Incentives and Market Structure in Intent-Based Exchanges: Evidence from a Solver-Reward Reform

• URL: http://arxiv.org/abs/2607.21955v1
• Date: Fri, 24 Jul 2026 04:04:15 GMT
• Title: Incentives and Market Structure in Intent-Based Exchanges: Evidence from a Solver-Reward Reform
• Abstract summary: We measure how a change to protocol-designed reward rules reshapes who captures value.<n>CoW Protocol CIP-74 replaced a fixed solver-reward cap with one tied to protocol revenue and introduced an ad-valorem volume fee.<n>Using daily solver shares over 395 days, we find the reform reallocated trading value by order size.
• Score: 2.5599656137521425
• License: http://creativecommons.org/licenses/by/4.0/
• Abstract: Intent-based decentralized exchanges delegate execution to a competitive class of agents -- solvers -- whose behavior is shaped by protocol-designed reward rules. We measure how a change to those rules reshapes who captures value, using a governance-dated natural experiment: CoW Protocol CIP-74 (effective 8 December 2025), which replaced a fixed solver-reward cap with one tied to protocol revenue and introduced an ad-valorem volume fee. Using daily solver shares over 395 days, we find the reform reallocated trading value by order size. The robust signature is a monotone size gradient: concentration fell in small orders and rose in large ones across four order-value buckets (Spearman rho=1.00, exact permutation p=0.042) -- a pattern that survives dropping the single largest solver. Aggregate concentration also rose (volume-weighted HHI 0.176->0.241), substantially carried by the incumbent top solver. By trade count the market de-concentrated (count-HHI -0.060). A simple solver-economics model rationalizes the pattern: an ad-valorem fee is competitively neutral, while a revenue-linked reward cap raises the marginal payoff to inventory-rich solvers on large orders -- consistent with restricted-entry predictions (Chitra et al. 2024). A control venue (UniswapX) shows no matching break. We detect no change in average execution quality (~7 bps bound). A triple-difference exploiting a February 2026 fee cut is directionally consistent but underpowered. Reward design measurably reallocates who captures value in intent markets, without moving the average price users receive.

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