Overview
Coincidence of Wants (CoW) is a foundational economic concept where two parties each have something the other wants, enabling a direct exchange without intermediaries. This principle, while simple in theory, poses significant challenges in practice, especially within decentralized finance (DeFi). DeFi platforms have developed various mechanisms to address the CoW problem, ranging from Automated Market Makers (AMMs) to more innovative solutions like batch auctions and solver competitions.
Historical Background
Historically, the Coincidence of Wants problem was a major inefficiency in barter economies. For a transaction to occur, both parties needed to have precisely what the other desired at the same time and place. This often made direct trade cumbersome and inefficient, leading to the development of money as a universal medium of exchange. Money simplified transactions by providing a commonly accepted medium that could be exchanged for goods and services, effectively eliminating the need for a direct CoW.
