clearing requires sophisticated solvers. This centralizes power, creating a new trusted entity and potential for collusion, mirroring MEV searcher dynamics.
- Key Risk: Market dominance by a few entities (e.g., CowSwap's reliance on a small solver set).
- Key Risk: Opaque fee extraction and order routing that undermines the fairness promise.
Oligopoly
Solver Risk
Trusted
New Entity
03
Liquidity Fragmentation & Composability
Batch auctions cannot natively interact with on-chain liquidity pools in real-time, creating a parallel system. This fragments liquidity and breaks atomic composability with DeFi legos.
- Key Risk: Requires wrapped liquidity or solver capital, adding complexity and centralization.
- Key Risk: Incompatible with instant flash loans and complex, multi-hop DeFi transactions.
Parallel
Liquidity
Broken
Composability
04
Economic Viability of the Solver
Solvers must be profitable to exist. Their revenue comes from capturing MEV and fees, which may be insufficient to cover operational costs (RPC, computation, gas) during low-volatility periods.
- Key Risk: Solver bankruptcy or exit during bear markets, collapsing the system.
- Key Risk: Fee pressure pushes costs back to the user, negating the promised price improvement.
Volatility
Revenue Dep.
Marginal
Profitability
05
The Cross-Chain Coordination Nightmare
Extending batch auctions across chains (e.g., for intents via LayerZero or Axelar) exponentially increases complexity. Secure cross-chain settlement within a batch window is an unsolved problem.
- Key Risk: Introduces bridge security assumptions and multi-chain MEV.
- Key Risk: Finality times of heterogeneous chains (e.g., Ethereum vs. Solana) make synchronized clearing impossible.
Bridge Risk
Security Added
Impossible
Sync Clearing
06
Regulatory Scrutiny of Order Matching
Centralized order collection and matching by a designated solver may trigger securities law scrutiny. Regulators could classify the solver as a regulated exchange or broker-dealer.
- Key Risk: Legal ambiguity creates liability for protocol developers and DAOs.
- Key Risk: Forces protocol to implement KYC/AML on solvers, destroying permissionless ethos.
SEC
Target Risk
KYC
Compliance
future-outlook
THE ARCHITECTURE
The Hybrid Future
The future of DEX design is a hybrid architecture that separates execution from settlement, using batch auctions as the unifying settlement layer.
Batch auctions become the settlement layer for all on-chain liquidity. This architecture separates the intent expression layer (UniswapX, 1inch Fusion) from the settlement layer (CowSwap, DFlow). Users express desired outcomes, solvers compete to fill them, and a single batch auction clears all trades atomically.
This hybrid model obsoletes continuous-time AMMs for large trades. The MEV extraction inherent to constant-function market makers creates a structural tax. Batch auctions eliminate this by aggregating orders and finding a single clearing price, a principle proven by CowSwap's $30B+ protected volume.
The settlement layer is the new battleground. It will be won by protocols that optimize for solver competition, cross-domain atomicity, and cost-efficient finality. This is the core thesis behind Across Protocol's intent-based bridge and UniswapX's off-chain RFQ system.
Evidence: CowSwap's dominance in large-trade execution. Over 70% of its volume comes from trades exceeding $100k, demonstrating that sophisticated users already demand batch auction settlement to avoid the toxic flow of traditional AMMs.
takeaways
THE BATCH AUCTION THESIS
TL;DR for Builders and Investors
The current DEX model of continuous-time trading is fundamentally broken, creating billions in MEV and poor execution. Batch auctions solve this.
01
The Problem: Continuous-Time Chaos
Atomic, sequential execution on AMMs like Uniswap V3 is a free-for-all. It creates predictable arbitrage, forcing users to pay for protection via MEV bots and private RPCs like Flashbots.
- MEV Extraction: >$1B+ extracted annually via sandwich attacks.
- Fragmented Liquidity: LPs compete against themselves within the same block.
- User Experience: Slippage and failed trades are the norm, not the exception.
$1B+
Annual MEV
~15%
Slippage Spikes
02
The Solution: Batch & Settle
Collect all orders in a discrete time interval (e.g., 1 second), find the single clearing price via a solver network, and execute them all simultaneously. This is the core of CowSwap and UniswapX.
- MEV Elimination: No front-running; all trades in the batch are equal.
- Price Improvement: Solvers like CoW Protocol compete to provide better-than-market rates.
- Gas Efficiency: ~40% gas savings from batching thousands of trades into a few settlements.
~40%
Gas Saved
$0
Sandwich Risk
03
The Architecture: Solver Networks
Batch auctions require a new infrastructure layer: competitive solvers. These off-chain agents (like in CoW Protocol) compute optimal batch settlements, creating a market for execution quality.
- Competition Drives Efficiency: Solvers profit from surplus, incentivizing better prices.
- Composability: Solvers can tap into any liquidity source (Uniswap, Curve, private pools).
- Critical Mass: Requires ~$100M+ in batch volume for solver economics to work.
~$100M+
Volume Threshold
10+
Active Solvers
04
The Trade-Off: Latency for Fairness
You can't have sub-second finality and MEV resistance. Batch auctions introduce intentional latency (1-5 seconds) to accumulate orders. This is the fundamental design choice.
- Not for HFT: This is for users who value fair execution over nanosecond speed.
- Cross-Chain Future: This model is ideal for intent-based, cross-chain systems like Across and LayerZero's DVN, where latency is already higher.
- User Abstraction: The wait happens in the background; the UX is 'submit intent, get best price'.
1-5s
Batch Window
0
Priority Gas
05
The Business Model: Surplus Capture
Protocols like CoW Swap and UniswapX don't profit from spreads. Their revenue is a fee on the 'surplus'—the value solvers generate by improving prices versus the quote. This aligns protocol and user incentives.
- Sustainable Fee: Takes a cut of created value, not extracted value.
- TVL Agnostic: Revenue scales with solver competition and volume, not locked capital.
- Projected Fees: At scale, this model can generate $50M+ annual protocol revenue.
$50M+
Potential Revenue
Value-Add
Fee Model
06
The Investment Thesis
The infrastructure for batch auctions is the next big stack. Invest in:
- Solver Tech: Companies building optimized solver algorithms.
- Intent Standards: The user-facing layer that abstracts batches (e.g., UniswapX).
- Cross-Chain Settlement: Networks that use batch semantics for secure bridging.
Build if you can tolerate latency for radical efficiency gains.
3
Key Verticals
Next Stack
Infra Focus
ENQUIRY
Get In Touch
today.
Our experts will offer a free quote and a 30min call to discuss your project.
NDA Protected
Confidentiality24h Response
Time to ValueDirectly to Engineering Team
No Sales Fluff10+
Protocols Shipped
$20M+
TVL Overall